JEFFERSON TWP — The South Butler School Board is considering a 2 mill property tax increase.

The board next week is expected to adopt a $32.3 million budget for 2010-11 that will include an operating deficit. Depending on the size of the tax increase, the gap between revenue and expenses will be filled by the reserve balance.

Without a tax increase, the budget drains the reserve of $795,465. If the board accepts the recommendation of the business manager and increases taxes 2 mills, that will reduce the operating deficit by $300,000.

The current tax rate is 87.625 mills. A mill is $1 of tax for every $1,000 of assessed property value. The current budget is $32.2 million. The projected budget amounts to an 0.2 percent increase.

The deficit was largely blamed on an increase in payments the district must make to the fund teacher pensions, the Pennsylvania State Employees' Retirement System. Those contributions are stipulated by law and will see sharp increases in the future.

"This millage increase is for one reason: PSERS," said board member Glenn Lang. "This is strictly for covering the disaster that's coming in two years."

Business manager Debbie Brandstetter showed the board information that indicates the amount the district must pay will rise from $325,000 this year to $2.2 million in 2012-13. That's a 570 percent increase.

To buffer that spike, Brandstetter's budget proposes setting aside $124,600 in the 2010-11 budget earmarked for retirement payments. If the board follows her plan, by 2012-13 the district will have set aside more than $1.5 million.

With that fund to make most of the retirement payments, district tax rates won't have to see such a large spike.

Brandstetter said in the proposed budget 4.5 mills go toward retirement payments. Using state estimates, she calculates more than 15.4 mills in 2015-16 will go toward retirement.

Projected revenue, 42 percent of which comes from real estate taxes, will increase in the proposed budget $7,500 from the current year. Expenses, however, will increase $66,800.

Included in the proposed budget are several capital projects including repairing the primary school roof, paving and carpeting.