Isaac Elementary School District (District) is at high risk of not being able to operate within its budget constraints and cash resources for the sixth year in a row. 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, General Fund operating reserve ratio, General Fund operating margin ratio, General Fund change in fund balance, and receivership status.

The District’s WSC has declined by 18.33% since fiscal year (FY) 2022, with declines every year except FY 2025, including a 14.08% decline in FY 2026, to date, impacting its student-count-generated revenues and budget limits.

After the District overspent its FY 2024 operating and capital budget limits by $2.9 million and $9.3 million, respectively, the Arizona State Board of Education (State Board) appointed the District a financial receiver in January 2025 in accordance with Arizona Revised Statutes §15-103. While operating under the financial receiver, the District revised its FYs 2023 and 2024 annual financial reports (AFR) and FYs 2023 through 2025 expenditure budgets to correct errors in financial reporting made by the previous administration. The District’s revised AFRs resulted in increased budgetary overspending amounts. The revised AFRs showed the District exceeded its operating budget limit by $5.6 million and $1.75 million and exceeded its capital budget limit by $18.7 million and $19.7 million in FYs 2024 and 2025, respectively. Further, the District’s receiver identified $2.3 million in FY 2023 capital budget limit overspending that was not properly reported by the District. As a result of the multiyear capital budget limit overspending, the District has no spending authority in the Unrestricted Capital Outlay Fund as it has a FY 2026 budget limit of $(17.2 million).

The District’s operating budget overspending also resulted in General Fund expenditures exceeding revenues (i.e., negative operating margin) in FY 2024 and an almost $22.7 million deficit ending General Fund balance in FY 2024. Up until the District’s FY 2024 budgetary overspending was discovered, the District used tax anticipation notes (TANs) and registered warrants to accommodate its overspending and cash deficits, resulting in over $523,000 in borrowing costs in FY 2025. The Maricopa County Treasurer discontinued registering warrants for the District in January 2025. At that time, the District entered a lease-lease back agreement with another Arizona school district to provide $25 million in cash resources, which allowed the District to eliminate its registered warrant balance and pay its vendors and payroll as they came due through the remainder of FY 2025. The District also paid its outstanding TANs balance in July 2025.

Although the District’s FY 2025 General Fund ending balance was approximately $3.0 million and its total fund balance for all funds was positive, the District had deficit cash balances of $30.8 million in other funds as of June 30, 2025; including a $25.8 million cash deficit in the Unrestricted Capital Outlay Fund which is related to the District’s prior year capital budget limit overspending. The District must still repay the $25 million lease back agreement with interest to the other school district and its outstanding deficit cash balances.

Based on the District’s budgetary overspending and cash deficits, it must identify and implement appropriate risk-mitigation measures to prevent future overspending and continue eliminating its deficit fund balances. See the District’s action plan below.