T/E Preliminary Budget Calls for 2.6% Tax Increase Question: What Happened to the $4 Million Surplus from October?

At its last meeting on January 6, the TESD school board voted 8-1 to authorize the Administration to display a 2020-2021 preliminary budget proposal that includes a property tax increase of 2.6%.  The proposed property tax increase of 2.6% is the Act 1 index. For the record, this will mark the 16th straight year of tax increases in TE School District.

At the January meeting, the public learned that the school district needs the tax increase to help close the projected $7 million operating deficit.  I am baffled … in a blog post dated October 10, 2019,  (you might want to review the post and the 54 comments) I wrote the following:

How is it possible that in June, the TESD Business Manager claimed a projected deficit of $1.5 million for the 2018-19 year and then based on that, the taxpayers received a 3.91% tax increase for 2019-20?  Then fast forward less than four months later and this same Business Manager tells the school board at the Finance Committee meeting this week that not only did the District not have a deficit for the 2018-19 year but instead it magically had a $4 million surplus — A $5.5 Million discrepancy! How is this possible?

The same business manager who magically found the multi-million dollar surplus in October now says the school district has a projected $7 million operating deficit.  It is no wonder that I have received emails from residents asking what happened to the $4 million surplus. In an effort to understand how those extra millions were accounted for in the preliminary budget proposal (which is on the agenda for adoption at tomorrow’s school board meeting), I searched for it on the school district website.

Today, I learned from Keith Knauss, former long-serving school board director at Unionville Chaddsford School District and regular contributor to Community Matters, that if you want to see a copy of the proposed budget proposal you must drive to the District’s administration building on North Valley Road.

I reread the press release from the January 6 meeting – it clearly states that the school board voted to authorize the Administration to display the budget.  Sorry, but forcing residents to drive to the administration building to view the budget is not my idea of transparency.  However, as I learned from Keith, it gets more ridiculous.

Rather than drive to the administration building to view the proposed preliminary budget, Keith filed a right-to-know request with the District’s Open Records Officer Art McDonnell (yes, also the Business Manager). Rather than provide a copy of the proposed preliminary budget (a public document) McDonnell denies the request! On what grounds, I cannot imagine.

Today Keith sent the following email to our school board members and shared a copy with me:

School Directors,

You may want to ask your business manager and Open Records Officer Mr. McDonnell why he is making it inconvenient to see the proposed preliminary budget passed by unanimous vote on January 6th.  A school board concerned with public review and comment would have had the budget available with the 1/6 agenda.  An acceptable alternative would have had the budget available on the district’s website the next day.  The questionable alternative chosen by Mr. McDonnell was to require the public to inspect the document at the district offices.  Why make it hard to see the budget?

Rather than visiting the district offices to see the budget, I chose to send a Right to Know request to the Open Records Officer Mr. McDonnell seeking the budget.  He could have easily sent a pdf copy of the budget as this is the standard format required by PDE for all budget documents.  Instead, my request was denied.  I have appealed that denial to the Office of Open Records.  This is an unfortunate outcome.  First, the denial paints the district as opaque rather than transparent. Second, the appeal requires time on my part and legal fees on your part.

I’ve attached a copy of the appeal.

Regards,

Keith Knauss

Reread the last couple of sentences of Keith’s email to the school board, “…the denial paints the district as opaque rather than transparent. Second, the appeal requires time on my part and legal fees on your part.”

Yet again, you have to ask yourselves “who” is running the TE School District? The District (read taxpayers) will now incur additional legal fees due to the actions of McDonnell over a simple right-to-know request. The budget proposal is public information! However, it’s not McDonnell’s money – so why should he care. Had McDonnell included the budget proposal on the District’s website immediately following the January 6 meeting, all of this nonsense, time and expense would have been avoided.

You have to wonder why McDonnell is limiting the number of people who will see the proposed budget proposal.  Many of our residents have full time jobs, so how many were actually available to go to the District’s Administration building? Was  McDonnell concerned that some of us might go looking for the $4 million surplus that the District had three months ago!

Transparency needs to be more than a feel-good buzzword.  The government has an obligation to share information with citizens. On the eve of the school board meeting to approve the preliminary budget (and tax increase), the meeting agenda is now on the District’s website.

Paging through the 122 page meeting agenda, I found a summary of the proposed preliminary budget, now indicating a deficit of $7,729,580. With a 2.6% tax increase (as allowed by Act I), the deficit is $4,689,619. To be clear, the public does not have a copy of the detailed proposed budget, only a summary!

My question remains – what happened to the $4 million surplus that the District had three months ago!  Where did it go Mr. Business Manager?

Residents want open and transparent government from our school board. The reason for that is simple: Our government is intended to be, as President Abraham Lincoln put it more than 150 years ago, “of the people, by the people, for the people.”

T/E School Board  – please help us!

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22 Comments

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  1. One would think, with all this guy has been through, he would be the most transparent and above board as he could possibly be.

