Arthur Wolk

Judge Tells Lower Merion School District to Revoke Tax Hike — Could the same thing happen in T/E School District?

A significant decision in the Arthur Wolk vs Lower Merion School District (click on bolded link to read 17 pg. decision) case  was rendered by Montgomery County Common Pleas Judge Joseph Smyth this week.  Judge Smyth ordered Lower Merion School District to revoke its tax hike, claiming that the school district could not increase taxes for 2016-17 by more than 2.4 percent. If a Lower Merion resident could take on his school district for over-taxing (and win), this decision has far-reaching ramifications for other school districts, including T/E School District. Not only front page news locally in the Philadelphia Inquirer but the Associated Press has picked up the story with articles appearing in the Washington Post, Boston Globe and beyond.

In his decision, Judge Smyth ruled that Lower Merion School District had consistently understated revenues and overstated expenses so it could falsely raise taxes when in fact it had huge surpluses. TE School District residents are you listening?  Our school district has raised taxes for the last 12 years (see chart below) and continues to build its fund balance. The TE School District fund balance as of June 2016 school board meeting is $32,381,047. Just like Lower Merion School District, our school district continues to raise taxes and increase the fund balance. Folks, that is $32+ millions of taxpayer dollars!

Taxpayers in TE School District have seen their taxes increased for the last twelve years as follows:

  • 2016-17: 3.6%
  • 2015-16: 3.81%
  • 2014-15: 3.4%
  • 2013-14: 1.7%
  • 2012-13: 3.3%
  • 2011-12: 3.77%
  • 2010-11: 2.9%
  • 2009-10: 2.95%
  • 2008-09: 4.37%
  • 2007-08: 3.37%
  • 2006-07: 3.90%
  • 2005-06: 1.40%
  • 2004-05: Zero Tax Increase

Will the Court’s decision to revoke Lower Merion School District tax challenge the TE School Board to reconsider their budgeting approach?

Attending TESD Finance and School Board meetings over the years, we have witnessed knowledgeable, educated residents appeal to the District on this subject – Ray Clarke, Neal Colligan, Doug Anestad, etc. have repeatedly weighed in on financial issues with their comments and suggestions. The discussion of the TESD 2016-17 budget even had former Tredyffrin Township Supervisor Mike Heaberg  attempting to reason with the school board.  Sadly, the school board does not listen – but continues to increase our taxes, build its mountain of “fund balance” dollars and, for the most part, does so with a unanimous 9-0 vote.  Where does it end?

Having read the decision in the Lower Merion School District case, Neal Colligan (with input from Ray Clarke) provides the following economic analysis between LM and TE school districts.  Thank you both – and here’s hoping that the TE School Board reads it!

I know we’ve all been reading with great interest the results of the Lower Merion tax case which made its way to page 1 of the Inquirer today.  This is frighteningly similar to the operations of our School District and I thought it might be interesting to do some comparisons.

The resident case against the LMSD basically argued that they had District had entered into a pattern of projecting annual operating deficits during their budget (and tax rate increase) process and ended each year with large surpluses.  The lower Court judge agreed and ordered LMSD to rescind some of their current tax increase.  As you know; we’ve experienced the exact same pattern in T/E.  For each of the last 5 years; the District has projected a deficit in its budget deliberations; set an aggressive tax (sometimes the Max allowed in the Commonwealth) increase to “close the gap” ; and each year ended in a Surplus position.  It might be fun to dig deeper.

LM’s current budget allocates approximately $259 MM to District spending; T/E’s current budget is about $131 MM…just about half the size.  According to the press releases; LM accumulated $40 MM in Fund Balance over the last 6 years (16% of current budget); T/E has accumulated about $13 MM (10% of current budget).  In the prior six years LM taxes increases have been 21.01%; in T/E we’ve had 18.68%. (The Judge’s order states that since 2006 LMSD has increased its taxes by 53%; the increase in T/E has been 38%.  I used the more narrow, recent figure as LM’s increases were skewed in the early years).   LM’s accumulated Fund Balance is reported at over $57 MM (all Fund/Capital accounts included); T/E’s is about $42 MM (this includes Fund Balance and Capital Fund which was funded by Fund Balance transfer)…about 74% of LM.  Let’s go deeper: The Court commented in the LM suit that the District’s average overestimation of expenses was 5.5% and the average underestimation of revenues was 1.1%.  T/E has a similar history (I say it differently); in the last 10 years, our District has spent about 96% of its budgeted expenses (this budget drives the tax increase obviously) and collects about 101% of its budgeted revenue.  Does it all seem similar?

Some other interesting notes.  LM Enrollment growth in the last 4 years-9.03%; T/E Enrollment growth 1.46% (this statistic was used in the LM budget presentation to justify the tax increase).  Students (approximate): LM-8,200; T/E; 6,400.  Years in the last 6 that tax increase was in excess of Act 1: LM-6; T/E-5.  EIT in community: LM-No; T/E-No.  Special Education budget: LM-$46 MM; T/E-$20 MM.  Salaries: LM-$123 MM; T/E-$57 MM.

In many ways, we compare favorably to LM.  Remember that LM spends the highest amount on a per-student basis in the State.  Without getting too far into the weeds; the fact remains that we, like our neighbors in LM, have been given deficit budgets in each of the last 5 years followed by “necessary” aggressive tax increases.  Our results have been a production of SURPLUS in each of those years; just like LM.  That’s the fact pattern that this suit took to question.  The same fact pattern exists here…almost precisely.  It’s nothing new; we’ve talked about in the T/E Finance Committee meeting for years BUT now there’s a new finding from the Courts.

Come to your own conclusions…the facts are pretty easy to find.

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