Pennsylvania State Comptroller General Timothy L. Dehua released the results of an audit of 12 school districts in the state this week. This reveals a standard legal practice that raises local property taxes while keeping millions of dollars in the General Fund.
“These districts represent a cross-section of Pennsylvania: the wealthy to poor tax base, urban, suburban, and rural communities,” DeFor said in a news release. “These districts have always found ways to use the law to their advantage so they can raise property taxes.
“It’s basically a ‘shell game’ that allowed these 12 school districts collectively to raise taxes 37 times, increasing their General Fund accounts to $390 million each.”
Districts were selected based on approved referendum exceptions and criteria that included districts with significant government funding balances for fiscal years 2018-2021. The constituencies are:
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- Abington School District, Montgomery County
- Bethlehem Area School District, Northampton County, Lehigh County
- Washington County Canon-McMillian School District
- Hempfield School District, Lancaster County
- Lower Merion School District, Montgomery County
- Bucks County Neshamini School District
- Allegheny County North Allegheny School District
- Northampton Area School District, Northampton County
- North Penn School District, Montgomery County
- Lancaster County Penmanor School District
- Lancaster School District, Lancaster County
- West Chester Area School District, Chester County, Delaware County
DeFour said in a news release whether each district had properly used the Pennsylvania Department of Education’s referendum exception method to raise local taxes, and whether each district had its general fund balance properly designated, apportioned, and He said the audit evaluated whether it was being used in a timely manner. intended purpose.
“Some startling trends have begun to emerge with auditors, such as moving funds to ensure districts consistently meet thresholds for tax increases,” said DeFour. “They also applied for an exception to the referendum as a normal budgeting tool, rather than an extreme measure as the law intended. We had enough unused funds.”
The Pennsylvania School Code and Taxpayer Relief Act (Act 1) governs how school districts can raise taxes and places limits on how they can be raised. If a district must increase taxes beyond the legal limit, it must ask voters for permission through a referendum or request an exception from the Department of Education.
The exception allows school districts to raise taxes above the inflation index without voter input, according to the news release. The Department of Education’s referendum exception application is based on the amount that school districts have budgeted to cover expenses and actual cash on hand.
“School districts told us they had to budget this way because they didn’t know how much money they would receive from the state,” Dehua said. The burden is on taxpayers, especially those with a fixed income, and if this is standard operating procedure in these urban, suburban and rural areas, it is an exaggeration to say that it is a common practice statewide. not.”
The audit team made the following recommendations to the General Assembly to help school districts fund education and protect taxpayers.
- Adds to Section 1 of the Act a provision requiring districts to use established and allocated General Fund balances and surplus funds from the previous fiscal year before requesting a referendum exception.
- Revising the Pennsylvania School Code terminology used in determining the mandatory threshold for tax increases from unreserved, unspecified to unlimited, to include funds pledged and allocated in the calculation to include school districts from raising taxes while keeping millions of dollars in common funding commitments and allocations. ; When
- Determine if you need parameters for budgeting and transferring operating surpluses during tax increases. For example, consider all remittances from the General Fund to be unallocated funds and require them to be included as fund-to-fund remittances in the General Fund budget before remittances to other government funds.
The audit team made the following recommendations to the education department:
- Review and modify the process for approving referendum exceptions when districts commit and allocate General Fund balances. The audit results show that the school district has adequate funds for relevant expenditures, has transferred excess surplus funds, is not using designated funds in a timely manner, or has no indicators of exactly the same type of expenditure. The team has shown it has not balanced its reserve budget before calling for higher taxes. Said.
- Consider revising the property tax referendum exception guidelines accordingly.
