Council Rock Dips Into Fund Balance To Lower Tax Increase

NEWTOWN - The Council Rock School Board on Thursday approved a $258 million budget for the 2022-23 school year that includes a real estate tax increase well below the Act One Index of 3.4 percent.

After voting down a proposed 1.59 percent tax increase, the board compromised on a 1.25 percent increase requiring the district to dip into its fund balance to the tune of $590,000.

The board voted 8-1 to approve the spending plan with Kristin Marcell voting against the motion. Marcell had favored a lower one percent increase, which had been debated by the board before settling on the compromise.

“In this time of inflation and available surpluses, I don’t believe now is time to pass a tax increase at this number. I support something that is lower,” said Marcell.

While Marcell favored a one percent increase, board member Yota Palli supported the 1.6 percent increase included in the administration’s proposed final budget.

“It balances our budget without dipping into our fund balance,” she said. “If we look at different economic indicators most likely we are headed into a Recession. If this happens both the revenue and the expense will be affected. The revenue will decrease due to suppressed economic growth and expenses will increase because of inflation. I find it fiscally responsible not to dig into our reserves and keep it to cover expenses in case of a Recession.

“The 1.6 percent increase is not going to allow us to go to town,” she added. “It doesn’t include our wish list and it’s not preparing us for future investments such as full day kindergarten or changing the high school schedule. The 1.6 percent increase is respectful for people on fixed income because it is not a huge increase and is well below the state index.”

Board member Ed Tate agreed. “It’s critical that we not dip into the fund balance at this point. We have talked about using fund balance. I think it’s a wise thing to do in strong economic conditions. Frankly most economists are saying that we are most definitely looking at a Recession. I think we are facing a tough year ahead. It would be wise not to dip into our fund reserve.”

Tate joined members Palli and Mariann McKee in voting for a 1.599 increase, which failed to garner enough votes to pass with members Ed Salamon, Mike Thorwart, Kristin Marcell, Bob Hickey, Joe Hidalgo, and Mike Roosevelt voting against the motion.

Pointing to the district’s $32.9 million fund balance, which is up by about $7 million from the previous year, coupled with the economic conditions facing residents, the board majority pressed for a lower percentage and the use of fund balance to fill the gap.

“Knowing we took $7 million off the tax base last year and we’re starting a Recession it’s a sign of good faith to use some of that money we captured last year and give it back to the taxpayer,” said Salamon, referring to an unexpected revenue windfall the district realized this past year from an increase in assessments.

Thorwart noted that two years ago the district had another windfall as a result of staff givebacks. “I tried to give it back to the staff but we spent it. We were in the same boat then. We sat on money. Like you, Mr. Salamon, 1.6 seems high. If we can coalesce around 1 or 1.25 that’s threading the needle. I don’t think zero is in our best interest.”

After debating between a one percent increase and a 1.25 percent increase in the real estate tax rate, the board eventually compromised on the 1.25 percent increase.

The proposed budget had initially forecast a 2.4 percent tax increase in property taxes. That was adjusted down to a 2 percent increase. After additional review, business manager Jason Harris presented a proposed final budget with a 1.59 percent increase that fully funded the budget.

The one percent earned income tax and the one percent real estate transfer tax remain unchanged in the new budget.