CAPE ELIZABETH — Possible state curtailments and a need for rainy-day savings were cited in a School Department budget increase expected to go to voters next month.
School Board members unanimously adopted the $22.5 million fiscal 2014 school budget on March 26. They said unknown future revenue losses influenced their decision to increase the budget by 3.5 percent.
A large portion of the increase, about $300,000, would cover the department if the state pulls much of its teacher retirement funding, an unprecedented plan Gov. Paul LePage has proposed in the state’s biennial budget.
That move would shift a large portion of retirement costs from the state to local school districts, although it’s still unclear exactly what the local share would be, because the state has not released its formulation.
Without calculating teacher retirement the budget increase would be 2.1 percent.
The board also increased the amount set aside for contingency, from $100,000 to $140,000, to create a cushion for projected continuing revenue declines and cost increases.
After debating whether to increase the fund by as much as $100,000, the board compromised on a $40,000 increase.
“I think we got lucky this year and dodged a bullet,” board member Mary Townsend said at the meeting, referring to state curtailments being less severe than originally expected. “If we can avoid a 6 or 7 percent (budget) increase in a year or two, I would like to see us avoid doing that.”
Townsend said other towns that don’t have deep reserves are proposing budgets that projects double-digit tax increases.
Board member David Hillman, who had pushed to increase the contingency fund by $100,000, said building up supplemental funds will be important in the coming years as budget uncertainties at the federal and state levels continue to mount.
“Given all these risks and uncertainties … I think we’ve got to plan for it now,” he said. “Starting to build up a revenue base now is being prudent. More than prudent, I think we’re being logical.”
The increased contingency fund will also replace reserve account funds, which the board used to supplement the budget against state cuts.
Drawing from reserve accounts can be risky, especially if the department has large unforeseen costs or drastic future cuts to state aid. If that happens, more serious action, such as borrowing or teacher layoffs, could be on the table.
Another large expense in the proposed 2014 budget is a 2.2 percent increase in teacher salaries, based on a three-year contract and a projected enrollment increase of 26 students. Another $151,000 has been budgeted for capital improvements.
The proposed state budget funds only $2.9 million of the department’s budget, leaving $19.6 million to be raised through taxes. The projected increase in property taxes for a median-priced $314,000 home in Cape Elizabeth would be $143.
The board will present the budget to the Town Council during a joint meeting at 7 p.m., Wednesday, April 10, at Town Hall. The school budget referendum is scheduled for May 14.
Voters will also see an average projected increase in their taxes of $22 from the proposed municipal budget increase of 2.4 percent, which was presented to the council in March.
The budget assumes the Legislature will reject the elimination of municipal revenue sharing proposed by Gov. Paul LePage’s budget, which would account for $640,000, about an $8,000 increase from this year.
This also presents a risk, because it’s unclear how lawmakers will react to the governor’s proposal.
The council finance committee is expected to set a public hearing date for the town budget on April 11.