North Allegheny, Canon-McMillan school districts accused of playing 'shell game' with money to qualify for tax hikes
PITTSBURGH (KDKA) -- Two local school districts are accused of playing a 'shell game' so that the districts could qualify for tax hikes.
North Allegheny School District and Canon McMillan School District are among a dozen school districts in Pennsylvania that are accused of playing a 'shell game' with taxpayer funds by moving money around so that the district could qualify for tax hikes.
Pa. Auditor General Timothy DeFoor released an audit of the 12 school districts that uncovered a legal standard practice where districts are raising local property taxes while holding millions of dollars in general funds.
State laws limit how much school districts can raise property taxes, but if a district must raise taxes above the limits set by law, they're required to ask voters for permission through referendum or apply for a referendum exception.
DeFoor said the districts have found a way to use the law to their advantage and it's basically a 'shell game' that allowed the districts to collectively raise taxes 37 times during four years that were reviewed from fiscal years ending in 2018 through 2021.
"At the end of the day, it's the taxpayers, especially those on a fixed income, that are shouldering the burden," DeFoor said.
The audit team has made recommendations for the general assembly to consider, including adding a provision that requires districts to use general fund balances and the prior fiscal year's surplus funds prior to requesting an exception to raise taxes above the index.
Following the release of the audit, the Canon-McMillan School District released a statement saying the following:
Last year, the Canon-McMillan School District was one of twelve school districts in the state to be audited by the Auditor General. First, Canon-McMillan School District should not have been included in this audit that included school districts having a total fund balance greater than $60 million as of fiscal year ending June 30, 2020. The Auditor General inappropriately considered the Canon-McMillan School District's bond proceeds that were being used to fund the District's construction projects and cannot legally be used for general fund purposes.
The purpose of this audit, as stated by the Auditor General in its report, pertained to the evaluation of our school district's "compliance with laws and regulations pertaining to fund balances." Despite acknowledging that the Canon-McMillan School District was fully in compliance with all laws and regulations, the report, nevertheless contains inaccurate and misleading information and statements regarding the district's budgeting process that the District feels is imperative to clarify for the public.
Act 1 of 2006 sets forth the legal requirements School Districts must follow when preparing and passing their budgets. Again, the District stresses that the Auditor General report makes no finding that the District violated any law or regulation pertaining to its budgeting process. Under Act 1, school districts are permitted under the law to annually raise real estate taxes up to the established State Index. However, school districts are also legally permitted to apply to the Department of Education for exceptions to this requirement. The decision to apply for exceptions must be made in January, which is at the very beginning of the budgeting process and before the majority of the budgeting process has even begun. There are no legal restrictions or requirements that must be met in order to apply for the exceptions. On one occasion, during the 2019-2020 school year, the District applied to the Department for approval of the budgeting exceptions. It is important to note that although the exceptions were applied for, the District DID NOT accept or utilize the approved tax increases over the Act 1 Index once additional information became available during the budgeting process. The District followed every law, regulation, procedure and process for establishing their budget in each year reviewed in this audit, and should in no way be faulted by the Auditor General for simply applying for, but not using tax exceptions.
Additionally, again, while the Auditor General found no violation of any law or regulation regarding the District's use of its fund balance, the report nevertheless, inappropriately insinuates that the District was not permitted to raise taxes because it maintained a fund balance. However, as stated previously, the Auditor General incorrectly inflated the District's fund balance by including bond proceed funds that were earmarked and could only be used for the ongoing construction projects within the District.
As our community knows, the Canon-McMillan School District and its Board of Directors have been open and transparent regarding our budgets and the use of our funds, including its long range facilities improvement plan – including new elementary and middle schools. We discuss our budget at public meetings and have held public hearings to explain this process.
It is concerning that nowhere in the Auditor General's report does it appear that the Canon-McMillan School District has very low taxes and currently ranks 13th out of 15 school districts in Washington County. The report also fails to mention or report that, of the 12 school districts picked for this special performance audit, the Canon-McMillan School District ranks the lowest in taxation. The report is also silent on where we stand with fund balance in our County/IU. We are in the middle to lower end of the list, but we are portrayed as having a high fund balance. Of the districts picked for this special performance audit, Canon-McMillan is the lowest in terms of fund balance.
For these reasons, the Canon-McMillan School District vigorously refutes any assertion in this report that the Canon-McMillan School District or its Board of Directors acted improperly or violated any rule, procedure, regulation or law in it budgeting process. We urge our taxpayers to fully read the District's rebuttal which is attached to the Auditor General's report.
The North Allegheny School District released the following statement:
- North Allegheny School District fully complied with the audit by Pennsylvania Auditor General Timothy L. DeFoor for the fiscal years ending June 30, 2018, 2019, 2020, and 2021.
- The findings by the Auditor General state that North Allegheny School District was in compliance with legal requirements for designating our General Fund monies.
- We received the full report yesterday afternoon and the District is reviewing the findings from the report with our Administration, Board of School Directors, and Solicitor and we do not have any further comments at this time.
