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Palominas Elementary School District

—Among the highest-risk districts

District demographic information

General information
County	Cochise County
Operational peer group (FY 2024)	10
Legislative district(s)	19 and 21

School information	FY 2024	FY 2025
Students attending	775	637
Number of schools	3	3

Summary of risks identified

Palominas Elementary School District (District) is at high risk of not being able to operate within its available budget constraints. As shown on the measure cards below, the District’s high-risk status is due to its change in weighted student count (WSC), operating and capital budget limit reserves, and capital monies redirected to operations.

The District’s WSC has consistently declined since fiscal year (FY) 2023, with an overall 27.46% decrease since FY 2022 and 7.62% percent decline in FY 2026, to date, impacting its budget limits and student-count-generated revenues.

The District’s operating budget limit reserve has fluctuated since FY 2021. It accumulated a peak balance of over $1.6 million in FY 2023, but it has steadily decreased that reserve to approximately $126,000 at the end of FY 2025, which represents a single-year decrease of 83.58% and a 4-year decrease of 92.15%. Further, if the District does not reduce its operating expenditures below what it spent during FY 2025, approximately $7.5 million, then it is at risk of exceeding its FY 2026 operating budget limit, which has declined to just over $6.3 million.

Similarly, the District accumulated a peak capital budget limit reserve balance of over $750,000 in FY 2022, but it has steadily decreased that reserve to only $63,144 at the end of FY 2025, which represents a single-year decrease of 59.58% and a 4-year decrease of 91.00%. The District began redirecting a significant portion of its capital monies to support operational spending starting in FY 2023 (49.35%) and increased that to 100%, or $422,074, in FY 2025. The District has only redirected 14.37%, or $50,000, of its capital monies to support operations in FY 2026 to date. The District’s steadily decreasing capital budget limit reserve and significant redirection of capital monies to operations could indicate it is delaying necessary operational spending cuts or may be at risk of overspending its capital budget limit when large capital spending needs arise.

While the District has not yet exceeded its statutorily prescribed budget limits, it must identify and implement appropriate risk-mitigation measures to prevent future overspending. See the District’s action plan below.

District action plan

The District's management created this downloadable financial risk action plan to describe its current and planned actions to reduce its financial risks. The action plan includes the District's identified root causes for each of its risk areas, its planned mitigating actions, and the estimated financial impact.

Analysis and data

The Measures page describes how each measure was calculated, how districts were identified as high risk for each measure, and other measure-related information.

High risk

Change in weighted student count

Analysis

-7.62%	-27.46%
(1-year change)	(4-year change)

Data

FY	Group A WSC
2026	679
2025	735
2024	877
2023	956
2022	936

What is this measure telling me?

This measure shows a district's change in group A weighted student count (WSC) over a 1- and 4-year period. A single-year substantial decrease in WSC, or smaller but repeated decreases over more years, may expose a district to higher financial risk due to the loss of student-count-generated revenue.

High risk

Budget limit reserve—

Operating budget

Analysis

-83.58%	-92.15%
(1-year change)	(4-year change)

Data

FY	Budget limit (in $)	Expenditures (in $)	Balance (in $)
2026	6,319,890
2025	7,591,484	7,465,380	126,104
2024	9,065,361	8,297,402	767,959
2023	11,701,550	10,088,773	1,612,777
2022	11,033,114	9,595,997	1,437,117
2021	10,990,717	9,383,879	1,606,838

Risk of overspending as FY 2026 operating budget limit is less than FY 2025 expenditures.

What is this measure telling me?

This measure shows how a district's Maintenance and Operation (M&O) Fund budget limit reserve has changed over a 1- and 4-year period. Declining, negative, or unfunded M&O Fund budget limit reserves indicate higher financial risk.

High risk

Budget limit reserve—

Capital budget

Analysis

-59.58%	-91.00%
(1-year change)	(4-year change)

Data

FY	Budget limit (in $)	Expenditures (in $)	Balance (in $)
2026	392,406
2025	191,926	128,782	63,144
2024	840,340	684,111	156,229
2023	960,447	423,338	537,109
2022	1,058,422	307,927	750,495
2021	834,743	132,924	701,819

What is this measure telling me?

This measure shows how a district's Unrestricted Capital Outlay (UCO) Fund budget limit reserve has changed over a 1- and 4-year period. Declining, negative, or unfunded UCO Fund budget limit reserves indicate higher financial risk.

Financial position—

General Fund operating reserve ratio

Analysis

36.53%	41.10%
FY 2025 unaudited	FY 2024 audited

Data

FY	Balance (in $)	Expenditures (in $)
2025 unaudited	2,839,326	7,771,548
2024 audited	3,849,735	9,366,823

balance ÷ expenditures = operating reserve ratio

What is this measure telling me?

