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KINGSTON — The state auditor general’s office has flagged Wyoming Valley West School District for a disappearing fund balance and for transportation reimbursement reporting errors over a four year stretch.

The district has not been hiding the depletion of reserves, done frequently over the last decade to control tax increases.

The performance audit — done periodically for all public school districts — reviewed records from June 2014 through June 2018. The fund balance was $4.44 million at the start of the period and $71,916 at the end. The report attributes the decline to “a cumulative operating deficit.”

The audit lays most of the blame on “rapidly rising costs for special education and retirement contributions to fund employees’ pensions.” Those are two costs school board members and district officials have complained about for the last decade or more, and both are largely out of a district’s control.

Payments into the pension fund are set by an independent state agency. When the pension fund was flush with cash at the turn of the millennium, districts paid very little. When fund shortfalls arose, the amount paid soared, hitting 34.29% of payroll this month.

Special education costs are dictated by the needs of the students. Under law, districts must comply with a student’s “Individual Education Plan.” Costs can soar dramatically in a single year if a student enters the district with a diagnosis that requires intensive help. WVW’s special ed costs increased 27% in the four-year period audited.

That problem is compounded by stagnant state subsidies for most districts. For WVW, total costs rose $3.3 million in the four years reviewed (to $15.4 million), yet state aid increased only $400,000 (to $3.3 million)

Fund balances have been a political football in recent years, with conservative think tanks arguing large reserves are essentially an excess tax on district residents. The audit cites a recommendation from the Government Finance Officers Association: Maintain two months of regular general fund operating revenues. The audit notes that WVW’s fund balance as of June 30 last year was less than one day of expenditures.

The audit also notes a problem raised by district officials for more than a decade: Wyoming Valley West has scant land for new development, meaning the property tax base can’t grow.

The audit recommends the district draw up “a multi-year budget” that is displayed on the district website for public discussion. In the “Management response” to the audit, the district agreed to create a budget for a minimum of three years.

But the response notes the variation in fund balance recommendations, saying the GFOA suggestion would mean setting aside $13 million, while a recommendation from the Pennsylvania School Boards Association — to keep 5% to 10% of annual expenses in reserve — would require $3.9 million to $7.8 million. Neither, the response notes, are “Practical” because of financial demands on the district.

Along with the costs cited by the auditor general’s office, the response cites other drains on the district: successful tax assessment appeals that lower the amount paid in property taxes, and growing enrollment in charter/cyber-charter schools that, under state law, siphon money from the district to pay those schools.

The response insists “in spite of the reduction of the fund balance, no educational programs and services have been cut or reduced,” no cuts were made in athletics, and all bills have been paid on time.

The transportation reimbursement issue centers on reporting of “nonreimbursable students” — those living within a state-set distance of the school. The audit says the district overreported the number of those students in two years and underreported them in two other years. The upshot: 35 students reported as reimbursable who were not. The district would have received $5,134 less if they had been reported as nonreimbursable.

The district promised to take steps to prevent the problem in the future.

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By Mark Guydish

[email protected]

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish