A last-minute jump in healthcare figures turned what was nearly a balanced budget into a $1 million problem for the Palmerton Area School District.

Assistant Superintendent for Finance and Facilities Ryan Kish presented the district’s preliminary 2026-27 spending plan to the school board Tuesday, projecting total expenditures of $43,119,175 against roughly $42 million in revenues — a deficit of just over $1 million.

More than $800,000 of that gap is driven entirely by medical costs. The district is self-insured, meaning a surge in employee claims hits the budget directly rather than being absorbed by an outside carrier.

“This year is probably the highest I’ve seen since I’ve been here,” Kish said of the anticipated 23% increase in medical rates.

He had built the preliminary budget at a 6% medical increase before receiving updated figures the day before the meeting.

“Before I got the updated numbers on Monday, I had about a 6% increase in the budget,” he said. “I updated them to about 18%,” — and even that projection still requires drawing on the fund balance to cover the remainder.

The district had budgeted roughly $4.8 million in healthcare expenditures for the current year and is already trending $300,000 over that amount.

“A few bad claims can really drive our budget, and that’s what’s happening right now,” Kish said. “We have very, very high claims this year.”

Kish said the problem is not unique to Palmerton. East Penn and Northwestern Lehigh school districts have been hit with similar increases, he noted.

“All the schools — I’m sure statewide — are all going to be struggling with this increase in medical rates,” he said.

Kish said he had hoped to deliver better news.

“Up until yesterday, I was hoping to present almost a balanced budget, maybe $100,000 or $200,000 off,” he said. “But with those healthcare numbers, it’s not looking good right now.”

To close the gap, the district could raise taxes up to the Act 1 index cap of 4.7%, which would generate $950,970. That would still leave roughly $112,000 to be pulled from fund balance. One mill of tax generates around $328,000 for the district and costs the average taxpayer $44 per year, Kish said.

He declined to detail specific tax scenarios Tuesday, saying those figures would be presented at the May budget workshop.

“Most of our increase this year is not debt service — it is medical expenses,” Kish said.

Beyond healthcare, the budget reflects several other pressures. Staffing dominates spending at 64% of the total. Tuition and outside placements — including cyber schools, charter schools, the Carbon Career and Technical Institute and intermediate unit services — make up 18%. Departmental budgets for athletics, curriculum and business operations account for 6%, with debt service at 5% and transportation and facilities each at 3%.

Salaries are budgeted to increase 2.5%, though the figure is compressed by an accounting shift. Kish removed two school psychologist positions from the salary line, where they had sat unfilled for eight years, and moved them into the special education budget as contracted services.

“We have not been able to get them as staff members, so we’ve been contracting out a lot,” he said.

If the district eventually hires the positions directly, he said, the money would shift back.

Support staff contract negotiations are ongoing. Kish said he budgeted the entire bargaining unit at the same raise percentage it received this year, noting the figure is a placeholder.

“That has no implication for what actually gets bargained,” he said

Special education costs rose $189,000 — an increase Kish attributed not to the removed psychologist positions but to the department’s trajectory overall.

“Our special education budget every year keeps going up,” he said.

Cyber charter school tuition increased $147,000, non-public tuition and intermediate unit services rose $431,000, and debt service climbed $130,000. The district’s capital construction project added $250,000 to the current budget, a figure that will double to $500,000 the following year.

On the revenue side, local sources totaled about $23.8 million, up $191,000 due to updated property assessments and earned income tax collections. State revenues reached about $17.6 million, up $482,000 driven largely by a growing ready-to-learn block grant. Federal revenues, at roughly $469,000, were flat.

Kish acknowledged the numbers will continue to move before the budget is finalized.

“I expect the medical numbers to change,” he said. “I don’t know if they’ll go higher or lower, but I don’t expect them to stay the same.”

The board will receive a comprehensive budget presentation at the May 5 workshop. The proposed final budget is scheduled for adoption at the May 19 board meeting, with a final general fund budget vote set for June 16.