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Pennsylvania Auditor General says schools moved money into reserves to allow them to seek tax increases

  • Scott LaMar
Auditor General Timothy DeFoor addresses the media at a press conference at the Pennsylvania state Capitol on Nov. 15, 2021.

 Sam Dunklau / WITF

Auditor General Timothy DeFoor addresses the media at a press conference at the Pennsylvania state Capitol on Nov. 15, 2021.

Airdate: January 27, 2023

It’s called Act 1 and Pennsylvania school districts’ budgets have often been determined by what Act 1 allows them to do since it was adopted by the legislature in 2006. Act 1 requires school districts to seek voter approval for tax increases greater than “the Act 1 Index” which is made up of several costs to schools factors. Districts can get exceptions from this requirement if tax increases are needed to cover specific types of expenses.

Pennsylvania Auditor General Tim DeFoor released results of an audit of 12 school districts this week that found the audited districts moved unspent money out of their general funds into reserves in order to be eligible for the exceptions. Sometimes those reserves totaled millions of dollars.

Auditor General Tim DeFoor was on The Spark Friday and said the school districts that were audited were taking advantage of a loophole in the law,”The loophole is that school districts who have reserves, who have plenty of money in their accounts, being able to apply for a referendum exemption, which is meant for meant for emergencies. And then another one is that the Department of Education, when they set these applications, one of the things that they look at from the school district, they look at a school’s budget. And as we all know, a budget is a is an estimate of how much money you’re going to want to need for the following school year, as opposed to this is something we recommended looking at cash on hand. That is the cash on hand that tells you how much money you actually have going forward. And we recommended that the Department of Education, when deciding to grant one of these one of these referendum exceptions, that they look at the cash on hand and not necessarily look at the budgeted amount.”

One of the responses from school districts after the audit was that the districts don’t know how much money they will be receiving from the state since both the state and school districts operate on a fiscal year from July 1st to June 30th. DeFoor agreed that was an issue,”It’s extremely difficult for school districts to have a completed budget at the same time the state submits its budget as well. So one of the things that we recommended is that we give the school districts another extra, an additional three months to have a completed (budget). We seem to have a completed budget from June 30th to September 30th, and that should give them enough time to have the information and get the information from the Commonwealth and to know how much money they’re getting from the Commonwealth.”

Schools also complained that public charter schools weren’t audited for having reserves on hand. DeFoor said he wouldn’t discuss whether audits of charter schools would be conducted in the future, saying he never talks about possible future audits.


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