The Keystone Oaks school board voted unanimously last Thursday to raise the real estate tax rate by 0.72 mills, but it may not be enough to stave off effects of debt service payments and a looming pension crisis facing districts across the state.

Directors approved a $35.7 million budget and a tax rate hike that will go from 21.31 to 22.03 mills. It will mean an additional cost of $60 a year to the average district household, and some will pay as much as $162 more annually, according to Gwen Walker, director of fiscal services.

Those increases don't compare with the difference KO will owe in pension benefits within two years. The district now pays about $400,000 in pension benefits. In 2012-13, it is projected to owe $2.3 million.

It's a problem facing schools across the state, said Jay Himes, executive director of the Pennsylvania Association of School Business Officials.

"Districts are faced with two simultaneous challenges with the Act 1 property tax index and the retirement tsunami," he said. "It's forcing school officials to take a much more critical look, with a sense of urgency, to reduce expenditures."

The Act 1 Index is the allowable percentage increase in property taxes for each of the state's school districts before exceptions or voter referendums. It is determined annually by the Pennsylvania Department of Education, using a formula that takes into account average weekly wages, the federal employment cost index and the market value/personal income aid ratio.

For the 2010-11 school year, the average increase in Pennsylvania's Act 1 index for all school districts is 3.8 percent.

KO directors are waiting to see how things play out at the state level before deciding on a course of action. Meanwhile, the district has been designating some of its $6.5 million fund balance to hedge against the crisis.

"Our response will depend largely upon what happens at the state level," spokesman Jim Cromie said.

Pennsylvania House Bill 2497, sponsored by House Appropriations Committee Chairman Dwight Evans, D-Philadelphia, seeks to relieve the financial weight school districts will carry in two years. It passed in the House two weeks ago and is in the Sentate for deliberation.

If approved, the bill would lower costs by reducing benefits for new employees but may cost taxpayers an additional $21.5 billion in the long term, according to a study by the Public Employee Retirement Commission.

It will do nothing to reduce a district's debt service, the amount it pays on debt per year.

KO's debt service is 13 percent of total budget, while its total debt is $64 million, a figure falling in the middle of those reported by neighboring districts. Carlynton's is $1.5 million, Chartiers Valley's is $47 million and Mt. Lebanon's is $230 million.

Mr. Cromie said KO would make annual payments until the debt is retired in 2022.

The top source of the school's debt has been a series of capital improvements to the athletic stadium and five schools during the last 15 years.

Critics of the district's spending questioned the hiring of an assistant superintendent during last week's board meeting.

"If we're hiring an assistant superintendent, I guess we're rolling in dough," said Jan Domalik, a member of the Green Tree Action Committee.

The board voted unanimously to hire Kathleen Foster as assistant superintendent. She has a three-year contract, and her salary is still being negotiated, Mr. Cromie said.

Ms. Foster previously worked with special education students at Dormont Elementary and will maintain some of those responsibilities in her new post.

"We're taking an existing position and renaming it. [Ms. Foster] will be given a few more responsibilities, and many of her current responsibilities will be part of the job," Mr. Cromie said.

Because of that, the district is not filling her position at Dormont Elementary.

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