Lancaster County’s largest school district plans to raise taxes 4.25% starting July 1, marking the highest increase since 2008 but still not enough to avoid layoffs and a hiring freeze.
How did the district’s finances get to this point?
School District of Lancaster, with nearly 10,000 students, has been struggling to balance its finances for years. Federal funds doled out to help public school districts during the pandemic served as a Band-Aid to help close that gap.
“When you go back and look at budget presentations from 2017, 2018 and 2019, you saw in five years we’re projecting very significant structural deficits,” said Drew Schenk, the district’s chief financial and operations officer.
In September 2019, the district projected a deficit of $29 million for the 2024-25 school year.
Money from the Elementary and Secondary School Emergency Relief Fund, a federal pandemic-era program that directed billions of dollars to schools to mitigate the effects of the pandemic, “gave us a couple years of relief,” Schenk said.
But those relief funds ran out in September 2024, and the district’s nine-member board and its administration faced a $21 million deficit heading into the 2025-26 school year.
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Special education costs on the rise
The financial challenges the school district faces are many — and similar to what neighboring school districts are experiencing — and they are exacerbated by a growing number of students who require extra and more costly services. Those students include those whose first language isn’t English and those who have learning or physical disabilities that require special education services.
Though the district’s total student population decreased from 10,880 students in 2019-20 to 9,959 students in 2024-25, the number of students requiring special education services nearly doubled, from 1,195 to 2,225, according to the state Department of Education and School District of Lancaster.
The number of English language learners whose first language is not English rose from 1,858 to 2,529 from 2019 to 2025, according to the district.
Students identified as English language learners and requiring special education more than doubled in that time frame, from 212 to 459, according to district data.
To paint a picture of what this might mean for the district in terms of hiring, Superintendent Keith Miles said a student diagnosed with autism could work with a speech pathologist, an occupational therapist and three paraprofessionals, and also require modified transportation to school.
Public schools are mandated by the state to provide special education services, but it’s a poorly funded mandate, as special education funding has lagged behind the rising costs of those services for years.
Finance director Kim Reynolds said the district expects to pay $2.7 million more next year in special education services but expects to receive only an additional $400,000 in special education funding from the state.
Years of similar funding gaps widened the district’s deficit.
Miles suspects the growing number of students needing special education services could be linked to prolonged remote learning during the pandemic.
Though Miles wasn’t leading School District of Lancaster at the time — the district was helmed by former Superintendent Damaris Rau, and Miles was superintendent for Bridgeton Public Schools in New Jersey — he similarly erred on the side of caution in keeping students home to mitigate the effects of the pandemic.
If he could do things differently, Miles said, he would have returned younger learners and learners at risk of potentially needing special education services to in-person instruction sooner, while keeping other students at home.
“Maybe we’re paying the price for delayed support in that area,” Miles said.
OPINION: If you’re unhappy about a tax increase, blame your lawmakers, not your school board [editorial]
ESSER funds run out
As schools scrambled to transition to remote learning, the federal government began doling out funding to help schools afford the associated expenses in the form of ESSER funds. For School District of Lancaster, the first wave of such funding helped buy technology needed to implement a one-to-one program in which each enrolled student receives an electronic device.
From 2020 to 2021, School District of Lancaster received $70 million in ESSER funds, all of which had to be spent or returned prior to September 2024.
The funding did supply relief for the district.
Declining enrollment typically calls for layoffs or “right-sizing” staff to align with population numbers; state funding for public schools is calculated, in part, according to a district’s enrollment.
With ESSER funding, the district could afford the salaries of support staff including social workers and learning coaches to maintain services, as student needs justified their presence despite declining enrollment, Miles said.
ESSER money also paid for one-time programming such as extended-day and summer learning to help reverse losses in academic achievement that resulted from remote learning.
The funding “allowed us to focus on our (most pressing) student needs,” Miles said.
But the infusion of cash only prolonged the inevitable.
Some of the district’s summer learning programs were canceled; nine staff positions, including the board secretary and a business position, are on the chopping block; and a hiring freeze is in place as part of $11 million in cuts to reduce a $21 million deficit without ESSER funding and without dipping into its general fund balance, which sits at just $6.4 million.
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Always in ‘some state of renovation’
ESSER wasn’t the only financial Band-Aid the city school district has used to stay afloat.
The current board and administration inherited buildings that were neglected throughout the 1990s. To serve its student body — the largest by far in the county — the district maintains 23 buildings.
