Keystone Central finance committee reviews preliminary budget, millage options and adequacy risk

The Keystone Central School District finance committee reviewed a preliminary budget update that projects a structural shortfall and outlines options to close part of it through modest millage increases, spending reductions and use of fund balance.

Joanie, a staff member presenting the budget, told the committee the district’s starting point showed a deficit that had been reduced from roughly $4.5 million to about $4.1 million through additional cuts and one-time actions. She presented two millage scenarios: a 1.78% increase that would yield about $490,000 (an average taxpayer impact at the district median assessed value of $98,400 of about $25–$26 per year) and a 3.55% increase that would yield about $980,000 (about $50 per year for the median-assessed homeowner). Joanie also said those increases would help maintain the district’s fund balance while addressing rising health-care costs and capital needs.

The committee discussed the district’s unassigned and total general fund balances. Joanie said the district ended 2023–24 with about $19 million in unassigned funds and currently projects a total general fund balance of about $17 million after planned commitments; she warned that without a tax increase the unassigned balance could fall to roughly $2.3 million (about 2.5% of fund balance) under a full-deficit scenario. She also noted the district currently sits at a 1.31 local effort rate and cautioned that if the district drops below the Pennsylvania Department of Education’s local effort threshold (1.27) the state could reduce the adequacy supplement the district receives.

Board members asked staff to quantify the relationship between each millage scenario and potential reductions to the adequacy supplement. Joanie said she would prepare estimates showing how a 0%, 1.78% and 3.55% millage decision would affect the adequacy supplement and overall revenues. She told the committee the district is expected to receive about $820,000 next year from state sources and that roughly $500,000 of that is labeled as the adequacy component in the current estimate.

Committee members also reviewed planned expenditure reductions: targeted hiring freezes/anticipated attrition that staff estimate will reduce personnel costs by about $475,000 for 2025–26, consolidated software subscriptions into the technology budget, and savings from hiring in-house special-education positions rather than purchasing outside services (one special-education line was reduced by roughly $270,000, per staff explanation). Joanie said the district will stop most building-level spending on April 4 for the 2024–25 year to better control end-of-year expenditures.

On revenue generation, staff described moving funds into higher-yield money market and certificate of deposit accounts and reported interest earnings from those investments. Joanie said the district has several million invested and that interest generation contributed materially to the revenue picture this fiscal year.

The finance committee asked for additional detail on: (1) precise calculations that determine the local effort rate and which districts historically lost adequacy funding for failing to meet it; (2) the district’s total bond debt obligations (staff said they would provide a full debt figure); and (3) a modeled impact of each millage scenario on adequacy funding and unassigned fund balance. Joanie said she will prepare that detail for the full board meeting in April.

The committee did not take a formal millage vote at this meeting; staff will present a proposed budget and recommended millage at the April full-board meeting for action.