A recent Jim Thorpe Area School District budget presentation revealed a projected $3.9 million budget shortfall for the 2025-2026 fiscal year. The presentation, which included a detailed financial breakdown, highlighted rising expenses, stagnating revenues, and systemic funding issues at the state level as the primary contributors to the deficit.

Jim Thorpe’s proposed budget includes total expenditures of $53,958,238 and anticipated revenues of $49,978,835, resulting in a shortfall of $3,979,402. According to officials, the largest portion of the district’s spending — over 60% — goes to salaries and benefits, amounting to more than $31.6 million combined. Additional major expenditures include transportation and tuition ($11.3 million) and professional and technical services ($3.3 million).

“If we increase property taxes to the 4%, which is the max allowed,” Business Manager Brian Off said, “it’ll bring in about another $1.2 million in our revenue.”

The budget presentation included a breakdown of proposed capital improvement projects totaling $1.29 million. These projects range from domestic hot water boiler replacements to gym lighting and floor repairs, as well as infrastructure updates like generator transfer switch upgrades and paving patches.

One project expected to begin this year, officials said, is a roof replacement with a total cost of $843,000. A grant, Off said, covers $322,000 of this cost, leaving a net cost to the district of approximately $500,000. This amount has already been reserved and will be rolled over into the next fiscal year.

“These are all projects that are either on the feasibility study or (our facilities director) feels are necessary,” the presenter noted. “Outside of not doing these projects, there are no extra funds for emergencies.”

The presentation also raised concerns about the growing financial burden of cyber charter school costs. In 2019-2020, the district spent just under $2.5 million on cyber charter tuition. That figure has now ballooned to more than $4 million.

“Our cyber costs have doubled in five years,” Off said. “There are budget plans that could hopefully address this in the near future, possibly as early as next year.”

Compounding the district’s financial challenges, he added, is a change in the state’s funding formula. The district is poised to lose $273,000 in state contributions this year. The reduction stems in part from the elimination of cyber charter reimbursement and a decrease in special education funding.

“We are actually number two in the state out of 500 districts in the amount of money we’re losing from the state,” Superintendent Robert Presley said. “The only district losing more money than us is the entire Pittsburgh School District.”

The revised state funding model, according to officials, redistributed money based on tax equity and adequacy without updating the formula to account for current district needs.

“They just shifted it over,” Presley said. “So we didn’t get it last year, and we won’t get it this year. But we lost because they got rid of cyber reimbursement, which was $357,000, and they lowered our special education by $10,000.”

Officials cited rising property values and family incomes in the district as reasons the state views it as capable of self-funding through local tax increases.

“The state says you have the ability to raise funds,” Presley said. “You are choosing not to. The reason we are not going to provide you with extra funds [is] the system says the local taxpayers should be paying.”

A proposed solution under consideration at the state level would replace the current cyber charter reimbursement system with a flat-rate payment. While an $8,000 per-student rate was floated, officials were skeptical.

“That’s a pie in the sky,” Presley said. “They’re looking at maybe a $10,000 flat rate or 11.”

Special education expenses within cyber charter schools were also flagged as disproportionately high.

“We pay almost $35,000 for special education students,” Presley said. “The state is beginning to look at that.”

Despite the financial challenges, the district is maintaining a healthy fund balance — for now. It ended the last fiscal year with $14.7 million, and despite a projected $600,000 loss this year, will still have a fund balance of $14.1 million. However, continued deficits, officials said, could drive that number down to unsustainable levels.

“If we continue at the spending rate... we’re going to end up below zero in 2028-29,” Off said.

Different tax scenarios were presented to the board. A five-year projection with no tax increase showed steadily declining reserves. In contrast, a scenario that adopts the full allowable increase under the Act 1 Index each year showed a relatively stable fund balance.

“This year, being a 4% increase, you get the most bang for your buck,” Off said. “It is the largest increase we can take over the next five years. If you don’t want to do it this year, you’re going to be trying to dig out of a hole going forward.”

According to the presentation, 48% of taxpayers would see a $55 increase or less in their tax bills under the proposed rate hike. This potential increase could be offset by an expected boost in homestead funding, which last year reduced the average tax bill by $62.

The district is also exploring a one-time funding boost by partnering with MSR, a third-party firm, to secure a loan backed by delinquent taxes. This arrangement could bring in between $500,000 and $700,000.

“They pay us and our regular tax collectors do their regular tax collecting,” Off said, “and they remit the money to MSR, who just took out a loan basically on those taxes.”