Most of those buildings were built in the early to mid-1900s without amenities such as air conditioning. Around 2007, following nearly two decades in which the buildings went without major renovations, the district embarked on what would be a decadeslong multiphase master facilities project.
When final renovations in the fourth and final phase of the project wrap up, likely in 2028, the district estimates it will have spent $428.5 million on the facilities project — a 114% increase over cost projections when it began in 2007.
Schenk’s predecessor, Matt Przywara, often said that with nearly two dozen buildings, the district should always be in “some state of renovation.” Schenk said that looks like making renovations to at least one building per year.
Neglecting renovations in the 1990s didn’t save costs, Schenk said, but delayed and increased the financial toll, as buildings in the 21st century have become more costly to maintain.
“It certainly has been a financial hurdle to get through all of these buildings in essentially 25 years,” Schenk said. “But it was needed. Our students deserve it.”
Future projects, Schenk said, should be less expensive and spread more evenly across budget years as the district plans continuous maintenance on its buildings.
That does mean the district will be continuously paying construction and renovation bills. In the 2025-26 budget, to close part of its $21 million deficit, the district will pull $7 million from its capital reserves fund — money set aside for infrastructure improvements — drawing down the balance to $28 million.
‘An impossible situation’
An additional $3.6 million generated by a 4.25% tax increase included in the proposed budget would close the remainder of the deficit.
For years, the board has approved 1.5% to 3% tax increases to minimize the financial burden on district taxpayers, especially while the district could rely more on the federal pandemic funds.
“Our board has made the right decision in the minimal tax increases during the pandemic, knowing that a potential higher increase was coming down the road, which gave the taxpayers relief in a time where unemployment had skyrocketed and people were really struggling,” Schenk said.
For the coming year’s budget, the board had to weigh not only the persistent financial challenges facing the district, but possible constraints to the district’s taxing authority in coming years.
Over the next five years, Schenk said the Act 1 Index — the maximum amount an individual district is allowed to raise taxes on residents without receiving an exception from the state — is likely to decline with the struggling economy. The district’s index number, for example, took a downturn during the 2012 recession.
While the tax hike for the 2025-26 school year is larger than previous years, the board could have raised taxes by as much as 5.6%, its Act 1 Index number. The district is making the move for a bigger increase in part because the district is projecting a $51.6 million deficit by 2030.
Without making further, and potentially harmful, cuts to staff and district programming, a lower tax increase in the proposed budget could have required dipping into the $6.4 million general fund balance, Schenk said.
The board opted not to dip into the general fund balance, as the administration is seeking to raise its fund balance to roughly $22 million, equal to the 8% cushion recommended by the state.
“It’s an impossible situation because when I vote to raise taxes, I feel that I’m increasing (taxpayers’) spending costs at a moment where increasingly families have tighter budgets,” board member Dave Parry said. “But I also know there is a level at which, if we decrease spending, it will hurt the district, hurt the students and overall hurt the community.”
Parry voted in favor of the 4.25% tax increase alongside his eight fellow board members.
“Because the state has not met its obligation to fairly fund districts, that economic burden is being passed on to local taxpayers,” Parry said.
State underfunding
In 2023, a Commonwealth Court judge ruled in favor of the School District of Lancaster and five other Pennsylvania public schools in deciding that the state’s schools are unconstitutionally underfunded. Pennsylvania ranks 42nd in the nation for the funding it provides to its public schools, according to PA Schools Work, an organization advocating for better public school funding. he organization.
School District of Lancaster is among the Lancaster County school districts that relies heavily on state funding. This year, the district received nearly $83 million in state funding, according to the district’s finance office.
For the 2025-26 school year, the state budget proposes a $4.1 million increase in state funding for the district. But the district is budgeting for only an extra $3 million, as the state budget is not yet final and negotiations in Harrisburg could extend past June 30, when both the district and the state are supposed to have their budgets finished.
If the district receives the full allotment, the additional $1.1 million will be deposited into the district’s fund balance.
Still, the district is underfunded by roughly $41 million, according to Schenk, and while the state has approved significant increases to public school funding, it does not plan to immediately erase the $5.1 billion funding gap across 371 districts statewide.
Closing that gap is expected to be done incrementally by the state over seven years, Schenk said.
“In the meantime, we have real cost expenses, serious needs in our community, and I think we all know that those needs persist — and not just persist; they’re increasing,” Miles said.
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