Farrell Area School Board members are looking at a $350,000 budget shortfall for 2003-04.

That's because the budget draft totals $11,968,000, 7.3 percent higher than this year's spending plan, Superintendent Richard Rubano said Monday. The board will be forced to come up with cuts to balance the budget for next year, he added.

The board earlier had been eyeing a $500,000 shortfall but was able to creatively cut back on some items, Rubano said.

The increase in spending is primarily for a 30 percent hike in employee health- care costs, a 200 percent increase -- or about $150,000 -- in the district's contribution to the Public School Employees' Retirement System, and a 15 percent increase in natural gas and electricity costs. Throw in the regular business costs, such as wages and supplies, and the expenditure side of the budget climbs, Rubano said.

In a related money matter, directors agreed to borrow $488,843 at 3.3 percent interest from First National Bank of Pennsylvania to pay off their health-care debt. Farrell is one of seven Mercer County districts that received additional bills to help the Western Pennsylvania Schools Health Care Consortium, which provides employee health care to 12 districts, pay off a $4 million debt. The board had to petition the court for permission to borrow the money because it was unfunded debt; the court approved the request for a loan April 9. The money from First National will cover the district's entire health-care debt, Rubano said.

The board has several budget meetings in the upcoming weeks with the first at 6 p.m. May 22 in the Central Office Board Conference Room. Budget meetings will continue at 6 p.m. every Monday after that until next year's budget is finalized, with the exception of Memorial Day, May 26.

"It's a difficult budget season we have. We're at a bare bones" spending plan, Rubano said.

Board members would like to add courses at the high school, but they'll have to take a closer look at the programs they already have, Rubano added.

The board also approved the district's participation in the Mercer County Schools Advanced Charter Enterprise School at a startup cost of $2,916. The charter school is for elementary students who are disruptive, nontraditional and have behavioral problems.