Editor’s note: Today we begin our review of the stories that shaped 2020. We will be publishing the top stories through New Year’s Eve.

By Jarrad Hedes

jmhedes@tnonline.com

Financial issues dominated a large chunk of the conversation in Lehighton Area School District in 2020.

The year began in January with directors narrowly passing a preliminary 2020-21 general fund budget, which at the time called for a $3.49 million deficit.

Patricia Denicola, Lehighton’s business manager at the time, said she created the budget using year-end actuals to cut down on historical overruns.

Lehighton had previously budgeted for $40.69 million in expenditures for 2018-19, but actually spent $43.9 million. In 2017-18, it budgeted $40.99 million and spent $42.39 million. In 2016-17, it budgeted $39.17 million and spent $41.37 million. In 2015-16, it budgeted $38.65 million and spent $44.01 million.

“This district is in the position it’s in because it spent more than the revenues it took in,” Denicola said in February. “Since 2016-17 through the 2020-21 preliminary budget, expenditures have increased, on average, 7%, while revenue rose less than 1 percent.”

Other factors prior to her arrival in the district also led to the deficit, Denicola said.

“Medical claims that were paid from July (2018) through March (2019), totaling $3.5 million, should have been shown as an expense on the books, but were not.

The district spent the spring trying to cut the deficit, which stood at $2.92 million on May 27, when a proposed final budget, though unbalanced at the time, was passed, to the dismay of some directors.

“It’s immoral to pass a budget where you are spending more than you take in, even if it is subject to change,” board member Dave Bradley said in May. “It’s premature to do this right now.”

As state funding numbers rolled in, the district was expecting more revenue and fewer expenditures, getting the deficit down to $1.94 million by June. Denicola announced Lehighton was figuring on a $9.28 million basic education subsidy, around $300,000 more than it had been planning for less than a month before. The district was also set to save more than $800,000 in salary and benefits through attrition.

On June 22, Denicola presented the district’s finance committee with revenue figures that would be generated through a tax increase, and the elimination of nonmandated transportation, middle school athletics and certain extracurricular programs.

Middle school sports were put back in the budget after Lehighton administrators agreed to a voluntary pay freeze, saving $59,093.

On June 29, by a 5-4 vote, Lehighton passed a 2020-21 budget that included a 1.76-mill tax increase generating $580,376; a voluntary pay freeze by administrators saving $59,093, the elimination of the technology director and assistant business manager administrative positions, saving $154,189, the elimination of certain extracurricular programs due to COVID-19 concerns, saving $84,614, and the elimination of nonmandated transportation due to COVID-19 concerns, saving $992,810. It left a proposed surplus of $91,053.

Just before school started, Lehighton passed a motion adding up to $800,000 to the budget for student transportation except for those living in Lehighton Borough. The district has since added three morning bus stops along Second Street in town for elementary students living in the borough. Afternoon transportation will begin for those students on Jan. 4.

In July, Denicola announced she was leaving the district after a year-and-a-half to become the chief financial officer in the Boyertown Area School District.

“It was the lack of overall professionalism throughout the district that led me to look elsewhere,” Denicola said in a phone interview.

Stern warning

The Pennsylvania State Auditor General’s office released a Lehighton district audit in October, which Auditor Eugene DePasquale said “should serve as a stern warning to other districts across Pennsylvania.”

“The district racked up a stunning $17.3 million tab for debt service during the audit period,” DePasquale said. “By the time the debt is scheduled to be paid off in 2044, district taxpayers will have paid over $43 million in interest on the loans. On top of that, the district spent millions of taxpayer dollars on a private education contract that district officials had mistakenly believed would be achieved at no cost.”

During the audit period, Lehighton’s general fund balance dropped from approximately $14.2 million as of June 30, 2015, to $874,439 as of June 30, 2019. DePasquale said that was “largely due to the district’s failure to budget for capital expenditures coupled with the costs of borrowing $62 million to consolidate and renovate school buildings.”

“The district racked up a stunning $17.3 million tab for debt service during the audit period,” DePasquale added. “By the time the debt is scheduled to be paid off in 2044, district taxpayers will have paid over $43 million in interest on the loans.”

The next step

District officials said a variety of changes are taking place, in the hopes they can lead to avoiding future issues.

“The board, in the previous expense reports, was not seeing the full cost the district was incurring,” Superintendent Jonathan Cleaver said.

“The board is now provided with additional financial reporting to include monthly reporting of both revenues and expenditures. During the periods under state audit, the board most often only received expenditure reporting. The board is now also provided with additional expenditure reporting data, expenditure reporting by object in an effort to understand the budget to allow for actual analysis.”

In addition, Cleaver said, the board currently receives monthly bank statements to assist in any budget analysis they wish to perform based on the districts most up-to-date financial data.

Bradley has repeatedly requested a special board meeting to discuss the state audit. Board President Larry Stern said on Dec. 21 that the issue could be added to the Jan. 11 finance committee agenda.