Harrisburg School District Administration Building

For the first time in six years, Harrisburg’s local school board has approved a budget, and it includes a property tax hike.

Having exited state receivership last week, the Harrisburg School District returned to local control, giving power back to the board to pass the 2025-26 budget on Tuesday.

The $213.1 million budget includes a 2% tax hike, bringing the mill rate from 30.78 to 31.4 mills. The tax raise will likely be the first in a series of increases over the coming years as the district continues working on financial recovery.

Budget approval was a new action for the board post-receivership, as the state-appointed receiver, Dr. Lori Suski, previously held almost all approval power. Levying taxes was the only power the board held during the six years of state control. But this year’s tax decision found the board weighing unique circumstances as the district faces a post-COVID funding cliff and a five-year state monitoring period with requirements following receivership.

In May, district officials proposed an initial budget with a 2% tax increase. Tuesday’s final budget was about $1 million more than the original proposal, due to receiving federal funding that will be used for expenditures such as additional staff, HVAC upgrades, added security measures at schools, and other items.

The approved 2% property tax hike mirrored the original proposal by Chief Financial Officer Dr. Marcia Stokes, who explained that additional revenue is needed. The district has used all of its federal Elementary and Secondary School Emergency Relief (ESSER) funds awarded during the pandemic, is seeing impacts of inflation and is experiencing an unprecedented drop in valuations from taxable properties in the city, especially large commercial properties.

In response, Stokes recommended that the board make small, incremental tax increases over the coming years.

“Our community is facing a 20% increase in their county taxes this year that they’re factoring in because they’ve [Dauphin County] not done cumulative increases,” she said. “So, how can we can we, as a board, make sure part of all of our processes when it comes to setting budget parameters is to look at not only the budget year we are developing but what’s that impact two, three, five years from now.”

Ultimately, the board unanimously voted in favor of Stokes’ plan.

The district’s previous top administrator, former receiver Suski, now sits as the district’s chief recovery officer, tasked with monitoring how the district follows its Amended Recovery Plan post-receivership.

When the budget was proposed, and again on Tuesday, Suski stated that the 2% tax increase may not go far enough to satisfy the recovery plan and the Pennsylvania Department of Education (PDE). According to Suski, the district received a recommendation from outside financial advisory firm Public Financial Management (PFM) for a 4.81% tax hike, which was recently increased to a recommendation of a 6.3% increase. PFM made that adjustment after learning that property tax revenue had dropped substantially.

The board and district officials faced the challenge of having to make budget and tax determinations without knowing how much state funding they would get. The district frequently has to adopt its budget before the commonwealth finalizes its budget, which is typically late.

Stokes explained that PFM calculated its suggestion using much more conservative revenue projections, assuming that the district would receive no increase in state funding. Stokes made her revenue calculations based on an assumption that the district would receive half of proposed state funding increases.

“We, as a district that are so heavily reliant on state aid, we have to gamble a little bit,” Stokes said.

She noted that she felt confident that Harrisburg would receive additional funding from the state, as it is a historically underfunded district and has already been awarded over $1 million in extra federal funding. An large tax increase would be a burden on the community that could not be reversed once the district learns of its awarded funding, she said. Stokes also noted that she has factored in $4 million in budgetary reserves in case the district doesn’t receive assumed state grants, so that significant cost-cutting won’t be necessary.

“I fully understand that the assumptions that Dr. Stokes is making are based on what we have seen historically in terms of state funding. However, there is no guarantee, as we know, that we’re going to receive 50% of the governor’s proposed budget. I hope we do. I hope we receive more of it,” Suski said. “We need to consider the long-term implications of that decision.”

Suski previously shared that she wasn’t sure how PDE would respond to the district not adopting PFM’s recommendation for the tax hike, as Harrisburg is the first district in Pennsylvania to exit receivership.

“I don’t think the playbook’s been written yet,” she said.

School board members expressed the difficult decision-making position they were placed in.

“It’s kind of a tough gamble because it’s like if we don’t go by the 4.81% and there’s nothing put in play and then later on down the line this conversation comes back up and it’s like, well, we did not abide by what they presented,” board member Brian Carter said.

District officials agreed that, for the upcoming school year, the district will be fine with the 2% tax increase, but the future impact will remain to be seen.

“Yes, this is a calculated risk,” Superintendent Dr. Benjamin Henry said. “Next year, in particular, we are just going to have to continue to monitor–monitor what is going on. If we have any additional properties that we have to get refunds or even state funding, we have to monitor it. And we will have to adjust next year’s taxes.”

The 2025-26 budget includes expenditures such as salaries and benefits, instructional costs, debt payments and over $30 million in payments to charter schools.

Also on Tuesday, the board approved a $6.2 million Capital Plan Budget, which draws on grant sources to make infrastructure improvements in the district.

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