This measure shows the percent of General Fund monies held in reserve for future spending (i.e., fund balance), compared to total spending from the prior year. A negative operating reserve ratio indicates a negative fund balance, which means the district must use monies received in the following year to cover prior-year spending.

Financial position—

General Fund operating margin ratio

Analysis

-10.06%	-13.08%
FY 2025 unaudited	FY 2024 audited

Risk reduced; at least 2 months of FY 2025 General Fund spending in reserves.

Data

FY	Revenue (in $)	Expenditures (in $)
2025 unaudited	7,061,365	7,771,548
2024 audited	8,283,101	9,366,823

(revenue - expenditures) ÷ revenues = operating margin ratio

Risk reduced; at least 2 months of FY 2025 General Fund spending in reserves.

What is this measure telling me?

This measure shows the percent of district General Fund revenues not spent in the year received for each of the most recent 2 years. A district with below-average operating reserves exposes itself to higher financial risk each time its spending exceeds its revenues (i.e., negative operating margin).

Financial position—

General Fund change in fund balance

Analysis

-21.06%	-21.67%
FY 2024 to 2025 unaudited	FY 2023 to 2024 audited

Data

FY	Change amount (in $)
2024 to 2025 unaudited	-757,359
2023 to 2024 audited	-1,065,232

What is this measure telling me?

This measure shows the 1-year percentage change in a district's General Fund balance for each of the most recent 2 years. Declining fund balances or a negative fund balance in the most recent year indicate higher financial risk as less resources remain available for current and future needs.

High risk

Capital monies redirected to operations

Analysis

14.37%	40.90%
(FY 2026)	(5-year average)

Data

FY	Capital monies (in $)	Amount redirected (in $)
2026	348,023	50,000
2025	422,074	422,074
2024	490,554	200,000
2023	405,234	200,000
2022	351,316	0

What is this measure telling me?

This measure shows the percentage of intended capital funding the district has redirected to operational spending rather than capital spending in the current year and on average over the last 5 years. Districts that direct a substantial portion of their intended capital funding to operational spending may be at higher financial risk.

Small school budget limit adjustment

Analysis

N/A - District is too large to be eligible for adjustment.

Data

FY	Adjustment (in $)	Total operating and capital budget limit (in $)
2026	0	6,712,296
2025	0	7,783,410
2024	0	9,905,701
2023	0	12,661,997
2022	0	12,091,536

The small school adjustment is included in the total operating and capital budget limit.

What is this measure telling me?

This measure shows a district's additional budget capacity from a small school adjustment in the current year and each of the prior 4 years. The loss of the ability to include a small school budget limit adjustment or an unfunded small school budget limit adjustment due to a frozen tax rate may indicate higher financial risk.

Frozen tax rate

Analysis

District's primary property tax rate is not frozen.

What is this measure telling me?

This measure shows whether a district has a frozen primary property tax rate, limiting the District's ability to increase its property tax revenue to fund its allowable budget limits.

Receivership

Analysis

District is not in receivership.

What is this measure telling me?

This measure identifies whether a district is operating under a State Board of Education-appointed receiver due to gross mismanagement or insolvency.

Less common revenues in FY 2025

Some districts have access to revenues and budget capacity that are not available to all districts. These revenues may help lessen financial risks for some districts, but desegregation and small school adjustment revenues can contribute risk for other districts, if they result in a district's property tax rate being frozen, which can cause the district to accumulate unfunded budget capacity. Select the information icon to learn more about the revenues presented.

	Desegregation	$0
	Federal Impact Aid	$21
	Small school adjustment	$0
	Voter-approved budget overrides	$0
	Total less common revenues per student	$0

Source: Desegregation, small school adjustment, and voter-approved budget override amounts - FY 2025 Arizona Department of Education BUDG75 report. Federal Impact Aid amounts - FY 2025 district submitted, unaudited annual financial reports.

Palominas Elementary School District

Summary of risks identified

District action plan

Analysis and data

Change in weighted student count

Budget limit reserve—

Operating budget

Budget limit reserve—

Capital budget

Financial position—

General Fund operating reserve ratio

Financial position—

General Fund operating margin ratio

Financial position—

General Fund change in fund balance

Capital monies redirected to operations

Small school budget limit adjustment

N/A - District is too large to be eligible for adjustment.

Frozen tax rate

District's primary property tax rate is not frozen.

Receivership

District is not in receivership.

Less common revenues in FY 2025

Additional school district resources

Arizona Auditor General