A proposed final budget in Palmerton Area School District calls for a 1-mill property tax increase to help offset an anticipated drop in local revenue due to COVID-19.

Palmerton’s board unanimously approved the proposed 2020-21 spending plan Tuesday night, which calls for $34.03 million in expenses for 2020-21, and $30.92 million in revenue.

It would be the first time in three years the district has raised property taxes.

The budget projections assume a $1.22 million loss in local revenue, the worst of the two scenarios outlined to the board.

“We’re certainly already seeing the impact,” Business Administrator Ryan Kish said. “April was the first full month since the shutdown and our earned income tax collection is down 33 percent from the same month last year.”

Kish said the data confirms his projection that Palmerton could see a $100,000 drop in earned income tax alone for the fiscal year.

The Pennsylvania Legislature passed Act 13 shortly after schools closed down in March, which meant all school employees, including secretaries, custodians and maintenance staff, as well as third-party contractors such as the bus transportation company would continue to be paid.

Kish said earlier this month the district did renegotiate the remainder of this year’s transportation contract with bus company George’s Transportation. That savings was estimated to be around $90,000.

“We’ve been talking to all of our vendors,” Kish said. “We’re anticipating we should be able to get a small discount on at least our auto policy. We continue to talk to our insurance company, copier company and vendors like that to see what we can do.”

The millage increase means a taxpayer with an average property assessment in the district would see their bill increase by $44. It would generate an additional $291,000 for the district.

Even with the tax increase, Palmerton would be facing a $2.8 million deficit, which would be covered through the district’s fund balance.

Projections show the district would have around $6.2 million in the fund balance following the 2019-20 fiscal year and $3.4 million following 2020-21.

Palmerton isn’t alone in its budgeting challenges. COVID-19 is expected to take a toll on financial plans across the state, with the Pennsylvania Association of School Business Officials predicting between an $850 million and $1.04 billion loss in local revenue for 2020-21.

“Every school district tax source and other non-tax revenue will suffer a precipitous decline for the upcoming school year,” according to Dr. Timothy J. Shrom, PASBO director of research, who developed the PASBO projection with Dr. Andrew Armagost, PASBO research and advocacy manager. “In an economic downturn we know that unemployment goes up, thereby reducing our local income tax revenue, and we know that the real estate market will be affected resulting in a reduction of our real estate transfer tax We also know that our taxpayers will need more time to pay, thus reducing property tax revenues, and with the significant cuts in the rates, interest earnings will take a hit as well.”

Two of the biggest increases in Palmerton’s 2020-21 budget, as they are every year, are salaries and benefits. Salaries are set to increase by $164,000, while the district will kick in an additional $148,000 to the Public School Employees’ Retirement System over 2019-20. Kish is also projecting a $150,000 increase in tuition for nonpublic schools such as Behavioral Health Associates.

Tuition to cyber and charter schools are also a concern, as more families may be looking at that option if school doesn’t return to a traditional setting in the fall.

“Despite a COVID-19 economic decline, school districts have no relief on charter tuition costs and special education required services, and those mandated costs will continue to increase regardless of the economic downturn,” said Hannah Barrick, PASBO assistant executive director. “Next year, we are anticipating a $230 million increase in charter school tuition costs and a $300 million increase in special education costs across the state. That’s $500 million increase in mandated costs when state revenue is uncertain and local revenue is expected to decline by $1 billion.”

Kish said Palmerton has trimmed its budget by $423,000 since a preliminary presentation in February.

Palmerton is scheduled to vote on the final budget on June 16.