    How can Directors continue to support this guy? Where does he get the authority to run the District like this?

    [Reply]

  2. Once transferred to the Capital Reserve Fund, the $4m can not be transferred back to the General Fund. At tomorrows meeting, I think Michele Burger should explain to the residents a number of things: first, why Art McDonnell is still working for the district; second, why the increase is at the minimum limit per state mandate and we still show a deficit of over $4m; third, the status of the Declaration of Taking for the McDonnell Nursery property; and fourth, the public MUST see the line item budget in its entirety. All of our answers MUST come from the Board and not the Supt of Schools or Art. We must know if the Board knows what is going on. I believe it is time for the Board to come out from the Dark and into the Light. They and we deserve answers.

    [Reply]

    Pattye Reply:

    Thank you Bill for your comment. Please School Board, as Bill says, “I believe it is time for the Board to come out from the Dark and into the Light. They and we deserve answers.” The community deserves to know the answers, we elected you — please step up and help us!

    [Reply]

  3. Pattye’s question, “what happened to the $4 million surplus” might be better phrased, “why were Mr. McDonnell’s budget estimates off by over $4M”?

    So why does a $4M budget error matter and is a $4M budget error a big deal?

    To lend some perspective, the tax increase during that fiscal year (2018-19) was 2.4% and it increased revenue by less than $3M. Thus, if the budget presented to the board and public was accurate (rather than off by $4M), no tax increase would have been necessary that year. In fact the same educational services could have been provided to the students with a slight tax decrease. Bottom line: A $4M budgeting error is huge and the board should be vigilant so as not to be misled into increasing taxes where no increase is necessary.

    [Reply]

    Easttowner Reply:

    Keith,

    This is a strategy that has worked for years for Art and for the Administration and the Board:

    Over estimate expenses

    Under estimate revenues

    Report a huge deficit to justify raises taxes

    Raise taxes

    Report a surplus after tax increases have been approved.

    The Board is well aware of this strategy. They sanction it yesr after year by approving the budget.

    [Reply]

    Keith Knauss Reply:

    Yes, this is the strategy used repetitively by Lower Merion. There is a case currently before Commonwealth Court where a resident is suing the district to force it to do honest budgeting and return millions in fraudulently obtained money. Justice is slow. The case started in Common Pleas Court 4 years ago. Appeals took it to Commonwealth Court then the PA Supreme Court. Now it’s back down to Commonwealth Court. Guess which lawyer represents LM? The same one that represents TE!

    [Reply]

    Easttowner Reply:

    Thanks Keith,

    The case you are referring to was initiated by attorney Arthur Wolk. He is using his own time and resources to use the courts to force Lower Merion to do honest budgeting. The initial ruling was in his favor, the LMSD appealed and it got all the way to the PA Supteme Court. I lost contact with it at that time.

    Could you explain why it’s back in Commonwealth Court. Why didn’t the Supreme Court make a decision? Thanks

  4. Thank you for shining a light on this major issue for taxpayers.
    Keep up the pressure.
    I attended a school board meeting last spring and was baffled by the lack of communication between the board and the township.

    [Reply]

  5. Can someone more schooled in these accounting matters tell me why this $4M surplus would have been transferred to the Capital Reserve Fund? Is it typical to do this when yet another projected deficit was right around the corner? Has McDonnell’s accounting error ever been rectified with the state? Has anyone ever consulted an attorney versed in these matters about McDonnell’s behavior and the seeming imbalance of power between School Board and Admin in TE?

    [Reply]

    Easttowner Reply:

    Easttown resident,

    As Keith Knauss a respected commenter on C M, and former School Board Director for the UCFSD states:

    The accounting error was corrected. Revised audits have been received and filed for the two fiscal years in question. That said, the board never held anyone accountable for the debacle because they never investigated the cause. The board cold have gained valuable information from the auditor (Mr. Furman), but failed to demand his attendance at a board meeting. Instead the board settled for the attendance of an alternate accounting firm partner who knew nothing of the audits in question. And they conveniently delayed his attendance by a month to a meeting when Kate and Ed were off the board and replace by two novice school directors.

    But we may yet get to hear Furman’s viewpoint in a document called the Management Letter. This is a letter from the auditor to the board listing any undisclosed problems with the audit. I should certainly have it within a month; maybe on Monday.

    Keith, did you receive the Management Letter from the Auditor to the Board? Did it list any undisclosed problems with the audit?

    [Reply]

    Keith Knauss Reply:

    Easttowner,

    You asked, “did you receive the Management Letter from the Auditor to the Board? Did it list any undisclosed problems with the audit?”

    Answer: Not yet. Mr. McDonnell replied within the prescribed 5 day time period, but invoked a further 30 day delay to my right to know request. The legal reason given was “The extent or nature of the request precludes a response within the required time period” and “Legal review required to determine whether record is a public record”. I’m uncertain why the district needed and extra 30 days to copy the Letter and I’m uncertain why a legal review was necessary as the district gave me other Management Letters.

