T/E School District Tax Increase — Will it be 2.8%, 3.91% or 4.33%? “To Be Continued”

On the eve of June 1st and days away from the end of school year, the school board still does not have an agreed up tax increase number for the budget! How is that possible? What we do know is that the tax increase will be less than the 6% that we have heard since the middle of December and the increase was approved in the draft final budget.  However, we are left with three numbers — 2.8%, 3.91% and 4.33%.  Exactly how did the Board come up with these various numbers? What are the numbers based on? And how does the incorrect accounting of the Special Ed expenses factor into the tax increase?

Although I was unable to attend the school board meeting this week because it was the same night as the digital billboard appeal, Doug Anestad attended and offer his remarks below. Plus the video of the May 29 school board meeting is now available on the District’s website, click here to view.

After reading Doug’s comments, my first takeaway is that maybe the TESD 2019-20 budget process should be renamed, “To Be Continued …”!  

The school board met Wednesday night. The agenda was very light.

What was interesting was that no new budget discussions happened. It is very late in the game not to come to a final tax rate increase. Therefore, the 2.8%, 3.91%, and 4.33% tax increases are all still on the table.

The board proposed changes to Regulation 2110: Job Responsibilities for Superintendent of School. The proposed change says that if one or more invoices from the same vendor above $200k is accounted for in the wrong fiscal year, the Superintendent must be notified and the Superintendent must inform the school board.

Of course, this proposed change in regulation came about because the administration didn’t tell the the school board about $1.2M in special education expenditures from 2016-2017 that were wrongly recorded against 2017-2018. I spoke about the regulation and said that if you have to tell the administration when $1.2M is misstated they should notify the board, it is not a policy issue, it is a personnel issue and they should treat it as such. Kyle Boyer also had concerns about it being a personnel and not a policy issue. The vote was 8-1 on the regulation change.

When the administration started discussing the launch of updating the Strategic Plan at a cost of $50k, some of the board members raised concerns. This is highly unusual as this item is not even normally voted on as a separate item. Multiple board members said that they thought that the district was not in a position to deal with a Strategic Plan. The final vote was 5-4 with Michele Burger, Kate Murphy, Ed Sweeney, and Heather Ward all voting against the motion. I believe that this close vote demonstrates that multiple board members are not happy with the current situation and the administration.

Major kudos to Ed Sweeney for bringing up the issue of revising the finance numbers for the prior years to be the actual numbers. He asked, and the board agreed, to look into the financial and legal ramifications of fixing the numbers to be the real numbers.  They seem to be most concerned about double dipping next year since they already got a higher taxing authorization from the state based on the wrong numbers.

I am not sure why so many on the school board continue to be so hesitant to figure out the truth. Why have they still not asked the auditors when Art McDonnell informed the auditors about the $1.2M account error? Why haven’t they already figured out what the process is to correct the numbers? Why haven’t they asked the state how revising the financial statements to be the real numbers will impact their taxing authority?

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  1. You gotta love this Board. They proposed two new Policies in relation to the “accounting timing error” debacle. Is essence; one says (1) “the Superintendent has to be in charge of the District’s financial reports” and (2) “if you make a $200,000 accounting error in the future; you have to tell the Board”. Come on….

    Who can forget George Costanza and his excuse to his employer?: “was I not supposed to have sex with the cleaning women on my desk?, no one said anything about that when I was hired”. This is NOT a Policy failure…this is a People problem. BTW, George was fired….

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    Tredyffrin taxpayer Reply:

    Rules written and enforced by administrators are designed to protect administrators rather than tax payers.

    Policy is meant to blind the public.

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    Doug Anestad Reply:

    It is trying amazing that an employee ultimately responsible for the money in the district hid a $1.2M fiscal misstatement from the board for almost a year and a half, lied about it for a whole year, lied about it the next year, and lied about being able to correct, it is still employed with the district. On top of that, it is looking more and more likely that he didn’t even tell the auditors about it and lied about that. What does someone have to do to be terminated for cause in the T/E School District? Can Art McDonnell shoot someone in the middle of Fifth Avenue and still have the board support him? Inquiring minds want to know.

