Pennsylvania Auditor General Tim DeFoor is responding to criticism his office faced after an audit of a dozen school districts.
The investigation, released Wednesday, examined several years’ worth of financial documents from districts in nine counties. It turned out they had repeatedly collected taxes at higher rates than normal – even though they had hundreds of millions in extra cash.
A press release explains that districts increased tax rates nearly 40 times between 2018 and 2021. They already had about $500 million in excess cash under them, but they still asked the state for a special tax permit — and even moved that extra cash to make it look like they needed more.
“In my opinion, this is a certain abuse of the system: if you don’t need something, don’t request it. If you move money and apply for it because you don’t have money, that’s not necessarily fair either.”
The practice isn’t illegal, but DeFoor describes it as a “loophole” that lawmakers should close in the upcoming session. The Auditor General’s report recommends a new requirement for districts to use all available cash before requesting further tax increases.
“As far as investing money for a rainy day, that’s great for an individual like us, but not necessarily for a government agency,” DeFoor told WITF’s The Spark Friday.
Some of the districts under scrutiny say the Auditor General’s report lacks a full understanding of their budgeting process.
A West Chester School District official told the Philadelphia Inquirer he once moved some of the district’s extra money, but no special tax credit. The district had spent the money on building improvements that year.
The Pennsylvania Association of School Business Officials said counties need to save money as the cost of things like pensions and charter school fees has increased by billions of dollars in recent years.
“Spending on special education grew to nearly $6 billion in 2020-21, and only about $1 billion was funded by the state,” the group said in a press release Wednesday. “Charter school tuition grew to nearly $2.7 billion in 2020-21 with no government reimbursement.
Specifically, the research did not examine whether public charter schools are unnecessarily holding on to excess cash. DeFoor deflected related questions from The Spark host Scott LaMar.
“We have heard concerns from local residents and the General Assembly about charter schools. We’ve talked about it,” DeFoor said, without explaining why charters were excluded from the investigation.
The Auditor General added that his office allows affected districts to review the report before it is released, and incorporated their criticisms into the final version.
“Nobody likes to be audited. Of course, if there are any kind of audit results, you will criticize them. But I stand by them,” he said.
Under state law, school districts are only allowed to request a special tax increase — something usually decided by voters — if the amount of unspent cash they have on hand is less than 8 percent of their total annual budget. According to the School Business Officials Association, only seven of Pennsylvania’s 500 school districts asked the state for such an increase last school year.