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District unveils proposed budget

January 18, 2007|by DON AINES

CHAMBERSBURG, Pa. - Pennsylvania's Act 1 will not put much of a brake on increasing property taxes in its first year for the Chambersburg Area School District as the administration unveiled a proposed $96.2 million 2007-08 budget that raises taxes 5.23 mills, a more than 3.68-mill increase in the current year's budget.

The tax increase, if it is adopted by June 30, will raise the taxes on a property with a market value of $100,000 by $55.96 per year, according to the budget presented by Business Manager Rick Vensel. One mill equals $1 for every $1,000 of assessed value on a property and the new tax rate would be 75.91 mills.

Act 1 is supposed to shift some of the tax burden from real estate to earned income taxes, but district residents first will have to approve a referendum in the May 15 primary to raise the district's earned income tax from .5 percent to 1.2 percent in exchange for a homestead exemption of $259 toward reducing property taxes.

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However, the law contains a number of exemptions school districts can use to raise taxes above an inflationary index set by the state. For Chambersburg, the index is 4.1 percent, or 2.9 mills, but Vensel told the board the district qualified for exemptions that would allow taxes to be raised 6.17 mills.

The exemptions are for increases in the district's retirement contributions, health insurance and special education costs above the index and grandfathered debt. The district incurred $116 million in debt in 2004 to pay for school construction projects and the debt service on that is one of the exemptions.

Because of the exemptions, Vensel predicted the budget itself will not have to be submitted to district voters in the May primary. However, some of the exemptions will not be available in later years, making budget planning more difficult, he said.

Vensel's revenue figures are based on the current tax system and shows real estate tax revenue, including a tax increase and a growing tax base, going from $41.2 million this year to $46 million in 2007-08. Earned income taxes would grow from $5.7 million to $6.1 million, according to the budget.

Both those figures would shift considerably if voters approve the tax study commission recommendation to raise earned income taxes, Vensel said. Thousands of homesteads and farmsteads in the district would qualify for the $259 exclusion, while both renters and property owners would see more money taken out of their paychecks.

At the same time, Vensel is projecting that the state's subsidy as a percentage of the total budget once will again shrink from 34.2 percent this year to 32.55 percent next year.

On the expenditure side, the biggest line item is salaries at more than $42.1 million, followed by health insurance at $9.36 million.

Preliminary approval of the budget is scheduled for the Feb. 7 board meeting.

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