12 PA Districts Hid Money To Justify Unnecessary Tax Hikes, Audit Shows

PENNSYLVANIA — An audit released Wednesday asserts that a dozen school districts across the state are shifting funds to be able to raise property taxes despite having millions of dollars in reserve. State Auditor General Timothy DeFoor is accusing those districts of moving funds to meet the state's legal standard for hiking taxes.

DeFoor is recommending changes in state law to prevent future unnecessary tax increases.

“These districts have found a way to use the law to their advantage so they could always raise property taxes," he said in a statement. "It’s basically a shell game that allowed these 12 school districts to collectively raise taxes 37 times during the four years we reviewed, which increased their respective general fund accounts to $390 million."

The districts cited in the audit:

• 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.

School districts mentioned in the audit denied any impropriety.

North Allegheny assistant director of finance and treasurer Kermit Houser said the district fully complied with the audit and the document noted that the district was in legal compliance for designating its general fund monies.

Similar denials of wrongdoing were sent by the North Penn and West Chester districts.

Neshaminy officials said the district accepted the audit's findings.

Lower Merion had no immediate comment. But in 2022, a Montgomery County judge approved a $27 million settlement for district residents who lived in the district in 2016, 2017, 2018, 2019, 2020, and/or 2021 after plaintiffs claimed the district unjustly and unnecessarily raised property taxes.

The audit examined whether each district appropriately used its general fund balances in a timely matter for intended purposes.

“Some startling trends began to appear to our auditors, like moving money around to make sure a district would always meet the threshold to raise taxes,” DeFoor said. "Each of the 12 districts had sufficient unused funds that should have negated some of the 37 tax increases.”

State law dictates how school districts can raise taxes and sets limits for those increases. If a district must raise taxes above the legal limits, they are required to ask voters for permission through a referendum or apply to the state Department of Education for a legal exception.

DeFoor suggested changing the law to require districts to use general fund balances and the prior year's financial surplus before raising taxes.

See the entire audit here.