When 2013 began, Pittsburgh Public Schools expected to run an operating deficit of $9.8 million, but by November things were looking up.
Instead of a deficit, an operating surplus of $2.7 million was predicted. By early March, the estimate grew to a surplus of $10.2 million.
When the year-end numbers for 2013 were released last week after an additional round of earned income tax revenue was received, the surplus was $20.8 million.
Now the question is: What does the surplus mean for a district that expects to run out of money in 2017?
"Right now, we are in a better position than we anticipated," Ron Joseph, chief operations officer, told the school board last week of the unaudited results. "I caution a lot of these differences that worked in our favor were one-time differences largely due to one-time revenues."
Superintendent Linda Lane, who has recommended various cuts aimed at making the district financially stable, told the board more analysis is needed to determine any long-range impact.
Ms. Lane said she doesn't enjoy proposing cuts, telling the board, "Believe me, it wouldn't be happening if I thought there was a way to avoid it. We'll do the very best we can to figure out what of this is going to roll forward."
For years, the district has been closing schools, increasing class sizes and cutting costs to try to become sustainable in an era in which increased state funding is no longer likely, charter school, pension and other costs are increasing, and enrollment is declining.
In 2013, the district spent nearly $495.4 million, about $26.4 million less than the budget of $521.8 million and $18.8 million less than it spent in 2012. The surplus amounted to about 4 percent of expenditures in 2013.
The district's revenues in 2013 were $508 million, or 0.97 percent less than those of 2012 but about $4.2 million more than budgeted.
Not only did the district realize a surplus, it also ended the year with its largest unreserved fund balance in years: nearly $103.2 million.
As the surplus grew, the district earlier this month revised its estimate of when it will run out of money from 2016 to 2017.
The district currently projects an operating deficit of $14.5 million this year, $37.5 million in 2015, $49.5 million in 2016 and $59.8 million in 2017, which would be too large to cover with the fund balance.
Board members had mixed views of what the surplus means.
In an interview, school board president Thomas Sumpter said, "It's positive. However, there's a lot of work that needs that to be done."
Mr. Sumpter said, "That's a one-point-in-time accountability factor. ... It doesn't speak to what you have to pay, where you're going to go, what you're going to do to make sure the future is more positive."
Board member Cynthia Falls said the surplus doesn't mean it's time for the district to loosen its belt.
"It's some good news. We'll breathe, we'll enjoy it, and then let's get down to some more hard work."
Board member Carolyn Klug said, "It's moving in the right direction. I think it helps us to better serve the children and get the district on its feet. ... In the long run, the picture is still bleak, but it's a step in the right direction."
Board member Mark Brentley Sr. was the most outspoken at the meeting, wondering what the district's true financial shape is. He said he believes the public is being given the worst-case scenario, resulting in some residents leaving the district.
In an interview, board member Regina Holley said, "I think Mr. Brentley basically said it all. I'm wondering how we actually got to where we are right now financially as well. ... I think the public needs to know that, especially after we voted to raise taxes."
In January, the board voted 7-2 to raise property taxes by 2 percent, which is expected to yield $3 million.
In an interview, board member Bill Isler, who along with Sherry Hazuda opposed the tax increase, said he doesn't see the operating surplus as a bonus to the district.
"I see at as very good management from the human capital point of view and also from the fiscal point of view but not something we can look forward to every year."
He said the district will have to "continue to hold the line on costs."
In the final result, tax receipts played a significant role in the positive outcome. Earned income tax and real estate transfer tax receipts were up; property tax receipts were down.
Earned income taxes yielded $110.78 million, an increase of $14 million over the estimate and $9.3 million over receipts in 2012. The financial report noted the district is benefitting from a requirement, starting in 2012, for employers to withhold the tax for all employees.
Those receipts are a case in point on how timing can affect the outcome. When Mr. Joseph gave a preliminary report to the board on March 3, the earned income tax receipts were expected to be about $9.6 million lower than they turned out to be.
In addition, real estate transfer taxes -- a reflection of property sales -- were up, with $10.9 million received, or $3.9 million more than budgeted and $3.2 million more than received in 2012.
Real estate transfer taxes have never before been more than $9.1 in any year.
However, the $154.8 million in property tax receipts was $9.5 million below budget and $12.4 million below receipts in 2012.
The reduction was due largely to successful assessment appeals by property owners. The district had set up an escrow account of $3 million -- from a 2013 property tax increase -- to cover appeals, but that was exhausted.
The timing of payments or expenditures can benefit or hurt a particular year. Transportation reimbursements were budgeted at $13.7 million in 2013 but came in at $9.1 million, which is regarded as a one-time reduction because of the timing of such payments.
Carey Harris, executive director of A+ Schools, an education advocacy group, looks forward to more analysis of the surplus.
"I think we really need to know how much of this is a one-time revenue windfall and how much of it is really going to be sustained over time," she said.
A+ Schools keeps tabs on the district's finances. "We pay close attention to the district's financial situation, and we see some structural cost problems, so I don't doubt there is some potentially real financial trouble down the road," she said.
Education writer Eleanor Chute: firstname.lastname@example.org or 412-263-1955.