There is no way to sugar-coat the situation; the Annville-Cleona School District has some very difficult fiscal challenges ahead. We want the taxpayers to be aware that the current school board is working hard to reduce costs without affecting our commitment to provide our students an outstanding education. We have a great academic tradition at A-C; our school has consistently ranked at the top of county schools despite the fact that we command less in resources than some of our richer neighbors.

So why are we having these financial difficulties? There is no one answer to this question but a combination of factors. Simply put, for several reasons, as discussed below, we have had both higher expenses and less income then expected - a difficult situation to manage.

First, we will discuss expenses:

The genesis of our difficulty was a previous A-C board decision to undertake substantial debt to buy a new school. Specifically, like so many homeowners in the United States, that board purchased a "home" (the new A-C High School), which was beyond the school district's means. In order to purchase the new facility, the school district took on nearly $35 million in debt, which requires us to pay approximately $1.5 million in interest annually.

We have "mortgage" payments that total more than $2.6 million dollars per year. To be clear, if we did not have this debt obligation we would be able to fully fund our educational programs while reducing taxes this year.

But the reality is that we do have that debt, and we need to deal with it. We cannot merely abandon our mortgage. The good news is that after payments are made in the next budget cycle the debt will be reduced to under $30 million. This board is aggressively paying down debt and refusing to take on more!

A second major expense we are facing are legal requirements to pay for losses in the Public School Employee's Retirement System pension plan. Similar to union-negotiated pensions that devastated U.S. car companies, the school district is required by Pennsylvania state law to fund school-district employee pensions so that they receive a guaranteed benefit upon retirement - a so-called "defined benefit plan."

Because of the recent stock-market plunge, taxpayers are required to make up for the losses incurred by school-district employees in their PSERS pension-investment accounts. For the school year 2010-11, A-C is required to pay an additional $300,000 into the PSERS pension fund, which is managed by the state. During the next several years this additional annual charge may increase exponentially to more than $4,000,000 annually.

This is a financial tsunami which if left unchanged will exert a crushing blow on this school district as well as most others! We must urge our state legislators to take definitive action to correct this situation!

Finally, utility expenses will significantly increase beginning next year as a result of the utility rate deregulation.

While our expenses have risen, unfortunately our income has been unexpectedly reduced due to three major factors:

Reassignment of earned-income-tax receipts from the Lebanon County Earned Income Tax Bureau left us with significantly less local funding then was anticipated - a reassignment that occurred after the discovery of the fraud of the former Lebanon County EIT bureau's executive director.

The severe recession we are experiencing has resulted in lost jobs or less pay for those who have kept their jobs and therefore reduced income the school receives from the local income tax.

Decreased funding from the state. To emphasize this point on loss of revenue, last year the A-C school district total budget was $180,000 less than the previous year's budget, but instead of being able to lower taxes we had to raise taxes by 4.9 percent to make up for the loss of income due to the factors mentioned above.

So what is the board doing to remedy this situation?

In the past two years we have taken a number of steps to reduce costs. We have reduced the workforce at the Annville-Cleona School District by 13 people, saving the district approximately $600,000 annually. We intend to undertake further personnel reductions, especially as our student population decreases. Again, we are proceeding in a prudent fashion so as to minimize the effect to educational programs.

The board will approve the temporary closing of the North Annville Elementary School for the next school year which will save an additional $160,000 to $200,000 per year. The school will re-open when student populations once again rise and we need the additional space.

We have made other budget cuts across the board, including athletics and other extra curricular budgets. We have other opportunities to make headway on these budget challenges.

Next year we will be renegotiating the multi-year school-district employee contract. We will need to negotiate an agreement that is more reflective of current economic conditions and of the school district's financial situation. More than two-thirds of the current school district budget consist of employee pay and benefits (especially when you consider the required payments to the PSERS pension discussed above), so this will be a very significant undertaking.

We hope to refinance our substantial debt to lower interest rates, but because of the timing of how our debt bonds were placed, as a practical matter, we will be unable to "refinance our mortgage" until a portion of those bonds come due in 2015.

As you can see, the challenges facing the A-C School District are daunting. We welcome every taxpayer's constructive ideas to work through these financial challenges, but please remember that we must not be pennywise but pound foolish in this endeavor.

Every person in our district, not only those that have children, has a vested interest in investing wisely and fully in the education of our next generation. Remember that they will have the burden of supporting our generation when we retire. There are no funds in the nation's Social Security fund. We will all be depending on future generations, who will need to compete in an increasingly competitive global marketplace, to pay for our Social Security as well as other debts - (indeed our current generation is passing on trillions of dollars of debt on to the next generation). We cannot short-change their educational experience or we will be sealing not only their fate but that of our own.

The United States of America is the greatest nation on this earth because in the last 200 years each generation has made sacrifices for future generations. These sacrifices have been much more than financial - I hope each of us remembers that every time we pass a military cemetery. I certainly understand the justifiable anger felt by taxpayers against the federal government and the Pennsylvania state government for wasting billions of dollars, but do not allow that anger to be transferred into punishing our local kids.

This school board must manage taxpayers' resources prudently and reasonably, but do not allow this school board to abandon the important mission of educating our children to prepare them to lead our great nation under God into the future.