TAX NEWS - June 2010

Pennsylvania Tax: Oley Valley School Board approves 2010-11 budget with no tax increase

For the second year in a row, the Oley Valley School Board adopted a budget with no tax increase.

It took two votes at Wednesday's meeting, however, for a divided school board to approve the $28.3 million spending plan with the current tax rate of 23.82 mills.

A proposed budget that carried a 0.29-mill tax hike - $29 for a property assessed at $100,000 - was rejected on a 4-4 vote. Robert J. Cappa, who would have been the swing vote, was not at the meeting.

School directors John C. Bieber, Stephen S. Burns, Carl J. Kubitz Jr. and Sherry L. Schultz opposed a tax hike. They said a surplus in this year's budget could be used to offset the $197,400 deficit in the proposed 2010-11 budget.

Kubitz argued that some of the $373,500 being set aside for a new roof on Oley Valley Elementary School could help offset the projected deficit.

Opponents of a tax hike had a problem with raising taxes because the 2009-10 budget was underspent by about $1.2 million.

"I'm not comfortable with raising taxes when we have that large of a reserve," Kubitz said.

Burns took aim at the 6.5 percent increase in expenditures in the proposed budget, noting that enrollment has declined by 90 students in the past two years.

"I can't see the need for an increase in expenditures when we have declining enrollment," he said.

Ralph C. Richard, budget committee chairman, favored the tax hike to offset increases in wages, health insurance premiums and pension costs.

Salaries and benefits climbed by $600,000, pension costs rose $500,000 and health insurance premiums went up $200,000, Business Manager Tracy Lester reported.

"The budgets for all of our school buildings have been cut," Richard noted.

Uncertainty over the amount of the state's basic education subsidy and legislation to curtail the cost of the Public School Employees Retirement System, proponents of the tax hike argued, cast a cloud over the budget process.

Board President Robert A. Heckman was skeptical that state legislators would deliver a budget by the June 30 deadline.

"I'm nervous about not enacting the tax increase until we know what's happening in Harrisburg," Heckman said. "It's a real land mine out there."

In the end, the board compromised on a budget with no tax increase.

It passed on a 7-1 vote. Joanne L. Ewing voted no.

The board re-enacted the existing tax revenue structure: $5 per capita tax, $5 residency tax, 1 percent earned-income tax and 1 percent realty transfer tax.

It also approved a $162 tax reduction for eligible property owners under the Homestead-Farmstead Exclusion, funded by state revenues from casino gambling.