PA: Judge Cuts School Funding

Here in Pennsylvania, we've had a potentially game-changing ruling come down that could create all new problems for school districts and their funding. This story has many moving parts, so you'll have to stick with me for a bit here.

The short version of the story is this. The Lower Merion School District raised taxes. Somebody sued them. The judge (Senior Judge Joseph A Smyth) in the case ruled that the tax increase was unnecessary and excessive, and he revoked it.

Arthur Wolk, retired lawyer, has fun new hobby

As the president of the Pennsylvania School Boards Association put it, ""I've never heard of this happening before . . . a judge substituting his/her judgment of financial needs of the district in place of locally elected school board members."In other words, this may be one not-large school district, but the ruling could be a very large deal.

So let's unpack some of the details.

School Taxes in PA

As part of Pennsylvania's ongoing work to crush public education promote fiscal responsibility, for the last decade we've had the bi-partisan fiscal straightjacket that is Act 1, which declares that schools may not raise taxes above a certain index without either a voter referendum or state-level permission. Lower Merion has allegedly been going the state exception route for the last ten budgets by claiming a projected deficit that would affect pensions and special ed. Here's how the district put it in response to the decision:

In Lower Merion, recent enrollment growth has exceeded projections and the impact on staffing and facilities planning has been significant and unexpected. Additionally, the District faces increasing unfunded and underfunded state-mandated costs, including retirement and special education. Without the ability to plan ahead for its financial needs and maintain adequate reserves, the District will lose critical flexibility during a time of uncertainty and growth. The implication for school programs is enormous.

That's not an unusual claim in Pennsylvania. Districts are climbing up a mountain of pensions debt, a huge series of balloon payments on pension liabilities that have been accumulated by a decade of bad choice sand exacerbated by the financial collapse back in 2008 (thanks a lot, Wall Street). How bad is it?

For the next decade, school districts will have to make pension fund payments equal to a full third of their total budget.

Lower Merion's Finances

Facing that kind of looming payment, lots of districts have adopted a policy of squirreling away as much money as they can. Maybe that's what is happening here, but Lower Merion is also one of the wealthiest districts in the Philly area, spending a whopping $22K per pupil and just dropped $200 million on two new high schools in 2009 and 2010.  

And it would seem that Lower Merion may have the worst budget process ever. The lawsuit and the ruling both leaned on what appear to be some serious mistakes in the predicted outcome of the year:

For instance, in 2009-10, the district projected a $4.7 million budget hole but ended the year with a $9.5 million overage. In 2011-12, it anticipated a $5.1 million gap but wound up with $15.5 million to the plus side.

Lower Merion business manager Victor Orlando testified that the district has between $50 and $60 million in the bank. This is in itself requires some of the aggressive accounting that the lawsuit complains about-- Pennsylvania also has laws about how much money a district can park in its general fund.

So the answer here may be that the buttload of money is in designated accounts, set aside for capital improvements or future gut-wrenching pension payments. The district has been voluble and public in asserting that it has been transparent, followed proper budgeting behavior, and has managed resources for maximum flexibility. They've got a whole response on their website, and while it is forceful and unapologetic, it also skips over any sort of specific explanation of why the district appears to be essentially making millions of dollars of profit every year.

(Side note: If Lower Merion seems vaguely familiar, that's because this is the district that got sued for using their students' webcams to surveil those students.)

The Plaintiff

Lord knows the world is filled with people who want to sue their school district because they think their taxes are too high. Who is this guy who actually did it?

That would be Arthur Wolk. (Wolk's co-plaintiffs are Philip Browndeis, Lee Quillen, Catherine Marchand, and Stephen Gleason). Wolk is an attorney who has made a name for himself in aviation law, scoring some big-payday lawsuits against companies on the behalf of victims of various plane crashes. Wolk is semi-retired, seventy-two, and called in this profile article a " pugnacious pit bull." And when it comes to detractors, Wolk has a reputation for libel lawsuits (you can get a pretty good picture of that image from this blog post entitled "Has Arthur Alan Wolk Finally Learned That He Cannot Sue Every Critic?" Wolk is clearly neither shy nor backward-- you can read more about him on his wikipedia page, which was set for him by the marketing company he hired to give him more web presence.

Wolk's two children did not attend school in the district, but he has a big house there and pays more taxes than he thinks he ought to. When the district's superintendent released a letter accusing Wolk of trying to establish public schools as lesser than private schools by choking off taxpayer support, Wolk replied with a letter of his own (referring to himself in third person).

There was no need for a tax increase this year or any year in the last ten according to audited statements. We have the highest paid teachers, highest paid administrators, and too many of them, and the most expensive school buildings and the highest per student cost of any place in the nation. Our school performance is on par with districts that spend half of what LMSD spends which means that the administrators have failed in their jobs and the people supposed to provide oversight, the Directors, have done nothing.

He also brings up senior citizens on fixed incomes who are afraid of losing their homes, because no discussion of school taxes in Pennsylvania can occur without bringing up the spectre of senior citizens afraid of losing their homes. I am not sure exactly who in Wolk's uber-rich neighborhood could be worried about losing their home over taxes.

Wolk has been explaining himself on the subject for months. In May he wrote a letter to the editor complaining about the district's wild spending way, creating debt by building "two Taj Mahal high schools" along with bunches of busing.