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  2. It is so dispiriting to return to the continuing chaos. The news of Ed Sweeney’s achievement in commissioning a report on the implications of finally correcting the financial submissions to the the state is definitely a step in the right direction. On the other hand, only four Board members stepped up to question the $50,000 spend on a generic strategic consultant, when an independent analysis targeting known problems would be so much more effective.

    It’s puzzling why the Board, members of the same community as those of us pleading with them, offering real expertise and also commenting here, have such a different perspective on the problems and solutions. Maybe I mentioned this before, but the diagnosis of Stockholm Syndrome offered by one Board member is not as impossible as it sounds.

    Are there signs now, though, that one or two members have escaped captivity, and that might lead to a mass break-out?

    Hope springs eternal.

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    Doug Anestad Reply:

    That is pretty much spot on I think

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  3. I watched the Board discussion (brought up by Ed Sweeney) on “correcting” this error on the State AFR forms. Finally, they are talking about fixing the mistake after 3 months. But, not ONE member said “let’s do the right thing here”. It was all about “let’s find out what ramifications we may have if we post the correct financial information with the State”. THAT work could have been done in March if not for the interference and obfuscation of the Admin (AND certain members of the Board).

    Back to my cheating analogy. You cheated for on a test and got an A when you deserved a B. Instead of doing the right thing and admitting the error; now they want to know “if we admit the truth that we cheated, do we get to keep our A?”. Great lesson for our students!

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  4. Couple observations after watching this section of the Meeting again. #1. Legal /Expert opinion: Ken Roos told the Board he could complete his opinion quickly…I’m glad the Board is finally asking. He made an interesting comment: his opinion may be different depending on the tax increase the Board selects. Since it’s been determined that the 3.91% tax increase would be the District’s Taxing Authority had they submitted the correct numbers for Spec Ed spending on their 2017/18 Annual Financial Report (with the State)… I assume Mr. Roos is less worried about a legal challenge if they stay below this level. Even if we are in violation of Act 1….if no taxpayer is harmed (the Board doesn’t use the taxing authority received by submitting an incorrect AFR); I guess the District could defend itself if tested in Court. Currently; only 2 Board members (Hotinski and Kantorczyk) are advocating for a tax increase above the 3.91%…that was from Tuesday’s Finance Meeting.

    It would be great if Mr. Roos could answer the question: Is the taxing authority we received currently in violation of Act 1. The PDE will not take a stand….District’s are on the honor system for the numbers they report to the State. If these numbers can be submitted in error and a District can move expense from one period to another impacting their taxing authority…I guess the Board is in the clear and can increase up to the 5.964%. I’m not really sure what “question” is being put to the District legal rep.

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  5. Observation #2: Consequences. Lots of talk on the consequences of correcting the District’s Annual Financial Reports. Would they have to re-open their audit report, would they have time to get this done, would there be other consequences for submitting incorrect amounts? Let’s be VERY CLEAR: any consequences are not rooted in “correcting” the error….ALL potential consequences are a result of submitting known false reports IN THE FIRST PLACE.

    What did we finally hear in writing from the Auditors this week? “Management made all decisions regarding how and when these transactions were recorded”. Management’s decision to change the reporting period for the $1.2 MM of payments IS the cause of any and all consequences that follow. Sometimes doing the right thing comes with consequences. We’ve had months of trying to get to the bottom of this issue….the auditor was being used as a scape-goat, well they pushed back and put the origin of this mess back where it always belonged: A Management Decision. The Board may want to consider generating their own Consequences if they were not consulted on this key Management Decision.

