Neshaminy Used Loophole To Raise Taxes, Auditor General Says

The Neshaminy School District has been accused by Pennsylvania Auditor General Timothy DeFoor of using a “legal standard practice where districts are raising local property taxes while holding millions of dollars in their general funds.”

The auditor general, a Republican, held a press conference Wednesday and questioned the 2022-2023 fiscal year tax increases for Neshaminy and 11 other districts in the state.

“These districts represent a cross-section of Pennsylvania – from wealthier to poorer tax bases and urban, suburban and rural communities,” DeFoor said. “These districts have found a way to use the law to their advantage so they could always raise property taxes. 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.”

As reported by this news organization last June, the Neshaminy School Board approved a $196.2 million budget that raised taxes from 165.6 mills to 171.23 mills. Don Irwin, the district’s business administrator, said at the time that the increase would equal out to an average cost of $62.19 per household, but it would have been a $157.84 increase without state aid.

At the time, district officials said the tax hike was due to rising costs, contractual obligations, and several large projects, including construction of a new elementary school in Middletown Township, being in the works.

DeFoor said the 12 districts his office singled out had healthy fund balances that could have been used to fill budget gaps. He called it a common practice to shuffle unspent money into other funds to justify tax increases.

According to the 2022-2023 budget, Neshaminy started the fiscal year with $13.8 million in unassigned fund balance, or 7 percent of the total budget.

For Neshaminy, the state limits the size of fund balance to be 8 percent in unassigned fund balance.

“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.

DeFoor said he supports schools having the money they need to operate, but they shouldn’t use legal loopholes to raise taxes.

“This is legal, but it is not necessarily transparent,” DeFoor told reporters. “They used the law to make sure this wasn’t transparent.”

The auditor general said the 12 districts he pointed to were found to be using the practice, but there could be even more in the state. His office will consider looking at use of the loophole in future audits.

The Neshaminy School District didn’t comment on the auditor general’s findings.

The Pennsylvania Association of School Business Officials (PASBO) said in a statement they have “concerns” over the auditor general’s findings.

“PASBO recommends additional analysis and a better understanding of how fund balances are managed and utilized by all of Pennsylvania’s 500 school districts and an appreciation of what is driving property tax increases prior to pursuit of any of the policy adjustments suggested based on a review of only 12 school districts,” the statement said.

The association added that it is key for districts to have unassigned fund balance. They said unassigned fund balance is “integral to the long-term preservation of school district’s general fund to ensure stability and consistency in providing the resources needed for all student programs and services.”

The auditor general called on the legislature to close the loophole. He said he’s forwarded his recommendations to lawmakers, the Pennsylvania Department of Education, and the 12 districts.

In addition to Neshaminy, the auditor general said the following districts also took part in the practice:

• 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;
• North Allegheny School District, Allegheny County;
• Northampton Area School District, Northampton County;
• North Penn School District, Montgomery County;
• Penn Manor School District, Lancaster County;
• School District of Lancaster, Lancaster County; and
• West Chester Area School District, Chester and Delaware counties.

Report a correction via email | Editorial standards and policies

---

---