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Posted on 01/25/2023 2:41:02 PM PST by lightman
Audits of 12 school districts has state Auditor General Timothy DeFoor believing school boards are playing a “shell game” with taxpayer funds by moving money into reserve accounts to allow them to make a case for raising property tax rates.
State laws limit how much school districts can raise property taxes and sets limits on those increases but allows for exceptions to be granted in one of two ways: ask voters’ permission through a referendum or ask the state Department of Education for a referendum exception.
“These 12 districts collectively raised taxes 37 times during the four years we reviewed [2018-2021] and each district applied for a referendum exception at least once,” DeFoor said, at a Wednesday news conference at the Capitol. “Each of the 12 districts had sufficient unused funds [in reserve accounts] that made some of the 37 tax increases unnecessary.”
He said auditors found it was a common practice for school boards to vote to move unspent money into reserve accounts. While this budgeting tool is legal, DeFoor said, “The problem is it’s not necessarily transparent.”
The 12 districts located in Allegheny, Bucks, Chester and Delaware, Lancaster, Montgomery, Northampton and Washington Counties represented included urban, suburban and rural areas. Some were wealthy and others poor. Given that the districts’ diversity and finding all were engaging in the same budgeting practices, DeFoor said, “it’s not a stretch to say that it’s not happening across the commonwealth.”
But the Pennsylvania Association of School Business Officials are pushing back against the auditor general’s conclusions regarding districts’ budgeting practices and use of their reserve accounts.
They said districts aren’t routinely seeking referendum exceptions to raise taxes. Statewide, only 7 of the 500 school districts got an exception in 2021-22, the most recent year data was publicly available.
In a statement, the organization also defended the need for districts to have fund balances. It said they “are integral to the long-term preservation of school district’s general fund to ensure stability and consistency in providing the resources needed for all student programs and services.”
It goes on to say the revenue from investment earnings on fund balances is also a way to avoid having to pay interest on borrowed funds to cover cash flow needs.
“It’s important to remember that all fund balances are one-time funds, and their use requires careful planning to ensure the financial stability of the school district,” the school business officials’ organization said in its statement.
School districts are permitted to have various reserve accounts. Ones labeled as committed and assigned, for example, are often directed to cover state-mandated costs such as pension obligations and charter school bills and have no caps on how much money can be put in them.
But school districts are barred by law from raising their property tax rate if the money sitting in their “unreserved, undesignated,” or unassigned, general fund reserves reaches a certain threshold. For most districts, that is no more than 8% of their total budget.
Auditors say the districts it reviewed moved money from their unassigned reserve accounts to its committed and assigned reserves to keep its balance below that threshold so they could raise their tax rate.
Susan Spicka, executive director of Education Voters of Pa. and a former school board member, was critical of the audit saying the auditors failed to understand the complexities of school district budgeting.
Besides, she said the auditors focused on the wrong type of public schools. They should target cyber charter schools, where 11 of 14 cyber charters are holding surpluses above the limits imposed on school districts, according to a report on cyber charter surpluses from Children’s First, a public education advocacy group.
“It makes no sense that he would ignore the cyber charters amassing such a huge amount of tax money, which, by the way, are property tax dollars that school districts have raised at the local level--some from the people on fixed incomes that he claims to care about--and sent to the cyber charters,” Spicka said.
DeFoor said the audited school districts told auditors they needed the reserves because they have to approve their budget by June 30 every year, which coincides with the state budget’s deadline. However, state lawmakers occasionally fail to pass the state budget on time so he said district officials say they never know how much money they’re going to get from the state.
“That was something that was clear across the board for all the schools,” DeFoor said. So he said one of his office’s recommendations is to change school district’s fiscal year to end on Sept. 30 instead. That way there’s a better chance they will know how much state money they be coming their way.
Other recommendations the office made for the General Assembly to consider:
· The state’s Taxpayer Relief Act, sometimes known as Act 1, should be amended to require districts to use the committed and assigned general fund balances and the prior year’s surplus funds before they are eligible to apply for a referendum exception.
· Alter the fund balance threshold to include committed and assigned reserves, along with unassigned reserves, in determining how much money districts can hold before they are allowed to raise taxes.
· Determine if there should be parameters regarding the transferring of money into reserve accounts which can create the appearance that a tax increase is needed.
DeFoor also recommended the education department revise the process for granting referendum exceptions to take into account districts’ cash on hand rather than basing their decisions on budgeted amounts when granting referendum exceptions.
“We all want to provide schools the resources they need to effectively and efficiently teach our children. We’re willing to do our part,” DeFoor said. “But we definitely cannot allow school board to use legal maneuvers or take away the voice of our taxpaying citizens. This is an opportunity to restore the original intent of the public school code and the Taxpayer Relief Act and to provide real property tax relief for fixed income senior citizens and for hardworking families.”
