With an eye toward the future, Palmerton Area School District will designate $942,000 it received in additional state funds into its fund balance.

The school board, on an 8-0 vote at a special meeting on Tuesday, approved the disposition of the additional state funds to the assigned category of its fund balance. Director Darlene Yeakel was absent.

The board agreed to designate the funds to help offset projected increases in its retirement rate contributions, special education and Carbon Career & Technical Institute costs in 2012-13.

That decision came after financial consultant Donna Les reviewed cost estimates for the 2012-13 school year.

Les informed the board that state regulations call for the adoption of a preliminary budget by Jan. 25, 2012.

She said the district's current projected retirement rate contributions for 2012-13 is 12.19 percent, which would result in an estimated additional cost of $256,032. Further, Les said the district will need at least that much additional money in each of the next three years as the rates are projected to increase even more over that time.

Costs will also continue to increase for special education students, which Les estimated at a minimum additional budgetary cost of $400,000.

As for CCTI, Les said the district should anticipate, at minimum, a 10-percent increase in student enrollment.

Other potential increases Les mentioned were charter and cyber-charter schools ($250,000) and fuel ($69,000).

Les indicated that there are three exceptions available for school district use: retirement, special education and debt service.

However, she said the district doesn't qualify for the debt service exception because it has level debt service

Also, the special education exception was modified to net the district expenses with the state revenue; therefore, Les said the index calculation is taken on a much smaller number, which provides less in exception value.

In addition, she said the retirement exception was also modified to use as a calculator the smaller wage base between the 2009-10 and 2010-11 school years.

Additionally, Les said that for the six months of 2011, the statewide average weekly wage and the federal employment cost index averaged 1 percent. With the second half of the year expected to be very close the first half, the index will be somewhere in the 1 percent to 1.2 percent range, which she said would drive an adjusted index of somewhere between 1.3 and 1.6 percent.

If that occurs, the estimated millage value increase would be between .638 mill and .786 mill, which Les said would result in an estimated dollar value of $182,260 to $224,540.

Les said the district is also faced with a large step movement for which seven teachers would qualify $86,382); salary increases $87,762); support staff contract increase ($98,655); administrative contract increase ($29,115); and the replacement of four retiring teachers with first year staff ($275,604). However, there is an estimated savings of $729,355 based upon seven retirements with no replacements, she said.

What that all means, Les said, is that the district could be faced with a potential budget shortfall of between $840,821 to $883,101.

Much like Les, Superintendent Carol Boyce suggested the board designate the $942,000 in the district's fund balance.

"The big storm is yet to come," Boyce said. "I think the prudent thing is to put it into fund balance."

Board President Barry Scherer concurred with that sentiment, and added "the picture's not getting any rosier."

Last month, the board, on a 5-4 vote, agreed to adopt the 2011-12 budget in the amount of $26,595,297.

That spending plan calls for a 12.6-percent, or 5.506-mill increase, that will raise the millage rate from 43.64 to 49.14 mills.

That means a person with a home valued at $100,000 and assessed at $50,000 will pay $2,457, or $277 more in property taxes to the district next year.