BETHLEHEM AREA SCHOOL DISTRICT	                                 APRIL 23, 2001
BOARD OF SCHOOL DIRECTORS 
BUDGET HEARING #1


BUDGET HEARING #1 

The Bethlehem Area School District held a Budget Hearing on Monday, April 23,
2001, beginning at 8:26 p.m. in the Auditorium at East Hills Middle School, 2005
Chester Road, Bethlehem, Pennsylvania.


MEMBERS PRESENT

Members present:  Directors Amato, Craig, Gallagher, Glancy, Heske, Leeson, 
Venanzi, Williams, and Koch - 9.  Student member representative Katie Jo Righi 
was also present. 


OTHERS PRESENT

Others present:  Thomas J. Doluisio, Superintendent of Schools; Jeff Tucker,
Solicitor; Stanley J. Majewski, Jr., Board Secretary; administrators; members of
the press and other interested citizens and staff members. 

Director Glancy, Chairman of the Finance Committee, announced that the second
budget hearing is scheduled for May 14, 6 p.m., in the Auditorium at East Hills
Middle School.  Preliminary adoption of the budget is scheduled for May 21, at
the Education Center.  On June 21, final adoption of the budget will take place
in the Auditorium at East Hills Middle School.

Directory Glancy  reviewed the budget hearing process.  This meeting will include
a budget presentation by the administration, questions and comments from the
board, and questions and comments from the audience.  If questions cannot be
answered tonight, answers will be provided at the next meeting.


MR. DOLUISIO - INTRODUCTION OF BUDGET

Mr. Doluisio stated that the letter of transmittal is self-explanatory and lists
the highlights of the revenues and expenditures.  To provide a perspective on the
budget, he explained a few items. 


CHARTER SCHOOLS

Mr. Doluisio stated that the charter school is a first-time ever line item in the
budget - $1,400,000 and is about .62 mills of the 1.95 mills.  If, in fact, as
the district gets the registrations from the Lehigh Valley Regional Charter
School, and we go into the names of students and go into the classes where those
students were scheduled, those students will be subtracted out, and the district
will look for savings.  At this time, that has not been done.  If any money can
be saved by losing those students, the administration will report that back to
the board. 


EMPLOYEE BENEFITS

Mr. Doluisio stated that another big item is employee benefits, requiring 
$1,500,000 of proposed added expenditures. 


INTERSYSTEM PAYMENTS

Mr. Doluisio stated another large increase of about $900,000 is in intersystem
payments.  Within this category an additional $230,000 is allocated for the BAVTS
to pay for additional debt service incurred for building/remodeling at the
vocational-technical school.  About $600,000 in intersystem payments pertains to
special education costs at the IU level and costs of institutionalized programs
that the district must budget for. 

Mr. Doluisio pointed out that the budget provides for staffing increases only in
some coaching positions which is phase 2 of the athletic reorganization.  The
quality of educational programs and the Academic Standards initiative have been
protected.


MR. MAJEWSKI - REVENUE

Mr. Majewski spoke concerning several areas of the revenue. The largest revenue
source is the current real estate tax.  The value of our mill has increased about
$25,000 per mill, an increase of about 1.14 percent.  This is a welcome increase,
but less than the rate of inflation.  Mr. Majewski defined a mill.  On each
property there is an assessed value which should be approximately 50 percent of
the property's market value.  A property having a market value of $100,000 would
have an assessment of $50,000.  If you take that $50,000, divide it by $1,000,
the factor is $50.  If you do this for all properties within the district, that
results in the value of one mill.  The value of one mill in this district is a
little over $2,200,000. 

Mr. Majewski stated that the economy within the district remains fairly strong
and is reflected in what is being budgeted for occupational privilege and earned
income taxes.  Although occupational privilege is a relatively small amount
compared to other revenues - about $25,000, it is a substantial percentage
increase.  Earned income tax still shows signs of fairly strong numbers,
reflecting a 3.35% increase.

