The Red Clay School District could be looking at a slight tax increase next year.
That was part of the message from district CFO Ted Ammann as he presented a preliminary budget at a Board of Education meeting last week. He said that while the district is doing well financially, expenses are rising.
Generally speaking, the district’s total tax rate is a collection of several different tax rates. The largest, which provides local revenue for the district’s operations, will grow next year as the district enters the third year of a referendum approved by voters in 2024 with more than 70% in favor.
But there are other components to the tax rate, and district officials are proposing changes to those. Ammann is suggesting a nearly 19% increase in the district’s tuition tax, which provides funding for special needs students. That increase, around $8.5 million, is being driven primarily by increases in staffing costs. Also proposed to rise is the district’s match tax rate - the portion the district must pay in to participate in state matching programs for things like reading and math support and substitute teachers.
Offsetting those increases is the elimination for one year of the district’s debt service tax. Ammann says the district raised the money to pay this year’s debt service last year.
“We did not get all those debt payments, but I assure you they're coming this year,” Ammann said. “But we have the funds to pay them, so that means that tax is going down this year.”
Overall, Ammann said, he is projecting about 4.7% budget growth next year. While the district’s tax rates won’t be set until October, Amman says that he thinks they won’t rise by that much.
“What I can tell you is when you net all those things I've talked about very quickly tonight, the increase is about 1.9% in revenues, which would translate to approximately 1.9% increase in tax rates,” he told board members.
Reassessment realigns the budget and tax schedule
Traditionally, midsummer is budget and tax time for districts like Red Clay. Board of Education members see a preliminary budget and usually set the tax rates for the next fiscal year after the Fourth of July weekend. This year, because of the ongoing complications from the state’s first property reassessment in decades, the process is being upended. Board members are set to vote on the preliminary budget in August, but they won’t be able to set tax rates until October.
That is due in part to legislation passed in the General Assembly this year, Ammann said.
“It's directing New Castle County to do a quality control review of certain commercial parcels that fit very clear criteria because there is a belief that perhaps they did not have appropriate assessments,” he explained.
New Castle County won’t be able to complete that review for several months, meaning that the board can’t set a tax rate until this fall. That puts the district in the novel position of approving a preliminary budget before it approves a tax rate to support that spending.
“You're voting on a budget in August, the hope would be that you would then support the rate that supports that budget in October,” he said. “It is a little bit different than most years, but it is a way of getting through this reassessment time of year that we're in.”
The district’s reserves are in good shape, but there are concerns
Ammann told board members that, coming out of this fiscal year, the district’s reserves are in good shape, seeing a marked - and unplanned - increase this year.
“That money goes back to the balance to be available for future years,” Ammann said. “So we did increase our balance as we had projected. We increased it 22.9% more than we had expected, which puts us in a very good position for next year.”
But, he warned, that balance can disappear quickly.
"If budgets continue to grow, or if they grow more than we planned for, or if there are too many pressures to increase various components of that budget, that balance goes quickly,” he said.
Among those pressures are the final numbers from changes to the state’s funding formula stemming from a new model from the Public Education Funding Commission. Ammann says he is also keeping a wary eye on the district’s enrollment, since that determines much of their state funding. Also on the horizon are pay raises for teachers that come from recommendations from the state’s Public Education Compensation Committee. Those raises will be funded by state dollars for some, but not all, teachers.
"That only covers our Division I teachers,” he said. “We have teachers in our tuition programs, in our match tax programs, and federal programs that are all in the same teacher's salary. We don't pay teachers differently because they're funded through the federal government or through the Division I unit count. So that certainly does put pressure because we are covering those additional salaries out of our local funds, or our tuition funds, or our federal programs.”
The Board of Education will vote on the preliminary budget next month.
