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Reports from Policy Analysts

Judge: Lower Merion schools misled taxpayers, must revoke tax hike

Submitted On: Thursday, September 1, 2016

Analyst: Hower, Aileen

A Montgomery County judge has ordered the Lower Merion School District in Pennsylvania to revoke its latest tax hike, saying the district misled taxpayers by projecting large budget deficits to justify raising taxes 4.4 percent when it actually had socked away millions of surplus dollars.

In what may be an unprecedented decision, Common Pleas Judge Joseph A. Smyth said in his decision Monday that the district could increase taxes for 2016-17, but no more than 2.4 percent.

"I've never heard of this happening before . . . a judge substituting his/her judgment of financial needs of the district in place of locally elected school board members," wrote Jim Buckheit, executive director of the Pennsylvania Association of School Administrators.

He said he anticipates more lawsuits against districts that also have healthy fund balances but raise taxes above their Act 1 indexes, the maximum amount allowed under state law.

The ruling could eliminate $4 million targeted for special education and retirement benefits in the coming year, according to the board, which added, "If the court's decision stands, the financial health of LMSD and districts across the state is in jeopardy."

The Pennsylvania School Board Association released the following statement about the matter: 

"The injunction issued Aug. 29, 2016, by the Montgomery County Court of Common Pleas requiring the Lower Merion School District to lower its tax rate was beyond the court’s authority, and paints an incomplete and misleading picture both of how the Act 1 Taxpayer Relief Act operates to limit school district tax increases and the reasons that school district fund balances are considered to be an important means of maintaining fiscal and educational stability.

Last year’s nine-month budget impasse provides a prime example of how important it is for school districts to maintain sufficient financial reserves. In the course of that impasse, it is estimated that school districts statewide were forced to take out loans amounting to more than $1 billion collectively in order to continue operating without state support, with significant unanticipated borrowing costs.

The decision by the court, if upheld, will add to this fiscal uncertainty and further jeopardize educational quality. Under Act 1, it is the Department of Education that has the exclusive responsibility to review and approve requests for exceptions to Act 1’s base limit on school tax increases. The Act 1 exceptions reflect the General Assembly’s recognition that there are some kinds of school district costs that can increase much more rapidly than others, especially in the area of special education and employee pension contributions.

A court of common pleas has no power to issue orders that effectively overturn the Department’s decisions and usurp its authority. The court’s decision incorrectly assumes that the Department does not have critical information it needs to make such decisions, when in fact all relevant information is regularly submitted and available to the Department.

The Lower Merion School District is in the process of filing an appeal to the judge's decision.

Excerpts taken from the Philadelphia Inquirer

Academic Level

P12

State

Pennsylvania

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