Mr. Majewski explained that interest on investments shows a reduction of
$100,000.  Mr. Greenspan's attempt to encourage the economy to grow in various
sectors has been lowering the interest rate.  That is going to reduce the amount
of income generated from investable cash.

Mr. Majewski stated that tuition from payments shows an increase of $100,000. 
That is not truly an increase, but simply recoding of information and is shown as
such lower on the page.

Mr. Majewski spoke about the basic instructional subsidy.  For the last several
years the district has received one percent from the state.  This year, the
district is anticipating receiving about 4.35 percent more, approximately 8.53
percent for special education subsidy.

There is a reduction for pension contribution because the state will fund 50
percent of the district's actual costs.  The rate for pension contribution has
decreased about three-tenths of one percent; therefore, the subsidy for the
pension contribution has gone down. Mr. Majewski pointed out the anticipated use
of $1,000,000 from the fund balance - funds that have been put aside for future
needs.  As of the end of June 30, 2000, the fund balance was $6,200,000. 
Considering what we are anticipating using this year, the fund balance should
have $5,200,000 remaining and with this continue to have a balance of $4,200,000
in our fund balance.  It is about four percent of the total budget.


QUESTIONS AND COMMENTS FROM THE BOARD

Director Craig questioned the area on intersystem payments, page 10.  He asked if
that reflects the charter school money that has been budgeted.  Mr. Majewski
responded that it does.  Director Craig asked if it also reflects the increases
for vo-tech, the IU, and the community college.  Mr. Majewski replied that it
does.  Director Craig asked if tuition payments to other educational
institutions, institutional children 1306 increase of $127,000, IU#20 direct
payments increase of $540,000, and the approved private schools increase of
$150,000 are all moneys for special education. 

Mr. Majewski responding on the 1306 court placed/approved private school programs
stated that most of those children will be 1306.  Those are children who are
placed in institutions outside of our district.  The district has little control
over that.  The district may place a child in an institution; however, most of
these placements will be court placements.  The numbers of students who are being
placed may not have increased appreciably.  There appears to be a pattern where
those students who are being placed may have been defined as regular ed students.
 Many students being placed now are having special education labels.  What
difference does that make?  By law, we are charged our daily tuition rate for the
days a student is there - approximately $32 per day.  There is no limit to the
amount we can be charged for a special education student.  The tuition rate over
the past six years has been about $32 a day.  Some of the special education rates
we are paying are $120, $130, or more dollars per day.  The cost will go up as
more students labeled special education are placed for these services.  These are
children that we do not know are being placed until we receive bills, at times. 
Once a bill is received, a lot of departments get involved.  It is not just the
additional cost.  Administratively, these students cause quite a bit of
additional labor.  It is out of our control.  The district cannot say no. 
Refusing to make payments would result in the state deducting the money from us.

Mr. Majewski explained that with the IU programs, based on the contracts being
received for the students who are placed and the cost of some of these very
expensive programs, it has increased approximately $500,000 to $600,000 from the
year before.

Director Craig pointed out that this is not the same IU payment that has been
approved as part of the IU budget.  Mr. Majewski stated that what was approved
was payment for the general operating budget.

Director Craig commented that $850,000 increase under tuition payments to other
educational institutions is something over which we have very little control;
$1,400,000 must be set aside for charter schools over which we have very little
control, and $400,000 is going to basic increases in budget for the IU, vo-tech,
and community college.  So roughly, $2,650,000 of the budget, before even
discussing anything, are items we have no control over.  Mr. Majewski confirmed
his comment.

Director Leeson asked if there is a reason for the rise from $8,050 to $15,000 in
musical instrument repair Ð elementary.  Mr. Doluisio stated we are trying to
achieve parity in the schools.  The children coming from poorer families lack the
ability to buy their own instruments.  In our more affluent schools, children
have that advantage.  This is to purchase more instruments for our poorer
children.

