Jim Thorpe Area School District is projecting a $4.14 million budget shortfall for the 2026-27 school year, driven by ballooning cyber charter school payments and employee benefit costs that administrators warn may soon eclipse salaries as the district’s single largest expense.

The proposed budget, presented Wednesday night at the district’s committee meeting, totals $55.97 million in expenditures against $51.83 million in projected revenues. Even applying the maximum real estate tax increase permitted under Act 1, 4.1%, would still leave the district $2.85 million in the hole.

The district is expected to vote Wednesday night on a proposed final budget. Even if approved, that plan could be adjusted through final approval in June.

Cyber charter tuition payments have become the district’s largest single expense after salaries and benefits, according to budget documents presented at the meeting. The district currently sends 209 students to cyber charter schools at a cost of roughly $4 million annually and that figure has climbed $2 million since the 2019-20 school year. The per-pupil rate is calculated by the state and charged back to the district monthly, withdrawn directly from its state subsidies.

“Special education is just over $31,000 a student, and regular education is $16,500,” Business Manager Brian Off said regarding cyber costs. “Cyber schools basically just submit a bill.”

Roughly half of the cyber population is estimated to be special education students, officials said. Off said the district is projecting a 10% reduction in cyber costs compared to last year, the result of a state formula change that allows districts to deduct a portion of their facility and student activity expenses from the tuition calculation.

A further reduction may be on the horizon. Pending state legislation would increase that deductible share from 60% to 85%, which Off estimated could trim the district’s cyber bill by an additional 3%. He cautioned, however, that the change may not advance this session.

“At the advocacy day, I didn’t have one discussion about changing that, even though it’s in the governor’s proposal,” Off said. “I don’t think it’s going to be a push.”

Benefits

Meanwhile, employee salaries and benefits combined account for 60% of the district’s total expenditures, roughly $33 million, and the ratio between the two is shifting in a direction that concerns administrators. Salaries for 2026-27 are budgeted at $17.3 million, while benefits total $15.65 million and are climbing faster each year.

“Every year, benefits get bigger,” Superintendent Robert Presley said, pointing to a graph showing the trend from 2021 through the current year. “Eventually, what the state is looking at is that your benefits are going to be a larger cost driver than all of your salaries. And it was never like that before, because the cost of health is going up every single year. It outpaces your salaries.”

The pension contribution rate under the Public School Employees’ Retirement System adds to the pressure. For every dollar of salary paid, the district must send approximately 34 cents to the state retirement system, meaning a teacher hired at $55,000 carries a true cost closer to $78,000 when benefits and health insurance are factored in, Presley explained.

“It’s going to be interesting when you get to new contract negotiations where your benefits are more than your salary,” Off said. “Which is an odd conversation to have.”

The revenue picture offers little cushion.

Real estate tax revenue has grown just 7.72% since 2021, according to budget documents, compared to 19.9% inflation over the same period. Earned income, transfer, and amusement tax projections were held flat for the coming year.

“Those revenue numbers are flat,” Off said. “We’re trending pretty much what we budgeted for this year.”

The district’s fund balance, which stood at $14.96 million at the start of this fiscal year, is projected to drop to $12.97 million by June 2026 and further to $8.83 million by June 2027 if no corrective action is taken.

The district’s roughly $4 million annual debt service payment adds another layer of fixed costs that cannot be reduced, Off noted. Salaries and benefits are largely contractual. That leaves purchased services — which includes cyber tuition, special education placements through the Behavioral Health Associates and the Carbon Lehigh Intermediate Unit, and transportation — as the primary area where administrators see room to move.

The district, officials said, has already begun. This year it brought one special education life skills classroom back in-house from the intermediate unit, a move projected to save a net $300,000. The savings are being reinvested into new staff positions created to support the program.

Presley said the district intends to pursue additional in-house special education services, both because it benefits students educationally and because the math is increasingly favorable.

Under the intermediate unit’s shared-cost model, every district in the region pays the same per-pupil rate regardless of their actual expenses, a rate that has been rising sharply.

“If I have a student in my building in an IU classroom, why can’t my speech therapist service that student?” Presley said. “We’re already paying my speech therapist. Why do I have to pay the IU several thousand dollars to service somebody that I have the capacity to service?”

The district added a third speech therapist this year after caseloads for the two existing therapists climbed into the 60s.

Beginning next year, officials said the district plans to pursue Medicaid access funding reimbursements for those services; money it was not previously collecting.

On the revenue side, the governor’s proposed adequacy funding formula would yield only a $140,000 increase for Jim Thorpe, Presley said, because the bulk of the new money is directed toward districts with larger low-income student populations.

If the board opts for the maximum Act 1 increase of 1.94 mills, the average Jim Thorpe homeowner, with an assessed value of $39,750, would see their annual tax bill rise by roughly $77, or about $6.50 per month, according to budget documents.

The district noted that 57% of taxpayers would see an annual increase of $78 or less under that scenario.