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  6. Observation #3: Say What? Dr. Hotinski went thru some tortured explanations/comments prefaced by “just so the public understands”. I am in the public, am pretty sure I understand the issue and she confused me totally. She talked about “double-dipping” if the ARF’s are corrected. Huh? Correcting the AFR’s and, therefore, the District’s taxing authority assures that you “single-dip” taxes for this year and the next. As she advocates for a 4.33% tax rate in the current year…that IS the Double-Dip…more tax increase than you should be allowed this year (if you submitted accurate Financial Reports to the State). Is it better to double-dip this year than next…is she convinced that the Board will raise taxes more than 3.91%? (I am not…the Board members have already spoken and only two want above 4%). Maybe she can tell me what she’s saying because I’m totally confused….she’s written on CM before.

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    Pattye Reply:

    Yes, Roberta Hotinski has commented on CM and most recently her remark related to the current budget discussions as has Ed Sweeney. I would encourage Roberta (and other board members) to explain — if our resident financial expert Neal Colligan is confused, you know where that leaves the rest of us!

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    Roberta Hotinski Reply:

    Hi again Pattye,
    Doug got the gist of my comments – my point was that if we adjust the AFR’s for next year we will double-count some of the 2017-18 special ed expenses and increase our overall taxing authority by over $1 million.

    I’ll refer everyone to page 50 of the May 13 finance agenda (https://www.tesd.net/cms/lib/PA01001259/Centricity/Domain/56/051319%20DRAFT%20Finance%20Committee%20Agenda.pdf), which shows the projected difference in exceptions between the actual scenario and “extrapolated” scenario (in which the AFR’s are changed) for all 3 years of interest (last year, this year, and next year). The total of the special ed exceptions for the actual scenario is ~$5.45 million versus $5.22 million if the revised AFR’s had been used to calculate all 3 years of exceptions.

    We can’t change exceptions for last year and this year that were already approved by the Dept of Education. Revising the AFR’s would impact next year’s special ed exception calculation – in this projection we would qualify for the higher “extrapolated” exception of ~$2.53 million, versus a ~$1.37 million exception if we kept the AFR’s as is. Our total taxing authority for the three years after changing the AFR’s would then be ~$6.6 million, or about ~$1.17 million higher than if we don’t revise them (the difference is due to double-counting of 17-18 special ed expenses already accounted for in this year’s exception). The year 3 numbers were estimates so these numbers aren’t final, but this illustrates what I meant when I said that changing AFR’s midstream would lead to “double-dipping”, which I think is worth considering.

    As always, my comments represent my views as an individual and not those of the entire board.

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    Pattye Reply:

    Thank you Roberta — I appreciate your taking the time to explain your position.

    Ray Clarke Reply:

    Huge thanks to Roberta for explaining her perspective on correcting the AFRs.

    This does get at a concern that I have noted here before: that the Board could use the authorization based on the wrong expenditures for the coming budget, then move the expenditures back to the right year and get an authorization to use them AGAIN for the 2020/21 budget!

    This would take a next level of disregard for the taxpayer!

    I sincerely hope that Roberta’s fears will not come to pass. The community has heard from PDE that the AFRs can in fact be corrected. And even if not, surely the Board can base its taxing decisions on the expenditures as they actually were, and considering a tax rate that is fair to the community and to the students.

    Keith Knauss Reply:

    Ms Hotinski,

    The district can submit corrected AFRs for 2016-17 and 2017-18 and then ask for and receive a revised special education exception. If someone tells you otherwise ask for written documentation. This would have been a simple process if undertaken in March, but because you’ve been misled by the business manager for so long timing may be a problem.

    I believe you were told that the CCIU invoices were booked correctly. Then you found out the CCIU invoices should have been recognized in FY2016-17. (required accrual method of accounting)

    I think you were told that because the district received a “clean” audit that the current 3.642% special education exception was legitimate. Then you found out that PDE uses the AFRs to determine exceptions; not the audit.

    I think you were told that the auditor approved the AFRs. Then you found out that the auditor makes no such approval and instead the business manager and superintendent self-certify the AFRs.