Director Heske stated he thinks budgets are about priorities.  In the past, the
board has looked at what the proposed budget is and the impact of what would
happen if some things were eliminated or reduced.  He asked the administration,
before the next hearing, to make recommendations concerning what it would
recommend to be either eliminated or reduced from the $1,400,000 for charter
schools.  He wants to know what programs would be affected.  That type of
information will also give a good start on where we might be able to save some
other funds.

Director Koch asked if the amount for charter schools includes the amount that
would be incurred for busing the students.  Mr. Majewski responded it would be
included in the transportation budget.

Director Amato asked if the charter school transportation is the  increase of
$115,000 in student transportation.  Mr. Majewski replied that the transportation
budget takes into consideration known runs and hours being anticipated for next
year.  If there is any increase due to charter schools, it would be very minimal.

Director Koch still questioned the increased costs to transport charter school
students.  Mr. Majewski stated that the district would attempt to, through
existing runs, create some efficiencies making efforts to keep transportation
costs down.  Therefore, increased transportation costs due to charter schools are
not included in the budget.

Director Amato asked for an explanation of the $115,000 increase on page 83 in
510.  Mr. Majewski stated it has to do with deductions from the subsidy for
anticipated intermediate unit transportation of students, primarily those in the
early intervention program.  The cost of that program is not known to the
district until June of every year when we see how much money the state has
removed from our subsidy to pay for that.  Director Amato pointed out that it is
a huge increase and asked how many students would be involved to incur a cost of
$115,000.  Mr. Majewski replied that the costs have not gone down.  Every time
there is an attempt to try to budget sufficient money for that, the district has
missed the target.  There have been substantial increases.  But the actual cost
of the programs has been far greater than the amount budgeted.  There has been
about a $30,000 increase every year. The early intervention program is an
extremely expensive mandate from the state.  The intermediate unit has the
responsibility of implementing early intervention.  Although the IU has the
responsibility of administering the program, it is still funded by the district. 
At the end of the year, the IU submits their costs to the state and the money is
taken from the district.  This is one of the larger unfunded mandates in average
increase per year.

Mr. Doluisio asked Mr. Agretto to explain the program to help the community
understand what the district is doing in educating prekindergarten students
through the IU.  Mr. Agretto explained that these are children ages three and
four who are identified as developmentally delayed.  They have other  various
involvements such as occupational therapy, speech therapy, physical therapy.  We
receive these children as babies and start therapies and schooling early for
these children as mandated by the state.  These are programs that the district
does not fund, educationally, up front.  The costs of transporting these students
to the facilities which work a different type of schedule than the school year
requires bussing runs of different patterns than the normal runs.  These children
have certified special education and/or preschool teachers working with them in
various places throughout the Northampton County area.  Two programs are housed
at Marvine Elementary School.

Director Amato asked to be informed at the next meeting how many students are
involved in these programs and why the programs can't be coordinated with our
bussing schedules in order to reduce these costs.

Director Amato asked about the purchase of new and replacement buses within the
transportation budget.  Mr. Majewski explained that the district is anticipating
the purchase of seven buses out of a capital projects account set aside for that
purpose.  It does not show up in the budget.  It will be paid for out of capital
reserve moneys that have been accumulated.  Next year will be the last year that
can be accomplished.

Director Amato asked for an explanation of 590 - miscellaneous purchased
services.  Two years ago it was budgeted at $85,000 and now is at $152,000.  Mr.
Majewski stated that 590 is for the cost of crossing guards.  The district has
asked the municipalities to add a number of crossing guards of which we share
half the cost.