House Republican Leader Bryan Cutler echoed that sentiment, saying, “At a time when the proper funding of our children’s education continues to be a paramount concern across the commonwealth, the fact that these school districts sought exemptions to raise taxes despite sitting on hundreds of millions of dollars of budget surpluses is wrong. The hard-working families of Pennsylvania, who are paying extra money to these school districts when they could have reinvested that money into their households, deserve better.”
He said once the state House, which is stuck in partisan gridlock gets organized, it can look at the issue of school district surpluses to ensure “Pennsylvania’s families are treated fairly in the return on investment they receive for the education of our children.”
Pennsylvania Ping!
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Never would have guessed they would stoop to that.
/a
My County is represented in those 12 Counties.
The Grift goes on and on and on...
They should name the school districts, not just the counties.
Are those pension funds in deep doo doo?
Betcha...
Mine isn’t.
But I know they all play that “reserve fund” game in part because those funds can be spent without going through the normal budgeting process.
Often used to start a new sports team or some other pet project.
Shenanigans by school boards, who would have thought it?
My late mom lived in San Diego County. The local school board financed a new high school by negotiating bond deal that required the district to pay off the loan with a ballon payment, principle and interest in something like thirty or forty years—long after the current board members are dead and gone.
Here is a link to an article about a different S.D. County school doing something similar.
This is not new. Every government agency or any agency that receives government funds or grants does this. There’s hardly a place anymore where we’re not getting screwed/scammed
From last October...
Check out the spin that makes Linda Blair look like a piker...
Yeah, it is a grift, but taxpayers keep handing money to these failed schools over and over again, basically no questions asked. Like the mRNA shots and masks, liberals just collapse and fall into line spouting every leftist education mantra. “It’s for the children.” “Education benefits all of society.” Utter pablum, but they always go along with it and then bellyache about the rich and why they are so poor. They are just too dumb to make any connection.
I know someone who has a nice pension. I won’t be
surprised at all if it is hit by California.
Would really hate to see it, but California is so poorly
run. It could be twice the state it is, if run properly.
Whoakaaaay, this may explain a bit...
PSERS mentioned.
Yes this is a game that is played. I tauhht several school districts how to do it for very beneficial purposes.
I taught schoold districts how to budget the Capital Reserve Fund to allow for the flexibility to meet unexpected expenditures in the genrral fund.
When money is transferred to the Capital Reserve Fund it cannot be transferred back to the General Fund.
However their are expenditures that can be paid from either fund.
For example, school busses could be purchased in the General Fund or the Capital Reserve Fund. Same with major repairs such as HVAC systems, roof replacement or repair.....
It is smart to transfer money to the CRF and budget it long term.
I’ll be honest, we also used it to hide the money set aside for teacher’s salary increases so they didn’t see the extra money during negotiations.
It is far better to use the CRF as a tool to level the wild swings in budgets and prevent huge tax increases in any one year.
It’s good to have the CFR as a contingency fund in the event a disaster suddenly breaks the General Fund Budget.
Yes it is open to abuse. That’s why I always recommended budgeting the CRF. I would have the administration look at all buildings and based upon expected life of building components and systems, budget long term for future expenditures.
A prudent person would do the same in their own life. If you know you need a new roof in three years, or a new car, you save and set aside money for it ahead of time.
Groomers
AND
Grifters.
Typical progs.
Speaking of CalPERS and CalSTRS...
https://www.sacbee.com/news/politics-government/the-state-worker/article241155276.html
https://californiaglobe.com/articles/us-pension-funds-lost-400-billion-on-china-investments-in-july/
https://www.pionline.com/searches-and-hires/calpers-piles-74-billion-alternative-investments
https://www.heritage.org/asia/report/why-state-legislatures-must-confront-chinese-infiltration
I’ll be honest, we also used it to hide the money
/\
Somehow
” honesty”
and
” hiding money”
just doesn’t sound as good as you thought.
.
A prudent person would do the same in their own life
/\
What ?
Hide money to grift more out of those footing the bill ?
Hardly what a prudent person would do,,
More like what a griffting
con artist would do.
“We all want to provide schools the resources they need to effectively and efficiently teach our children. We’re willing to do our part,” DeFoor said. “But we definitely cannot allow school board to use legal maneuvers or take away the voice of our taxpaying citizens.”
I live in Pierce County, WA, and they have not run an independent audit on the school systems since before I came here in 1993. They choose to do it internally. For this reason I have voted every year against money movement on the ballot aimed at them. If they can prove they don’t have the money for a meaningful award, I would vote for it. But until they accomplish and publish a full audit of the funds earmarked and in hand for their operations, I can’t trust anyone with absolutely no transparency.
wy69
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