    I believe you were told that it was impossible to revise AFRs. Then you found out it was possible.

    Please, get some outside help!

    Neal Colligan Reply:

    Thanks for engaging. I now understand your perspective. BUT, the double-dipping you mention could only happen if (1) the Board used it’s full taxing authority granted this year (which is inflated due to submitting incorrect numbers); (2) corrected the 2017/18 AFR’s after the tax decision and THEN (3) used the full taxing authority next year. In this specific case, you are correct BUT it would seem highly unlikely that the PDE would allow the change of the 2017/18 Spec Ed spending amount to be different in two separate calculations.

    This does not tackle the question of whether the District is in a current Act 1 violation. THAT critical answer would put the issue to rest BUT I’m not sure who would give you that determination. You said: “We can’t change exceptions for last year and this year that were already approved by the Dept of Education”. I’m not sure you’ve really received that opinion from an Authoritative Source…have you seen that statement in writing from the PDE? You were likely surprised when you saw the Auditor’s statement, after what you were told about their involvement. I’ve never seen an opinion from the PDE that a District can’t change exceptions for this year…only assurances from the BM relating some conversations he had with the PDE at some point.

    As the Board (in a majority) is leaning towards using the tax authority (3.91% or less) that the District would have been given had they submitted correct 2017/18 numbers….why not make the change?

    Sorry, if I sound like I’m piling on…I do appreciate the forum to discuss the issue…thanks again.

    Doug Anestad Reply:

    Roberta, thanks for your post. I wish more board members would do the same.

    You state “We can’t change exceptions for last year and this year that were already approved by the Dept of Education.”

    That is not my understanding after lots of research.

    Is your primary source of information for this statement from the administration? If it is, they have shown that they are willing to lie over and over again to the board and the public on this topic.

    I would highly recommend that you have the board seek its own facts directly with the state. I think you might be surprised on just how badly the board has been led by both the administration and legal.

    Roberta Hotinski Reply:

    Always happy to chat further with constituents about this or any issue, but conversations with a time delay are awkward! Feel free to contact me directly – info is here: https://www.facebook.com/HotinskiforSchoolBoard

    Tredyffrin taxpayer Reply:

    Roberta,

    Thank-you for your comments. I’m sorry to read that you believe time delays are awkward. I don’t mind time delays and would appreciate reading what you have to say on Community Matters. As you know, many community members check in here and it’s a great way to help the whole community understand your point of view instead of the one of two via a FB chat. I look forward to reading what you have to say on CM. Thanks.

    Pattye Reply:

    Yes, I encourage a continued dialogue from Roberta on Community Matters and invite the other school board members to do likewise. With the final school board meeting over the budget coming up on Monday, June 10 the public still remains in the dark about what tax increase to expect.

    Doug Anestad Reply:

    I believe what Roberta Hotinski is saying is that since the district already got a higher special education exception then they would have with the right numbers, if they change the numbers so that they get a higher special education exception next year than with the current wrong numbers then are are getting higher numbers for both years – one of those years through the wrong numbers and one of those years for the right numbers. She is worried about it even if they only take the 3.91% because they were authorized for more. It is the authorization she is worried about, not the actual taken. At least that is how I understood it.

    I don’t agree with the above, but I think that is how the administration will try to push some board members to take higher than 3.91% as this is their “last chance” to do so since they can’t “double dip”. Again, I think this is bogus and the Business Manager put the board in an awful situation with his initial decision, the hiding of the error and decision, and the followup lies to cover the decision and hiding of the error.

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    Pattye Reply:

    Doug, you say, ” … the Business Manager put the board in an awful situation with his initial decision, the hiding of the error and decision, and the followup lies to cover the decision and hiding of the error” but doesn’t the Board bear a responsibility to the public to do something about the Business Manager? Doesn’t the public deserve oversight of these actions by the Board?

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    Doug Anestad Reply:

    Yes. I personally am tired of listening to Art McDonnell’s constant stream of lies which predate this issue by many years.

