Editor's Note: An earlier version of this story misidentified House Republican Leader Bryan Cutler's title.
State House Republican Leader Bryan Cutler wants to change laws governing public school property tax increases after an audit showed 12 districts – including three in Lancaster County – received state approval to vote on hikes higher than the wage inflation rate even while holding significant funding reserves.
Republican state Auditor General Timothy DeFoor said in a press conference Wednesday that the 12 districts, including School District of Lancaster, Penn Manor and Hempfield, collectively raised taxes 37 times while “sitting on” $390 million in general fund balances from July 1, 2017, to June 30, 2021. While he was critical of the practice, he noted that it is legal within the current school funding framework approved by the Legislature.
Under current state law, school districts cannot increase property taxes each year beyond the amount determined in the Act 1 index, which tracks wages and school-related costs, without either putting the request to a vote by district residents or seeking an exemption from doing so that is granted by the state.
DeFoor explained in his findings that districts were moving funds into accounts that are not considered when a district asks for an exemption from the state. Then the districts would ask for the exemption. He argues that this practice, which is allowed under the law, undermines voters’ say in the taxing process.
Cutler, former House speaker, agrees.
“The fact that these school districts sought exemptions to raise taxes despite sitting on hundreds of millions of dollars of budget surpluses is wrong,” Cutler, whose 100th District includes the southeastern municipalities of Lancaster County, said in a statement Wednesday. “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.”
Based on his findings, DeFoor recommended revising the state guidelines for giving school districts exceptions and pushing the deadline for district budgets from June 30 to September. Districts often must develop their budget without knowing the funding they’ll receive from the state as the state-mandated deadlines for schools’ and the state’s budgets are June 30 but state lawmakers have failed in some years to meet that deadline.
Lancaster County school district administrators took issue with the tone of DeFoor’s audit.
Penn Manor School District, which falls in Cutler’s legislative district, used the referendum exception three times in the audited period. District Business Manager Chris Johnston said those were three of only four exceptions the district has asked for since exceptions went into effect in 2007.
“They caught us right at the time we were using them,” Johnston said.
Johnston, who has served as the district’s business manager for 27 years, said DeFoor’s report failed to mention that in the audited years, Penn Manor has undertaken a $100 million high school renovation project.
“One of the problems with what they were trying to do is make blanket statements,” Johnston said. “One of the reasons that they didn't include all the things we told them is because it didn't fit the narrative that they were trying to portray.”
Hempfield School District spokesperson Cheryl Irwin-Bass declined to comment but referred LNP | LancasterOnline to a statement posted to the district’s website.
The statement reports there were “no findings” - which are typically errors or problems - and directs those interested to read Hempfield's responses to the report's recommendations. Each audited district was given an opportunity to respond to the report's recommendations.
SDL Acting Superintendent Matthew Przywara said in a statement to LNP | LancasterOnline that the district has been recognized for more than a decade for its excellence in financial reporting.
“The audit report refers to common practices of school board budgeting, which the auditor general agrees are fully legal,” Przywara said in a statement. “The School District of Lancaster has a long history of prudent, forward-looking, transparent financial management.”
DeFoor indicated in press releases about the audit that the 12 districts were picked for examination because they had received state-approved exceptions while they had substantial fund balances.
The audit report is available at bit.ly/3RmeIRr.