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.”
The teacher’s unions hate the CFR use as that money is not available to pay their salaries.
I taught SD’s to use zero base budgeting and justify every expenditure each year and not just increase the previous year.
I taught them to transfer budget surpluses to the CRF for future contingencies to avoid wild swings in the budgets.
A carry over of a surplus one year might lead to a huge deficit two years fown the road if you fail to match current operating expenditures with current revenues.
It’s not really hidden, except to the stupid, which most teacher’s unions are.
That’s why I made them budget the reserve funds. Full disclosure and transparency. The unions were just too stupid to understand Fund Accounting Accepted Procedures.
If you swallow the teacher’s union propaganda without understanding the greater picture, you would agree with the article.
Facts are twisted in the article to bias the reader’s opinion.
not really hidden, except to the stupid,
/\
Hey, you’re the one that said you hid money, not me.
Transparency ?
Weasel.
I retired many years ago. This was one of my areas of specialization. As a CPA, I conducted the independent audit of many districts.
Was on the state CPA committee establishing the guidelines and procedures. They were established to provide better accountability and transparency.
School district accounting used to be cash basis like the government. Wide open for manipulation.
We switched them over to accrual basis accounting to better reflect actual operations and stop the manipulation games.
Your lack of understanding of the topic is only surpassed by your ad hominem attacks to hide your ignorance..
Thanks for posting those. I’ve bookmarked them, because they will help to explain why the pensions evaporate, should they
do so.
If a district is trying to protect the taxpayers from the liberal Democrat spend, spend, spend teachers and unions, proper accounting must be done.
This article is written from the perapective of the liberal media using propaganda to manipulate people to help them get more money.
Don’t swallow the blue pill.
To help understand the absurdity of the article, imagine if the school district did not set aside money for teacher’s pensions by creating a “reserve in the form of a pension fund.”
If the schoold district went cash basis on teacher’s retirement checks the unfunded liability owed to all the teachers would not show up on the financials abd the district would spend to bankruptcy.
The same concept applies to the Capital Reserve Fund. These teachers are too stupid to see that money is set aside for major future expenditures and is not available for them to spend now.
This article is biased cow poop.
Typical prog weasel.
You admit you hid money
Then called it prudent and transparent.
Then bitch when someone feeds your own admissions back to you.
Typical.
Your weasel dance and twist not withstanding.
"WHAT? NYT Editorial Board Member Claims ‘Real Debt Crisis’ Is ‘Low Taxes'"
FR: Never Accept the Premise of Your Opponent’s Argument
With all due respect to Freeper parents, please consider the following.
If parents were making sure that the schools that they send their children to were reinforcing what parents are teaching their children about the federal government's constitutionally limited powers, then children could remind their parents of the following remedy for "insufficient" taxes to run schools.
In order for each state to find more funding for schools, and a lot of other things, ALL the states need to put a permanent stop to unconstitutional federal taxes by effectively "seceding" from the unconstitutionally big federal government by repealing the 16th (direct taxes) and 17th (popular voting for federal senators) Amendments (16&17A).
"Article I, Section 9, Clause 7: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time [emphasis added]."
"Congress is not empowered to tax for those purposes which are within the exclusive province of the States." —Justice John Marshall, Gibbons v. Ogden, 1824.
“If the tax be not proposed for the common defence, or general welfare, but for other objects, wholly extraneous, (as for instance, for propagating Mahometanism among the Turks, or giving aids and subsidies to a foreign nation, to build palaces for its kings, or erect monuments to its heroes,) it would be wholly indefensible upon constitutional principles [emphases added].” — Justice Joseph Story, Commentaries on the Constitution 2 (1833).
Pelosi: "We have to pass the bill so that you can find out what is in it." (non-FR; 6 sec.)
“Cherish, therefore, the spirit of our people, and keep alive their attention. If once they become inattentive to the public affairs, you and I, and Congress and Assemblies, judges and governors, shall all become wolves [emphasis added]. It seems to be the law of our general nature.” - Thomas Jefferson (Letter to Edward Carrington January 16, 1787)
If the repeal amendment was strictly limited to repealing 16&17A, then relatively little, or ideally no discussion would be required before ratification imo.
Also, unconstitutinal federal taxes are taxes which the very corrupt, post-17th Amendment ratification Congress cannot reasonably justify under its constitutional Article I, Section 8-limited powers and a few other constitutionally enumerated expenses.
When was the last time school’ districts downsized and cut taxes. It’s obvious what they are doing is working. There’s no management. There‘s no excellence. Just plenty of grift and grooming.
MADDIE HANNA (wrote this article)
“I cover K-12 education, focusing on suburban schools, charter schools, and education funding.”
She is an education reporter for the liberal Philadelphia Inquirer.
Take your head out of your arse.
You are doing a Humblegunner imitation.
The auditor who conducted this biased study is a political hack with a degree in sociology. He’s also active in the NAACP.
Not a CPA.
Dude
Wake up
What do you expect ?
You admitted you hid money
Then called it prudent
and
claimed you were transparent.
Then try to spin your duplicity behind insulting me.
Typical...grifting...Prog.
Spit.
My cynicism and misanthropy are encroaching upon my good side.
Diogenes of Sinope (l. c. 404-323 BCE) was a Greek Cynic philosopher best known for holding a lantern (or candle) to the faces of the citizens of Athens claiming he was searching for an honest man.
By the way, I heard that cynics were called the “Dog Men” because like dogs they defiantly urinated in the street as a protest against society.
Notice the article does not say which 12 districts. Saying which county does not identify the offenders.
Found the info in another article (lazy reporter/editors at original source):
Abington School District, Montgomery County;
Bethlehem Area School District, Northampton and Lehigh counties;
Cannon-McMillian School District, Washington County;
Hempfield School District, Lancaster County;
Lower Merion School District, Montgomery County;
Neshaminy School District, Bucks County;
North Allegheny School District, Allegheny County;
Northampton Area School District, Northampton County;
North Penn School District, Montgomery County;
Penn Manor School District, Lancaster County; and
School District of Lancaster, Lancaster County;
West Chester Area School District, Chester and Delaware counties.
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