  7. Observation #4: Shout out to Easttown. Kate Murphy’s “if I can’t explain it, I’m not voting for it”…is still the best line of the season…she’s really found her voice and is not a “just-go-along” Board member. Tina Whitlow has done a ton of research on new reading methods and is able to speak very eloquently about what she believes the District’s direction should be in this critical and highly-charged issue. She breaks with management on their approach…this is a brave stance but it looks to me like she’s done her homework. Heather Ward is likewise well thought-out and has a good financial mind. Sometimes I’m not sure of her path when she starts asking questions…but if you give her a few minutes…she gets the the meat of the issue!!

    Great part about this group: they represent both political parties (showing that the School Board is as close as we get to non-denominational government); two are recently minted and one more experienced and they each seem to have their own competencies AND they are not afraid to swim upstream if that’s what is required.

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    Doug Anestad Reply:

    That was one of Kate Murphy’s best lines. Another good one from her was basically “If the administration puts someone on a list to be considered for cost reduction, it is okay to consider it for cost reduction”. Seems like pretty solid logic to me.

    I think that Ed Sweeney and Heather Ward are two unsung heroes here. Ed has been on the right side of many of these issues with the board eventually catching up to him. It is a shame they didn’t follow his lead earlier. Heather has seen through the misinformation from the administration and done so while asking extremely good questions and making extremely good comments. Quite impressive for someone with her limited experience.

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    Tredyffrin taxpayer Reply:

    Doug,

    Could you explain what this means further, “If the administration puts someone on a list to be considered for cost reduction, it is okay to consider it for cost reduction”. Seems like pretty solid logic to me.”

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    Doug Anestad Reply:

    Sure.

    Kyle Boyer was very passionately objecting to the board delaying spending $300,000 on a new reading program and related questioning by some board members as to whether or not that program was the best way forward.

    The quote I gave was Kate’s response to Kyle’s objection.

    Her response was precise, logical, and as I said before, pretty solid logic to me.

    I will point out also that multiple board members spent considerable amount of time doing their research on this topic. They did a really good job and deserve much respect in my opinion for doing so.

  8. Observation #5 The Budget (and I’m done after this!!). The Board never really talked about the Budget this year. While it looks like a tax increase around 3.9%…that’s STILL HIGH. Look at what other Districts are doing this year. While it’s not 6%, let’s not go wild celebrating.

    Important questions need to be asked. Why is Spec Ed spending up AGAIN this year by double-digits? How can the Board find out on May 28 that THIS year’s budget just took another $700,000 deficit hit (clearly the money has already been spent…how can it be reported only now)? At the same meeting $500,000 of expense was added to next year’s budget. The Board is right in losing Trust with the Budget Process and the numbers they are presented. They are not accurate, change without warning, could be subject the “Management Decision (above) and trust is eroding. Some system needs to be put in place that the Board can Trust and produces the results they need to pursue good government.

    Like it or not; this will probably mean some big changes…in people, in Board practice and in Leadership. That’s a big lift: I think they have the right guy in charge. Rev. Dorsey can navigate these difficult seas but I don’t envy the work in front of him. I don’t think the Board can wait until next school year to make some over-due changes. Certainly they’ll want to do the Budget work that they missed this year…I can tell many have serious questions. Looks like a working summer. I’m around this summer if I can help.

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    Pattye Reply:

    If I were an elected school board director, I’d be taking you up on your generous offer of help — again, hope that the Board is reading and listening!

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    Ray Clarke Reply:

    All excellent observations from Neal. And perhaps the Board will have some time to reflect on them amidst this week’s graduation ceremonies.

