School district financial risk analysis

Measures

Financial position—General Fund operating margin ratio

27 of 207 districts are at high risk for Financial position—General Fund operating margin ratio

For our analysis, we look at 3 different measures to determine a district's financial position: change in fund balance, operating margin ratio, and operating reserve ratio. Each of the 3 measures analyzes components of a district's General Fund revenues, expenditures, and ending balances to identify potential risk related to General Fund resources. Although each of these measures looks at similar financial data, they focus on different relationships in that data. We assessed each measure individually to ensure that concerns present in 1 or 2 of the measures were not overlooked based on less concerning results for another measure.

Beginning in FY 2020, districts received COVID-19 federal relief grants with less restricted allowable uses than most other federal or State grants. Some districts' financial position measures may have improved when they used federal relief monies for allowable spending, including maintaining operations, that might have otherwise been paid from the General Fund, contributing to larger General Fund balances than they likely would have without these federal relief grants. In total, State-wide district General Fund balances continued to increase in FY 2023, increasing 53 percent since FY 2020. Districts may continue spending remaining federal relief monies for allowable grant purposes instead of available State and local monies until September 2024. See our interactive dashboard for more information on district spending and planned spending of COVID-19 federal relief monies through June 30, 2022.

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 negative ratio indicates that the district spent more money than it received for the year. A district with below-average operating reserves exposes itself to higher financial risk each time its spending exceeds its revenues.

If a district's operating margin ratio was -10 percent, the district spent 110 percent of its revenue in that year. When annual spending exceeds revenues, districts are generally able to use operating reserves (i.e., fund balances) built up in prior years to meet current spending needs. However, when a district has little or no operating reserves, such spending can result in a negative balance.

A district's General Fund balance could be negative due to misallocation of State or local tax revenues between funds or budgetary overspending. Districts with negative operating reserves that do not have frozen tax rates may be able to work with their counties to levy additional taxes.

All districts with a negative operating margin ratio could be considered at higher risk for this measure. However, to recognize that negative operating margins present less risk for districts with larger fund balances, we limited the districts considered high risk for this measure to those with a negative operating margin ratio in either of the most recent 2 years and a fiscal year 2023 per student General Fund ending balance less than 25 percent of the State-wide average.

FY 2023 per student General Fund ending balance
State-wide average* $3,410
25% $852

*Calculated the per student amount for each district and then averaged, excluding districts with extreme values that would skew the average.

Districts that do not submit or submit incomplete and unreliable unaudited annual financial reports (AFR) are also considered high risk for this measure, as we are unable to determine a reliable measure result.

(General Fund total revenues-General Fund total expenditures)  = Operating margin ratio
General Fund total revenues
Report date Number of districts at high risk
December 2020 36 of 207
December 2021 23 of 207
December 2022 22 of 207
December 2023 27 of 207

General Fund amounts were obtained from districts' audited financial statements or unaudited annual financial reports as indicated below. Districts that are not required by State law to receive an annual audit generally do not prepare annual financial statements. However, all school districts are required to prepare AFRs each year. To analyze similar data when AFR data was used, we looked at the funds most commonly included in districts' general funds in financial statements. However, financial statement and AFR amounts may not be consistent for the same funds if auditors identify adjustments that are reflected in financial statement amounts to correct errors or meet governmental financial statement reporting requirements. To avoid distorting the measure ratios based on reporting inconsistencies between unaudited AFR data and audited financial statement data, we did not compare data across those sources.

  • Fiscal year 2023: Amounts were obtained from unaudited district AFRs submitted to ADE as of November 27, 2023.
  • Fiscal year 2022: Amounts were obtained from district-submitted audited financial statements, if available. Otherwise, amounts were obtained from district AFRs submitted to ADE as of November 27, 2023.

Districts at high risk for this measure

School district County Legislative district FY 2022 FY 2021 Additional information
School district County Legislative districts
Agua Fria Union High School District Maricopa County 22, 23, 25, and 29 3.5% -4.4% No additional information
Antelope Union High School District
1 of 4 highest-risk districts
Yuma County 23 and 25 -18.5% 5.7% No additional information
Apache Junction Unified School District Pinal County 7, 10, and 15 1.4% -9.5% No additional information
Benson Unified School District Cochise County 19 3.0% -3.1% No additional information
Blue Elementary School District Greenlee County 19 -1.2% -48.5% No additional information
Chino Valley Unified School District Yavapai County 1 -2.5% 1.2% No additional information
Congress Elementary School District Yavapai County 1 -2.2% -5.6% No additional information
Cottonwood-Oak Creek Elementary School District Yavapai County 1 2.6% -1.7% No additional information
Fredonia-Moccasin Unified School District Coconino County 6 and 30 -11.4% -27.4% No additional information
Hayden-Winkelman Unified School District Gila County 7 -5.3% -19.0% No additional information
Heber-Overgaard Unified School District Navajo County 7 1.4% -2.0% No additional information
J. O. Combs Unified School District Pinal County 15 1.1% -3.7% No additional information
Kingman Unified School District Mohave County 6 and 30 -7.6% -5.5% No additional information
Laveen Elementary School District Maricopa County 11 1.2% -1.2% No additional information
Nadaburg Unified School District Maricopa County 28 and 29 1.7% -6.0% No additional information
Owens-Whitney Elementary School District Mohave County 30 -16.2% 12.6% No additional information
Quartzsite Elementary School District La Paz County 30 -77.7% 0.3% No additional information
Queen Creek Unified School District Maricopa County 15 -4.3% 6.2% No additional information
Saddle Mountain Unified School District Maricopa County 25 -0.3% -0.4% No additional information
San Fernando Elementary School District Pima County 21 -66.3% -46.1% No additional information
Santa Cruz Elementary School District
1 of 4 highest-risk districts
Santa Cruz County 21 -4.1% 0.1% No additional information
Santa Cruz Valley Union High School District Pinal County 16 and 17 N/R -4.5% N/R = Not reliable; District’s FY23 AFR data is incomplete due to an accounting data breach.
Sierra Vista Unified School District Cochise County 19 -4.7% 0.5% No additional information
Toltec Elementary School District Pinal County 16 N/R 6.6% N/R = Not reliable; District’s FY23 AFR data is incomplete due to an accounting data breach.
Tonto Basin Elementary School District
1 of 4 highest-risk districts
Gila County 7 -4.7% -6.2% No additional information
Yarnell Elementary School District Yavapai County 1 -7.7% 2.8% No additional information
Young Elementary School District Gila County 7 -32.6% 14.2% No additional information