TOWANDA - The Towanda School District is looking at a $601,908 shortfall in its $23.8 million budget for the 2013-14 school year, which could require an increase in its school property tax, the district's business manager said.

The shortfall arose to a large extent from unfunded mandates that the district has to pay for, as well as the fact that the district had used $750,000 of its fund balance to balance last year's budget, school district business manager Doreen Secor said.

The "big" unfunded mandate that the district is facing it that the district must increase its contribution to its employees' pension fund from 12.36 percent of employees' salaries this year to 16.93 percent of employees' salaries next year, which amounts to a $444,504 annual increase, she said. The increased contribution rate was mandated by the board of directors of the Pennsylvania School Employees Retirement System (PSERS).

The district also implemented two special education classrooms for students from the Beacon Light program, which will have a $250,000 effect on the budget, she said. The classrooms were needed because Beacon Light has started a new program for students with behavioral issues, school officials said.

In addition, the school district's expenses for medical insurance premiums will increase by 10 percent next year.

The district is also facing increased expenses for the growing number of students who need instruction in English as a Second Language, she said. Five students needing ESL instruction enrolled in the district on Friday alone.

On the plus side, the total real estate assessment in the district is up $64,404 this year.

The assessment grew for a number of reasons, including people making improvements to their homes and new buildings being constructed.

The growth in the real estate assessment would have been closer to $100,000 except for the fact that the county and CraftMaster Manufacturing Inc. had reached a settlement which reduces the assessment on the company's plant in Wysox Township, she said.

Because the school district had used $750,000 from its fund balance last year to balance its budget for the current school year, the district is now "$750,000 in the hole." which is impacting the 2013-14 budget, Secor said.

"You used a savings account (the fund balance) to offset expenditures," Secor said.

We started off (the planning for the 2013-14 budget) needing $750,000 right off the bat.

Earlier this year, the school board had passed a resolution which would limit any increase in the district's school property tax for the 2013-14 school year to the state index for the school district, which is 2.4 percent."

If the school district raised its property tax the full 2.4 percent, it would bring in an additional $188,218 next year, which is nowhere near enough to fill the $601,908 budget shortfall.

As the district plans its 2013-14 budget, there are still a number of unknowns, including how much federal revenue will be coming to the school district next year and how many staff will be retiring.

"We're not sure what the implications of sequestration or anything like that will be" on the district," Secor said.

School staff have until April 15 to announce if they are retiring this year.

To help pay for the increased PSERS expenses and the increase in medical insurance, the district is tapping $544,504 from its fund balance that had been earmarked for those expenses.

Several years ago, the district began setting aside extra funds for PSERS to help pay for anticipated increases in the district's contribution rate to PSERS.

Superintendent Steven Gobble said the district will wait to get more information on the financial unknowns in this year's budget - including the amount of federal funding and the number of retirements - before issuing specific options on how to fill the $601,908 budget hole.

"We have been exploring a lot of contingencies" for how to fill the budget hole, he said.

More information on how the budget hole will be filled will be provided to the school board over the next month, School Board President Robert Fetterman said.

The school board is scheduled to pass a proposed 2013-14 final budget at its first meeting in May. At its second meeting in June the board will adopt a final 2013-14 budget.

James Loewenstein can be reached at (570) 265-1633; or email: jloewenstein@thedailyreview.com.