Jim Thorpe Area School District is staring down a projected $4 million budget shortfall for the 2026-27 school year, and district officials are warning that without property tax increases, the district’s financial reserves could be wiped out within four years.

Business Manager Brian Off presented the preliminary budget figures Wednesday at a board workshop, outlining total projected expenditures of $55.6 million against revenues of just under $51.6 million — a gap of $4.01 million.

The district is permitted under Pennsylvania’s Act 1 to raise its millage rate by 4.1% this year, which would generate roughly $1.28 million in additional revenue and move the millage rate from 47.34 to 49.28 mills. For a homeowner with a property assessed at the district’s average value of $39,750, that increase would mean approximately $77.64 more per year in school taxes — before any homestead exemption credit is applied.

“Fifty-seven percent of taxpayers would see a $78 increase or less,” Off noted.

Homestead funding from the state is expected to soften the blow somewhat. The homestead credit increased by $48 last year and is projected to rise again, which would reduce the net tax impact for qualifying homeowners.

The biggest cost drivers in the proposed budget are salaries and benefits, which together account for 60% of all district expenditures — a figure Off said has held steady between 58% and 60% for several years running. Medical insurance costs alone are projected to rise by 10%, adding more than $500,000 to the budget.

The district also renegotiated its professional and support contracts last year, locking in wage increases that will carry forward for several years. Transportation costs are rising as well, Off said, driven in part by expanded van service for students with special needs and a state reimbursement formula that worked against the district. Although the district’s transportation partner became more efficient — putting more students on buses — the assessed market value of properties in the district jumped 19%, which lowered the district’s state aid ratio for transportation by 2%, costing roughly $100,000 in expected reimbursements.

“It was completely out of our control,” Off said of the reimbursement shortfall. “It was impacted by the market value of the properties in our district.”

Revenue sources offer limited relief. The district draws 58% of its income from local real estate taxes, 14% from other local taxes such as earned income and amusement taxes, 26% from state funding and just 2% from federal sources.

“There are proposed savings on the cyber side, but I’m not sure what the appetite of the legislature is to attack cyber again for a second straight year,” Superintendent Robert Presley said.

With no tax increase included in Wednesday’s presentation, district projections show the fund balance falling from roughly $14.9 million at the start of the current school year to $8.9 million by June 2027. A property tax increase each year would stabilize the fund balance and keep it at a level that Off said is important for the district’s long-term creditworthiness.

“We’ll probably be going out for a bond around 2029-30,” Off said. “If we’re in that 15 to 20 percent fund balance to revenue ratio, that helps our credit rating, which would help us get a better interest rate, which would save us money in the long term.”

The board must pass a preliminary budget in May. Presley reminded board members that they can’t raise the tax rate above whatever ceiling is set in the preliminary budget.

“If you do a preliminary budget with a zero tax increase, when it comes to the final one, you can’t say, ‘Oh, I changed my mind, I want to do 2.5% or I want to go four,’ ” he said. “You can come down from the preliminary, but you can’t go up.”

The district’s current fund balance stands at approximately $12.9 million after a budgeted expected loss of just under $2 million in the current 2025-26 school year. A final budget is expected to be adopted before the end of June.