Wednesday, December 26, 2018

PA: State High Court Will Hear Anti-School Tax Lawsuit

Can a court overrule an elected school board when it comes to taxation? The Pennsylvania State Supreme Court is one step closer to deciding just that in a lawsuit that has been kicking around for a couple of years now.

I wrote about this case in some depth back in 2016, and I'm going to quote liberally from myself.

Fun fact: One of Lower Merion's most famous alumni
The short version of the story is this: Lower Merion schools raised taxes, and a taxpayer in the district hated the idea enough to sue over it. The initial decision was in the plaintiff's favor, and the judge (Senior Judge Joseph A Smyth) in the case threw out the district's tax rate. This obviously has all sorts of scary implications for school districts across the state, and so the case has been working its way up through the legal system. The district has been losing, but Commonwealth Court stopped the appeals process on a technicality. The State Supreme Court has now sent the case back down, saying the technicality doesn't matter-- just decide the case on its merits. 

Let me recap the particulars of the case because, not surprisingly, this is a case in which nobody is looking like an angel.

It's the state itself that has set the stage for this baloney.

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 choices and 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.

In this climate, stashing a big pile of money in the bank is not an unusual district move. On the other hand, Lower Merion seems to have been pretty aggressive in building up its rainy day fund.

Lower Merion is 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.

But before we throw up our hands and declare shenanigans on the district, let's look at the plaintiff, who is not exactly unfamiliar to the court system.

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. The district's attorney has claimed that he simply jumped past the proper procedure:

“There was another procedure he was supposed to follow, the way it should have been done is through the budget process, and then through the Department of Education, which is the way these things are supposed to be done,” said Putnam.

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. 

The implications here are fairly huge; should Wolk prevail, we'll live in a state where charter, voucher, and other private school parents could sue the public school system every time it even thought about raising taxes, using the court system to help maintain a two-tiered system of schooling. 

And if that wasn't enough, the plaintiff's also indicated in the original suit that they would like the board stripped of authority and replaced by a state-appointed overlord. Of course, we have a system for stripping elected officials of authority-- it's call an election-- but like many reform-minded folks, these plaintiffs appear to object to democracy when it affects their wallets. 

So, the case will be heard and decided, and then the loser will appeal it to the State Supreme Court, and we'll finally see if the court system is willing to override democracy. It's a shameful mess, and shame on the school district for making such an easy target of themselves, and shame on Arthur Wolk for deciding that he should be the arbiter of what students do or don't deserve.

Stay tuned. 

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