Director Amato asked for an explanation of budgetary reserve and capital reserve
- program code AC and program code EM.  In this year's budget $174,000 was
budgeted.  In the previous year's budget actual expenditures were zero.  The next
year's budgeted amount is $400,000.  Mr. Majewski explained that in that
budgetary reserve account nothing is ever charged.  The budgetary reserve account
is set up for anticipated costs in other areas that have not yet been allocated. 
Mr. Doluisio added that this is a reserve account to be used, for example, for
collective bargaining with employee groups.  Mr. Majewski stated that the current
year's budget would have started at $400,000.  As funds are allocated to
different areas during the year, the amount decreases.  When comparing
beginning-of-the-year to beginning-of-the-year, the amount would have been
$400,000.

Mr. Majewski explained capital reserve.  Several years ago, because we couldn't
work off of the bond issue, there was an attempt to set up a budget to transfer
money from the general fund into a capital reserve for capital and maintenance
items.  We have done that in the past.  However, the last two years, we have not
budgeted anything or transferred it because we found it difficult to do.  We
didn't have the funds available to do that.  The $100,000 is an attempt to try to
get that back in the budget.  That would go from the general fund to the capital
reserve fund to try to accumulate funds.

Mr. Doluisio commented that the weakest part of the budget, in terms of being
used as a planning document in anticipating expenditures, is the fact, as pointed
out by Director Amato, that we do not have our buses in the general fund budget.

Mr. Majewski stated that the capital reserve budget does not appear as part of
the general operating budget which is what is being reviewed.  Capital reserve
funds are funds that have been previously put aside that, prior to being spent,
the board approves, but are not required to be budgeted because they are existing
funds.

Mr. Doluisio stated that there are two other areas of weakness in the budget. 
If, in fact, the district had additional revenues to spend, the areas would have
been accommodated.  Buses is one area.  There is not enough money in the
technology budget to have the replacement program needed in the five-year plan
being developed.  The major area of weakness is the fact that we have been unable
to have in the general fund budget the equivalent of about a mill of maintenance
money to fix things.  We need about $2,000,000 in a reoccurring line item to fix
things.  We have been living off the bonds.  If the district runs out of bond
money, it will run out of money to fix things.

Director Craig questioned item 620 - maintenance/custodial energy.  A very small
increase is shown.  If that is gas and oil, he asked if the increase is enough. 
Dominic Villani replied that it is for heating, gas, and fuel oil.  A number of
things are being done to economize such as the Johnson Controls Partnership of
Guaranteed Savings which has been very positive.  The energy management system,
installed a few years ago, is paying dividends.  There is a strong preventative
maintenance program with the HVAC staff also providing efficiencies.  Many
buildings are dual fuels - oil and gas.  A number of conversion projects have
been done.  An example is the converting of Freedom High School and Liberty High
School Classroom Center from total electric to gas.  Asa Packer was converted
from electric boilers to high efficiency heat pump systems.  Director Craig
commended Mr. Villani for keeping costs at a minimum when costs are skyrocketing.

Director Amato questioned item 140 - salaries - technical and item 180 - salaries
- service work and laborers.  He asked if those two are the negotiated amounts. 
Mr. Villani replied that it is the 3.5 percent.

Director Amato questioned item 760 - equipment replacement of $50,000, up from
$5,000 in 2000-2001  Mr. Villani stated it is for various equipment such as
vehicles.  Maintenance staff is deployed from one location.  The majority of
vehicles are quite old.  It is time to replace a few.

Director Amato questioned an increase of $71,500 for supplies.  Mr. Villani
stated the two major items are HVAC supplies.  During the district building
campaign, the district went from approximately six buildings having air
conditioning to approximately 20.  The other area is custodial supplies.  With
increased square footage and the installation of lavatory facilities in
elementary classrooms the supplies allocation needed to be increased.

Director Leeson asked if the sports program wasn't going to be reviewed prior to
approving beginning of the second phase, including the middle school assistant
coaches.  Mr. Doluisio stated that Mr. Villani is planning on doing that during
the May facilities meeting.  This will be in the middle of the budget season.

