The Altoona Area School Board reviewed its projected expenditures for the 2025-26 preliminary budget during a committee of the whole meeting Monday and is faced with a more than $2 million deficit as costs continue to climb.

According to business manager Sue Franks, total expenditures for the projected budget are $125,798,910 — a shortfall of $2,433,622 from the district’s projected revenue of $123,365,288.

That shortfall is the largest deficit the district has faced since the pandemic, Franks said.

Although the shortfall is a concern, Altoona Area has had larger deficits of up to $7 million in previous years and years when the budget was projected to have a surplus, Superintendent Brad Hatch said, noting district officials are trying to develop a budget without knowing what their actual allocations are going to be from the state and federal levels.

For example, last year Altoona Area received nearly $3 million in excess of what the district had budgeted from the state’s projected revenue, Hatch said.

“You have those years, but then you also have years where it’s very lean and your unforeseen expenditures blow your budget into a deficit,” Hatch said. “At that point, you have your general reserve to be able to cover your shortfall.”

Franks said Altoona Area has a reserve fund balance of about $30 million to cover a potential deficit. There is also more than $4.4 million in potential positive adjustments the district could receive in Ready to Learn and basic education funding that could offset the deficit, she said.

As a worst-case scenario, if the school board decided to raise real estate taxes to the Act 1 index of 5.8%, that would generate about $1.2 million in revenue, Franks said, adding the district could use its reserve fund to cover the remaining shortfall.

“We are very lucky right at the minute that we still have a fund balance,” she said. “If the need arose and we weren’t able to cover expenditures with current income, we do have savings money that we could draw from.”

During the meeting, Franks said 92% of the overall budget consists of instructional and support-related expenses.

“The majority of our budget goes toward educating kids, which is what we’re here for,” Franks said.

A line-by-line breakdown of expenditures by function shows that instruction costs are projected at $75,913,865, a $2,893,868 increase from the 2024-25 budget, most of which is related to contractual increases in salaries and benefits, Franks said.

Support services expenditures were listed at $40,380,562, an increase of $1,568,152; operation of non-instructional services were listed at $2,566,579, an increase of $196,303; and other expenditures and financing uses were listed at $6,937,904, a decrease of $696,563.

The district is facing a projected $3,012,313 shortfall in transportation-related expenses, which are anticipated to total $5,160,663 in the 2025-26 school year, according to Franks.

Cyber school tuition costs are also projected to increase $587,000 over the 2024-25 budget to $4,889,800. Those costs continue to increase year over year, Franks said.

Board President Val Mignogna said he feels there should be limitations in place to prevent students without a medical diagnosis from leaving public brick and mortar schools for outside cyber charter education.

“This is setting society up for a bad future when we have 10 to 20 percent of your student population not physically coming and interacting with people. That can’t be good,” Mignogna said.

Hatch said he feels the best legislation to reform cyber charter education would institute a flat $8,000 tuition rate for regular education students to attend cyber charter schools and $12,000 for special education students.

Hatch said the district has lobbied with local representatives to look at funding reform and cyber charter reform.

“At the end of the day, the reform that I would like to see is that if school districts provide a cyber option, that families should have to utilize that first and at least try it before having the opportunity to go to an outside cyber option,” Hatch said.

The school board is scheduled to approve the proposed 2025-26 general fund budget at the May 12 meeting and adopt the final budget at the June 16 meeting.