LMSD Hid Money To Justify Tax Hikes: PA Auditor General

LOWER MERION TOWNSHIP, PA — The Lower Merion School District is accused of shifting money around to increase property taxes while sitting on full coffers, according to the results of a state audit.

State Auditor General Timothy DeFoor Wednesday released an audit that asserts a dozen school districts across the state are shifting funds to be able to raise property taxes despite having millions of dollars in reserve.

Among the 12 districts listed in the audit is the Lower Merion School District.

DeFoor is accusing those districts of moving funds to meet the state's legal standard for hiking taxes.

DeFoor is recommending changes in state law to prevent future unnecessary tax increases.

“These districts have found a way to use the law to their advantage so they could always raise property taxes," he said in a statement. "It’s basically a shell game that allowed these 12 school districts to collectively raise taxes 37 times during the four years we reviewed, which increased their respective general fund accounts to $390 million."

In 2022, a Montgomery County judge approved a $27 million settlement for residents who lived in the district in 2016, 2017, 2018, 2019, 2020, and/or 2021 after plaintiffs claimed the district unjustly and unnecessarily raised property taxes.

The settlement brought an end to a six-year legal saga led by attorney Arthur Wolk who represented various plaintiffs, all of who were taxpayers in the district.

According to LMSDBudgetSettlement.com, the amount each taxpayer receives will be proportional to the amount of school taxes that taxpayer paid.

Additionally, the district will credit $4 million per year in the tax bills that will be sent in 2023, 2024, and 2025, and will reduce the school tax millage rate to 31.2045 for the 2022-2023 fiscal year.

District residents who believe they are entitled to funds in the settlement should go online here.

The districts cited in DeFoor's audit:

• Abington School District, Montgomery County;
• Bethlehem Area School District, Northampton and Lehigh counties;
• Cannon-McMillian School District, Washington County;
• Hempfield School District, Lancaster County;
• Lower Merion School District, Montgomery County;
• Neshaminy School District, Bucks County;
• North Allegheny School District, Allegheny County;
• Northampton Area School District, Northampton County;
• North Penn School District, Montgomery County;
• Penn Manor School District, Lancaster County; and
• School District of Lancaster, Lancaster County;
• West Chester Area School District, Chester and Delaware counties.

The audit examined whether each district appropriately used its general fund balances in a timely matter for intended purposes.

"Some startling trends began to appear to our auditors, like moving money around to make sure a district would always meet the threshold to raise taxes," DeFoor said. "Each of the 12 districts had sufficient unused funds that should have negated some of the 37 tax increases."

State law dictates how school districts can raise taxes and sets limits for those increases. If a district must raise taxes above the legal limits, they are required to ask voters for permission through a referendum or apply to the state Department of Education for a legal exception.

DeFoor suggested changing the law to require districts to use general fund balances and the prior year's financial surplus before raising taxes.

See the entire audit here.