BETHLEHEM, Pa. — Pennsylvania’s auditor general released an audit Wednesday that questioned 12 school districts’ raising of property taxes, including the Bethlehem Area School District.
Auditor General Timothy DeFoor said that while the school district was in compliance with the law, he accused the board of misleading taxpayers and using accounting gimmicks to unnecessarily raise taxes.
- A state audit found Bethlehem school board used accounting moves to raise property taxes in 2018 and 2019
- Superintendent Joe Roy said the district is being fiscally responsible
- Northampton Area School District was also audited for similar reasons
DeFoor also audited Northampton Area School District.
The audit focused on school districts that had approved referendum exceptions and had substantial general fund balances for fiscal years 2018-21, a news release said.
Bethlehem schools Superintendent Joe Roy said he disagreed with the auditor’s findings and said the school board acted appropriately.
“They didn’t get what they wanted out of the report,” Roy said. “Because we didn’t use the exceptions and we didn’t even have tax increases in two out of the four years. But they drew the conclusions they wanted to draw anyway.”
State budget approval 'a big issue'
The audit found that Bethlehem requested referendum exceptions for fiscal years 2018, 2019, 2020 and 2021, citing pension obligations and special education costs.
In those years, the district’s general fund totaled between $30.4 million and $38.3 million. The school district raised taxes in 2018 and 2019, although not above the index.
The state sets a cap on property tax increases, called the Act 1 Index, which is based on inflation. School districts can get a waiver to exceed the limit in certain cases.
DeFoor argued that could be misleading to taxpayers as the district did not need referendum exceptions to balance its budget because it had enough money to meet rising costs for both pensions and special education.
Roy said a big issue is the state Legislature doesn’t approve its budget until the end of June, while school districts must start their budget process months in advance.
“School districts told us they must develop their budgets this way because they never know how much funding they will receive from the state,” DeFoor said in a news release. “But at the end of the day, it’s the taxpayers, especially those on a fixed income, that are shouldering the burden.
"If this is standard operating procedure for these urban, suburban and rural districts, it’s not a stretch to say that it’s common practice across the state.”
Reducing the fund balance
The auditor general also found the Bethlehem Area School Board reduced the available amount of money in the general fund to below 8% of the next fiscal year’s spending by committing or assigning the money to other purposes, such as capital projects, pensions and budget deficits.
The Pennsylvania School Code doesn’t allow districts to increase taxes if the unassigned fund balance is above 8%. The fund balances from 2018 to 2021 ranged from about $33.6 million to $46.1 million.
The audit found transferring and assigning money allowed the school district to raise taxes in 2018 and 2019 when it said the tax revenue was unneeded.
Roy disputes the assertion that the district should have used more of its savings.
“That’s their opinion,” he said. “Their opinion is we should have drawn down the fund balance more than we did."
The report’s recommendations for Bethlehem include discontinuing the practice of applying for referendum exceptions and assigning surplus general revenue funds to other areas.
Northampton Schools also audited
The audit also found that Northampton Area School District applied for referendum exceptions all four years while having enough general revenue funding to balance its preliminary budget.
It increased taxes in 2018, 2019 and 2020, although not above the index. It also had unused assigned funding.
“They didn’t get what they wanted out of the report. Because we didn’t use the exceptions and we didn’t even have tax increases in two out of the four years. But they drew the conclusions they wanted to draw anyway.”Bethlehem Schools Superintendent Joe Roy
In its response, the district pointed out there was no finding of non-compliance with any law or regulation. It also noted that the definition of sufficient funding can be a matter of debate.
Some of the other school districts included in the audit report were Abington School District, Hempfield, North Penn and West Chester Area School District.
DeFoor said in a news release that state lawmakers should require school districts to use committed and assigned General Fund balances and the prior fiscal year’s surplus before asking for a referendum exception.
He said they should also make it more difficult for districts to have large surpluses and also increase taxes.
