Tredyffrin-Easttown projects $4.6 million deficit under current revenue assumptions; Act 1 index, exception revenue and state aid shape outlook

Tredyffrin‑Easttown School District finance staff told the school board at a March 10 budget workshop that, under current untreated revenue assumptions, the district faces a roughly $4.6 million shortfall for the 2025–26 budget year.

The presentation said total proposed revenue for 2025–26 is $183.4 million, with local revenue—primarily real estate tax receipts—making up the majority. District staff showed an illustrative revenue path that applies a 4% Act 1 index plus projected exception revenue; combined, the modeled 4.66% increase would generate about $6.8 million and reduce the deficit compared with an untreated scenario.

Why this matters: the board must set a final budget in June and staff said the primary levers to narrow the gap are the Act 1 index plus any approved exceptions, state subsidy changes, and routine revenue assumptions such as investment earnings and interim assessment gains. Staff warned that some revenue sources are variable year to year and should not be relied on to balance recurring expenses.

Key numbers and assumptions - Total proposed revenue for 2025–26: $183.4 million. - Current modeled deficit (untreated): roughly $4.6 million. - Act 1 index used in the presentation: 4%; combined with exception revenue the illustrative increase equals 4.66% (about $6.8 million). - Capital transfer: the budget has historically included a $6 million capital transfer; staff said they reduced the working assumption to $5 million based on recent realizations (an average of about $5 million produced in recent years). - Health and dental insurance preliminary rates: budgeted at 8% increases (staff said a second look will occur before the April workshop). - Employer retirement contribution: staff reported a projected employer rate reduction to 34%, producing an approximate $275,000 improvement in the budget. - District fund balance cited: about $33.8 million.

State and federal funding Staff walked the board through state and federal components of revenue. The presentation noted that the district receives slightly more than 15% of its revenue from the state, with federal grants a relatively small share. The presenter said the governor’s proposed 2025–26 budget contains a modest increase in the basic education subsidy (about $75 million statewide, described in the packet as an estimated 1.3% formula-driven increase for districts overall) and additional line items such as facility grants, a student-teacher stipend program and proposed mental-health grant funds. The presenter cautioned that the governor’s proposals still must be acted on by the legislature.

Special education and transportation subsidy Board members and staff emphasized a longstanding gap between special-education spending and state subsidy. Staff cited roughly $33.4 million in special-education expenses for the most recent completed year and said the state subsidy returned to the district was about $2.7 million for that year—leaving a significant local net cost. A slide in the packet showed a multi-year average gap the presenter described as “about $15 million” per year over a 10-year window. Transportation subsidy also remains well below expense, the presenter said: the district pays roughly $8 million in transportation while state reimbursement has been around $1 million under current funding practice.

Charter and cyber tuition The board discussed charter-school tuition costs and an item in the governor’s proposal that would cap a regular‑education cyber charter tuition rate at $8,000. Staff noted the district’s cyber charter tuition varies by enrollment and service type and that a state cap limited to regular education students could produce modest savings for the district. One board member estimated that if a flat $8,000 rate applied to the district’s cyber students, the district could save in the low hundreds of thousands of dollars; staff cautioned the savings depend on the final enrollment count and whether the cap applies to regular‑education students only.

Revenue variability and risk Staff emphasized that several revenue lines are variable—investment earnings, interim assessments, transfer tax and delinquent collections—and that the district uses multi-year averages to smooth projections. The presentation used historical charts to show how those volatile lines move over time; the presenter said the district is assuming a 4% earnings rate in this proposal but will revisit that if market conditions change.

Fund balance and capital funding The packet showed recent practice of transferring operating fund surpluses into capital. Staff said the district has used bond proceeds and general‑fund transfers together to fund capital projects; if current revenue assumptions remain untreated the model would deplete fund balance in roughly 2½ years, staff warned—an outcome they said is not the board’s plan but illustrates the risk of no revenue action.

Process and next steps Staff said the board will revisit the figures at a second budget workshop focused on expenditures on April 7 and will take up a proposed final budget on April 28 before approving a final budget in June. The presenter said some numbers remain subject to change—most notably the state’s response to exception filings and final insurance rate renewals.

Direct quotes from the meeting included the presenter summarizing the workshop focus: “So tonight, in the workshop, we're gonna be focusing mostly on the revenue side of the budget.” Board members asked for clarifications on federal funding flows and special‑education mechanics; in one exchange a board member noted the history of federal programs and the presenter clarified how some federal funds pass through the intermediate unit to the district.

What the board asked staff to follow up on Board members asked staff to (1) update an earlier analysis comparing charter‑school classifications and related costs, (2) verify parking‑permit revenue assumptions, and (3) continue monitoring state budget developments that might change the district’s projected basic education or special‑education allocations.

Speakers quoted or named in the presentation are listed in the article’s speaker section below. The board will return to the budget at its April 7 workshop and again when it reviews a proposed final budget April 28.