Wolk's critics (and he has plenty) repeatedly accuse him of advocating a two tier system, with just the basics for public school students. Here's an oft-quoted excerpt from his lawsuit.

Public school education means basic adherence to the minimum requirements established and imposed upon school district by the State Board of Education, Public education is not courses, programs, activities, fee laptop computers and curriculums that are neither mandated nor normally part of a public education standard, and are normally provided only by private institutions at larger expense to individual patrons who prefer to afford their children education and opportunities that are neither required, nor offered, nor appropriate for public education paid for by the taxpayers.

Well, that's pretty clear. Some nice things are only for private school students, and taxpayers shouldn't have to pay for anything except the basics.

So what do the plaintiffs actually want?

We seem to be pursuing two different arguments here. On the one hand, the argument is that the schools are spending money wastefully on things they don't need. On the other hand, the argument is that the district is collecting more money than it spends and that extra money is the problem.

A poster under the name "John Q. Public" posted a short video/slide show to lay out the remedies sought by the plaintiffs. You can see it for yourself, but here are some of the highlights according to John Q.:

* They want their $55 million back
* They want the board stripped of authority and the district put under control of a court-appointed trustee
* They want the court to return the district to "basic public school" levels
* They want a higher teacher-student ratio (low ratios are for private schools)
* Pay teachers less, and provide cheaper benefits
* Remember the webcam lawsuit? They want everyone fired who knew about the webcam stuff.
* And they don't want the district to communicate with taxpayers unless the district also boosts the plaintiff's signal to the community as well.




So, basically, they would like to see the end of local control for the district and instead have the district run like a company by The Right Sort of Person, the kind of person who understands that public schools should be spare and simple and cheap.

Where does the suit stand?

The judge said the district had to roll back their proposed and budgeted tax increase. The district has appealed. Wolk in his public responses since the ruling has been talking as if the tax increase was the only issue he ever wanted to address. 

Oh, and one other thing. As he promised form way back at the beginning of all this, Wolk has been beating the drum to start “Dump the Lower Merion School Directors,” through which he and others intend to “run a slate of responsible independent candidates whose mission it will be to restore honesty and integrity to the district.” Reportedly taxpayers have also been treated to bot-flavored e-mail on the issues.

Is there more to this story?

Some local friends of public education have been looking hard for a connection between Wolk and any of the many reliably reformy folks that can be found in the Philly area. And since Wolk clearly walks and talks and advocates austerity measures and wants to destroy local control like a duck, it seems reasonable to see if he hangs out with any of the other reformy ducks.

Wolk lives in Gladwyne, a community on the main line in Philly that was, in 2011, ranked the 7th richest zip code in the US. That makes Wolk neighbors with many of the finest rich folks in the region, but I live in a town where some residents have been arrested for dealing drugs and if you use that to suggest I'm a drug dealer. I'll object. In 2014 he represented families suing over a plane crash that killed Lewis Katz, co-owner of three Philly media outlets--the Inquirer, the Daily News, and Philly.com.

Philly.com's coverage of Wolk has certainly been friendly; the post-lawsuit profile is framed by discussing how he loves puppies and wrote a book about his last beloved pooch. So far, it appears that philly.com has not felt the need to either profile the school superintendent's pet preferences nor provide a platform for him to explain his position on the suit.

But as I'm sitting here right now, I have to say that while we seem to be playing a familiar game, none of the usual players are immediately apparent.

(Also, just to be thorough, I can tell you this much about the judge. Joseph Smyth has been a judge for over thirty years, who was for the most recent part of his career in juvenile court.  He started a behavioral court, grew up in Norristown, decided not to pursue an athletic career. Some sources, including ballotopedia, have him retiring in 2015, but here he is.)

The Implications of This Lawsuit

Despite all the twists and turns and layers in this story, the biggest possible implication here is the one sitting right on the surface-- if a judge can step in and supersede a local school board's judgment with his own, school districts in Pennsylvania could be looking at some serious, serious trouble.

That's the one new part of this story. Rich guys who think elected school boards should be done away with are, sadly, old hat at this point, as are rich guys who believe they shouldn't have to pay taxes to run a school for Those Public School Children. Okay, there's a slightly new wrinkle here because in the case of Lower Merion, Those Public School Children are mostly white and wealthy. So perhaps a few more people will wake up when they notice that this is an attempt to disenfranchise taxpayers and voters who aren't poor urban black folks.

And come on-- when your budgeting process appears to be $15 to $20 million dollars off, you have got to know that you need to explain yourself to the public, because people are going to get cranky if they think they are taking money out of their bank account just so you can park it in yours. Sure, charter and private schools can do this sort of thing and nobody has any way to know. This is precisely why financial transparency is a good idea-- it lets the public know what is going on. But it also gives the district a responsibility to let the taxpayers know what's going on (and no-- saying "Well there were budget meetings and if you had bothered to come, you would know" is not an acceptable communications plan).

This is also a reminder of what helps drive the privatization of education. Because as sure as some folks looked at those numbers and thought, "Well, damn, my taxes are too high," there were other folks thinking, "You mean they cleared $15 million in profit in just one year??! We have got to get into this business."

I have no idea what's going to happen next in Lower Merion schools, but I'll be paying attention, because this story is going to have plenty of implications for all of us.