Director Leeson asked where the after-school and Saturday programs are listed. 
Mr. Doluisio stated it is in the Academic Intervention on page 12.  Director
Leeson questioned the lack of an increase.  Mr. Doluisio stated that some
additional federal funds were added to this.  There is about $650,000 in
intervention money.  The administration will be proposing summer school at each
grade level for the summer of 2002.  A request for an increase will probably be
seen at that time.

Director Amato asked what the $72,000 increase in interscholastic athletics is
for.  Mr. Villani stated the cost increases are for coaching salaries, salaries
of other personnel in that department, bus driver salaries, contributions to
retirement and social security.

Director Amato questioned employee benefits - item 260 - workers' compensation. 
Nothing was budgeted for the previous two years.  He asked why that came about. 
Mr. Majewski explained that in the past workers' compensation was self-funded. 
It is now an insured program and is being separated from the self-insured fund
and is shown as a separate line item.  It was funded at about $400,000 a year
previously.  By moving from the self-insured to the insured program, the district
was able to save about $100,000.  Current year costs are $300,000.  However, the
workers' comp increases have been significant and are going up to just under
$400,000 for next year.

Director Amato questioned the increase cost of prescription drug programs.  Mr.
Majewski stated that the prescription drug programs, not as a dollar amount but
as a percentage, is the most rapidly growing cost item.  About a $400,000
increase is anticipated next year which is approximately a 28% increase and not
likely to slow down.  Director Amato asked what the employee contribution is for
drugs.  Mr. Majewski replied that it is five dollars and is a negotiated item. 
The remainder of the increases are spread between dental, which is a much smaller
percentage, and basic hospitalization and physicians.

Director Leeson questioned item 330 - other professional services included in
Department of Instruction - Secondary.  Mr. Perfetti reported it is a payment the
district makes to WLVT for educational programming.

Director Leeson questioned the $29,000 increase in books and periodicals.  Mr.
Perfetti explained there has been an increase in the cost of the materials for
the LaSalle math program which is being expanded to grade eight and grade eleven
next year.

Director Leeson questioned the $2,500 increase in general supplies listed in
Department of Instruction - Secondary.  Mr. Perfetti stated these are support
materials for textbooks that are purchased, such as maps, workbooks, consumable
supplies.

Director Amato stated he is pleasantly surprised at the budgeted millage increase
of 1.95 mills.  A projection of millage increases over a period of time was given
to the board a couple years ago.  In this particular year, the millage increase
was to be 3-1/2 or 3-3/4.  That was not considering charter schools.  Mr.
Doluisio confirmed the projection of 3.47 when this was updated in January 2001. 
Director Amato stated that, with that in mind, the budget has been trimmed a lot.
 He asked what items were reduced.  Mr. Majewski replied that the first time the
budget was reviewed, it was a much higher number.  Director Amato commented that
the district has a heck of a business manager.

Director Glancy stated that six or seven years ago there was a study on musical
instrument replacement.  A 10-year cycle was devised.  Last year Liberty High
School band uniforms were approved.  Mr. Majewski stated there have been a number
of reasons Liberty High School did not get out to bid.  Because the money was not
spent this year as anticipated, two items will need to be increased to reserve
for encumbrance and the fund balance will have a zero impact on the millage.  Mr.
Perfetti stated that a $60,000 item was earmarked for Freedom High School in the
current budget.  Director Glancy remarked that the uniform replacement schedule
seemed very logical and prevented the district from having a $200,000 bill
because three schools would not be purchasing uniforms in the same budget year.

Director Craig questioned whether the air conditioning for Liberty High School
cafeteria and auditorium could possibly be budgeted for by inserting it in place
of some other items.

Mr. Doluisio stated we would very soon be eliminating programs and increasing
class size in order to make any further reductions.