    Just adding a couple of thoughts:
    1. The Board is bailed out of the worst implications of the cover up by the inexorable rise in Special Ed expenses. Suppose the run rate was flat or increasing at only the Index, and yet expense was packed from one year into another. A tax increase would be created out of thin air.
    2. So, perhaps their prevarication is made easier by the lack of a gross tax violation, but in what value system should that even matter?
    3. Another Board worry, perhaps: does accepting the right numbers (and everyone knows what they are, regardless of any legal, financial, or regulatory studies) implicitly indict the Administration to which they are beholden? Do they not want to face the consequences of that? Consequences that many commenters here believe are actually the most needed outcome?
    4. And all of this diverts the Board from its responsibility to provide fiscal oversight of the $150 million school district enterprise, and in particular a $25+ million unexplained and unconstrained special education category. Should we expect a book report at the end of the summer?

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  9. Maybe the board should invite the Auditor General to help. He’s free, neutral and routinely audits districts.

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    Pattye Reply:

    Excellent idea!

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  10. Just received an e-mail from the TESD mailing list with a link to the agenda for Monday’s school board meeting with the following heading “Agenda VI, A: Adoption of the 2019-2020 Final Budget at 3.91%” on page 8.

    The full document is available here:
    https://www.tesd.net/cms/lib/PA01001259/Centricity/Domain/56/June%2010%202019%20eAgenda%20-%20Web.pdf

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    Pattye Reply:

    Dan — the final budget with the tax increase remains in flux, not yet decided.

    In review, on page 7 of the agenda, the adoption is for 2.8% tax increase (my personal favorite as its the lowest increase!), page 8 of the agenda, the adoption is for 3.91% tax increase and on page 9 of the agenda, the adoption is for 4.33% tax increase.

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  11. People in this township need to wake up and know what’s really going on here.

    If you recall, Kyle Boyer was backed by The very politically active PTO. Those same activists had a specific agenda, to raise our taxes for their kids. If you attended Education meetings, you would overhear these same people say, “we can afford more taxes” as they compared Lower Merion & Radner School District’s. Makes one ask, why didn’t they move to those school districts in the first place?

    You have a very political PTO—(maybe one reason participation levels have dropped off) not all, but the ones in positions of power, use their power. It has been documented here that Jamie L. who was the Head of the VFES PTO attended a Board Meeting to petition the board for TESD principals to get their Bonues. (This was recorded, you can look it up).
    Then, the following school year, 5 months later, she and a hand full of concerned mothers, petioned the Education Committee to spend more money for programs for their kids. One can say, it was almost a quid pro quo—-I support bonues for the principal’s, you support my programs for my kids.

    These are also the same group of people who had Lawn signs and handed out Kyle Boyle pamphlets for Election Day. You, see, Kyle Boyer is going to support any program they want—even if it’s at the expense of the rest of the majority of students. That is, it’s ok to cut programs for the rest of the students, but don’t touch his supporters. And who says politics doesn’t occur at the school board?

    Once again, people,parents,tax payers need to wake up and connect the dots to see who is really representing them and their students. Just look at the recent budget increases—-where is the money going to?? Middle Math Programs—No. Restore Foreign Languages in Elementary Schools—No.

    As noted on this blog, there are real concerns going on with this board— Lack of Leadership, Lack of Direction, Lack of Ethics etc… One hopes they don’t take things personally but realize they were elected to represent ALL the students, not just the vocal minority and those who Participate in their election committee. Although we don’t attend every meeting, we are watching and so are our kids—we deserve better.

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    Citizen Reply:

    Hold’n
    The question where is the money going(?) is a great one and one I’ve been asking for years.

    Niche reported recently that the AVERAGE teacher salary in TE is $92,000. That does not include gold standard healthcare, and retirement benefits. Roughly half the teachers in TE make over $92,000 per year with 16+ weeks off per year. How many of you (who pay for this outlandishness) enjoy the same? Not one.

    You can bet come the next contract negotiation, they will clamor for more, threaten to strike, March arm in arm wearing UNION identical t-shirts to get even more because “they deserve it” while students are ignored and worse retaliated against for speaking up.

    Tax increases go to never ending outlandish salaries and retirement benefits for employees who bully and intimidate students, parents, Board Members and tax payers.

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