    I should have the Letter by Feb 12th.

    [Reply]

    Easttowner Reply:

    Keith,

    Thank-you so much.

    This action by B.M. Art McDonnell and the implied support for it from the Board does not engender trust with the community.

    Please keep us informed about this process.

    Easttowner Reply:

    Easttown resident,

    You ask:

    Has anyone ever consulted an attorney versed in these matters about McDonnell’s behavior and the seeming imbalance of power between School Board and Admin in TE?

    I’m not sure the imbalance of power between the Board and the Administration is a legal matter. I think it’s a matter of educating citizens so they vote for candidates who truly represent the best interests of taxpayers, parents and students. Voter turnout in our township was very good in November but when you talk to residents about why they voted in a social worker, a retired School District Administrator and a retired School District teacher, you hear about the awful way Donald Trump conducts himself and the awful way he runs the country.

    Not one of them attends meetings or pays attention to school district operations so they know nothing about the way the teachers, the administrator, and the social worker on the School Board abdicate their power to the Administration.

    It isn’t just the 2 teachers, the Administrator and the social worker on the School Board who abdicate their power to the Administration, I think Todd is an attorney and he strongly and fiercely fights for the Administration. Roberta votes in their favor and Michele has shown she can be a strong “team” player too.

    It will take voting in Directors who know the issues and represent the interests of the people.

    [Reply]

  6. I think EVERY taxpayer in the district needs to phone and email the school board to address this matter ( and Mr. McDonnell )..
    sooner rather than later. Let’s all wake up and get our calculators out!!

    [Reply]

  7. I continue to marvel at the fact that the Manager still has a job. And more importantly that the Superintendent stands idly by. It is clear to me that what we need quickly is to replace the Superintendent with a person who has run a for-profit corporation and clearly understands the budget process. It is clear that the Board has nary a clue as to how to manage or monitor the actions of the Administration and further all that is happening is that the educators are clueless as well so they depend on a Manager that is hoodwinking all of us.

    [Reply]

    Easttowner Reply:

    Papadick,

    Thank-you for your comment.

    Supt. Rich Gusick does not stand idly by, he supports Art and the Solicitor Ken Roos in their mission to hide information from the public, cover up bad acts committed by Administrators and teachers and protect and shield all employees from consequences of their bad acts. Supt. Rich knows how to read the budget.

    I don think the Administration is hood winking any of us anymore. We know how they operate. It’s very clear to anyone who attends a few meetings.

    The question is why does a Board, whose members ran on the platform of transparency for taxpayers and meaningful exchanges of ideas with parents, allow this culture to continue?

    [Reply]

  8. The issues before the Commonwealth Court and Supreme Court are/were obscure procedural issues that don’t make sense to detail here. And those procedural issues relate to the injunction (a tax reduction in 1998 from 4.44% to 2.4%) not the underlying case (return of millions and other sanctions). Once the procedural issues are cleared up the injunction may be affirmed, remanded back to Common Pleas Court for further action or rejected. Then on to the underlying case for hearings and testimony. I hope I’m alive when it’s finally ready for me to testify again.

    [Reply]

    Easttowner Reply:

    Keith,

    Thank-you. The last line in your comment is interesting.

    ——-I hope I’m alive when it’s finally ready for me to testify again.——-

    As a Unionville Chadsford Resident and former UCFSD Board Member, why did you testify in this case regarding LMSD?

    Did residents and financial experts on this matter living
    in TE testify?

    [Reply]

    Keith Knauss Reply:

    No one from TE testified in the Lower Merion injunction hearing. There were only two witnesses – the LM business manager and me. I testified because I had uncovered the fictitious budgeting practice at LM and I wrote a letter to the editor of the Main Line Times in 2016. Wolk read the letter and gave me a call.
    https://www.mainlinemedianews.com/mainlinetimes/opinion/as-i-see-it-budget-fiction-from-the-lower-merion/article_8ede27bc-032e-5f3a-8cc6-5fcaf5fc5b14.html

    You might ask, “Why did someone from UCF discover something at LM?” Answer: LM is a beacon for union negotiators everywhere. They have the highest paid teachers with the best benefits. I heard about how great LM is from our union negotiators. As a result I looked at LM financials and asked myself, “How can year after year budget deficits not bankrupt the LM district”? Answer: LM has budget deficits, but actual surpluses (fictitious budgeting).

    [Reply]

    Easttowner Reply:

    Keith,

    You say:

    “””””” I testified because I had uncovered the fictitious budgeting practice at LM and I wrote a letter to the editor of the Main Line Times in 2016. Wolk read the letter and gave me a call.
    https://www.mainlinemedianews.com/mainlinetimes/opinion/as-i-see-it-budget-fiction-from-the-lower-merion/article_8ede27bc-032e-5f3a-8cc6-5fcaf5fc5b14.html””””””

    YOU uncovered the fictitious budgeting practice?

    Wow! That leaves me with nothing to say for now except:

    THANK-YOU!!!!!

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