Director Heske asked Mr. Majewski to comment on the loss of property value.  Mr.
Majewski stated the loss of value from Bethlehem Steel properties is very sorely
missed, amounting to several hundred thousand dollars a year in real estate tax
receipts.  The Boroughs of Fountain Hill and Freemansburg are fairly stable and
don't change much.  Hanover Township has shown very steady, controlled growth at
approximately two percent per year.  Bethlehem Township has been growing more
rapidly than any other municipality.  That growth and some of the industrial
parks in both townships have helped offset the loss of value in the City of
Bethlehem where most of that Bethlehem Steel property loss had occurred.  One
property alone had a market value reduction of over $20,000,000.  That cost the
district in lost tax revenue in excess of $300,000.  There are more than just
that one example.  Loss of assessed value is probably hurting the district by
about $400,000 to $500,000 a year.  The district is lucky that there have been
some other developments to offset that.

Director Leeson asked Mr. Majewski if he is anticipating that the fund balance
will go down to about four percent of the budget.  Mr. Majewski stated it will be
approximately four percent.  By June 30, 2002, there will be about $4,200,000 on
a $115,000,000 budget.  It will be less than four percent.  Director Leeson asked
what Mr. Majewski recommends be kept in the fund balance.  Mr. Majewski stated
board policy has a formula, based on contingencies, stability of the environment
statewide and local.  Right now, we will be on the low end according to our
policy but still within compliance because of the stability.

Director Craig questioned the $1,400,000 earmarked for charter schools.  He asked
what would happen if only $600,000 was spent and if it could be put into the fund
balance to build it back up.  Mr. Majewski responded affirmatively.

Mr. Doluisio stated that if this charter school would go belly-up for the year
and we know before June, it would impact this budget by eliminating that money. 
Mr. Majewski commented that  $200,000 of that money will remain.  The Vitalistic
portion is not going away.  Mr. Doluisio stated that the district could eliminate
a half mill of taxes if that charter school would decide to not open next year
before the end of June .

Director Williams stated that every year money is taken from the fund balance to
offset the budget and every year she states that we cannot continue to do this
unless we can somehow put some back into it.  As mentioned earlier, we need to
have ongoing projected costs and a budgeted item, which we aren't doing this
year, for technological improvements.  Director Williams also expressed concern
about the capital improvement being taken from bond issues which is reflected in
the debt service being paid every year until the bond is paid off.  There are
ongoing expenses such as Liberty's air conditioning which the district needs to
address.

Director Craig stated he recalls Mr. Majewski at this time last year saying that
we had two more lean years ahead, meaning this proposed budget and the following
one, after which taxes would be coming in from industrial parks.  Mr. Majewski
confirmed this as still being true.

Directors Craig and Amato questioned the amount in the fund balance.  Mr.
Majewski stated on June 30, 2000, the last audited statement, the fund balance
was $6,200,000.  There is $1,000,000 allocated in this budget.  We budget very
lean and spend what we budget.  Assuming the use of that $1,000,000, the fund
balance will be down to $5,200,000.  Then, $1,000,000 in this proposed budget
will bring it down to $4,200,000.


COURTESY OF THE FLOOR TO VISITORS

No one wished to address the Board of School Directors. 


REVIEW BY MR. DOLUISIO

Mr. Doluisio provided a review.

¥	Director Heske has asked the administration to look at the impact finding
	what could be reduced to "eat" the $1,400,000 for charter schools. 

¥	Director Amato has asked how many students are served per early childhood
	program and work on the coordination of bussing schedules for these programs 
	with other district programs in order to save transportation costs.

¥	Director Glancy has asked the page number on which the Freedom High School
	band uniform money.  Dr. Nelson stated it is on page 77.

Director Glancy, in addition to those requests, asked for a list showing the
percentage of this budget's total increase for each of the top five items.


ADJOURNMENT

Director Glancy announced that the meeting was adjourned at 9:43 p.m. 

Attest,



Stanley J. Majewski, Jr. Board Secretary


:mg