New Audit Finds School Districts Stockpiling Funding

January 25, 2023, Harrisburg Pa. — A new report released today by Pennsylvania Auditor General Tim DeFoor reveals that Pennsylvania school districts are raising taxes while stockpiling funding in their reserves. School districts, by law, can only raise taxes without voter approval if their fund balances fall below a certain threshold. But the audit finds that districts are strategically transferring and “committing” funds to avoid the restriction and raise taxes despite large reserve funds.

The audit covers 12 school districts, and its findings show “common yet questionable practices” allowed the districts to raise taxes 37 of the 48 times they were eligible. The districts raised taxes despite having sufficient funding—an average of more than $360 million collectively—in their reserves.

“School districts are flush with cash even as they promulgate a narrative of underfunding,” said Senior Vice President of the Commonwealth Foundation Nathan Benefield. “Many districts have been stockpiling taxpayer funds for years—increasing their reserve funds far above what’s necessary for a rainy day.”

The Commonwealth Foundation has tracked the growth of all 500 school district reserve funds since 2012. Reserve funds collectively increased almost 33 percent to $5.29 billion, according to the latest financial data from Pennsylvania’s Department of Education. In addition, school districts still hold over $3.6 billion in leftover federal pandemic aid.

“The audit confirms that many school districts are not only adequately, but excessively funded,” said Benefield. “The state should move to protect Pennsylvania taxpayers from unnecessary tax increases and direct funding towards students—including those seeking alternatives to their neighborhood school. Families, not school buildings, need more resources.”

The audit concludes that school districts violate the intent of the law by raising taxes while simultaneously holding excess funds. The Department of the Auditor General therefore recommends that state lawmakers review and revise laws, including those relating to how reserve funds are defined, how much is an appropriate balance, and when districts can raise taxes without voter approval.

Please click here to see your school district’s total reserve funds.

Commonwealth Foundation experts are available for comment. Please contact Stefanie Mason [email protected] or 414-418-5132 to schedule an interview.

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