Judge orders Pennsylvania district to rescind tax increase

Judge orders Pennsylvania district to rescind tax increase

Ruling says the Lower Merion district misled taxpayers by claiming budget deficits when it has surplus revenue.

A judge in Pennsylvania has ordered the Lower Merion School District to revoke its latest tax hike, saying the district misled taxpayers when it projected large budget deficits to justify raising taxes 4.4 percent when it actually had millions in surplus funds.

The Philadelphia Inquirer reports that the ruling came in a class-action lawsuit filed in February by an area lawyer and two other people, who argued that the district had misappropriated funds.

In his ruling, Judge Joseph A. Smyth said the district could increase taxes for 2016-17, but no more than 2.4 percent.

The judge said he would "leave for another day" the question of rebates, refunds, and credits for those who already have paid their school tax bills.

The Lower Merion school board has appealed the ruling, and the district has issued a lengthy statement in defense of its accounting and budgeting practices.

"Instead of supporting districts’ efforts to save and plan for an uncertain future, the court is encouraging budgeting practices that could lead to a reduction of services and the need to propose new revenues like personal income taxes to make up shortfalls. Superintendent Robert Copeland and Board President Robin Vann Lynch said.

The judge's ruling could eliminate $4 million targeted for special education and retirement benefits in the coming year, according to the board.

Between 2010 and 2015, the 8,300-student Lower Merion district, one of the wealthiest public school systems in the Philadelphia area, predicted large annual budget deficits, yet had millions of dollars in its reserves, the judge noted. 

The judge also found that because the Pennsylvania School Code does not permit a district of Lower Merion's size to store more than 8 percent of its money in reserve funds, the district transferred its surpluses to other accounts.

Smyth ordered the Lower Merion school board to revoke the 2016-17 tax rate at its next scheduled meeting Sept. 19.

The Pennsylvania School Boards Association says school districts should have 5 to 10 percent of their operating expenditures in reserve. 

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