School district financial risk analysisDecember 2020

District

Demographic information

Less common revenues

County: Graham County
Operational peer group (FY 2020): 4
Legislative district(s): 14
FY 2019 FY 2020
Students attending: 2,891 2,907
Number of Schools: 6 6
FY 2020
Desegregation
0
Federal impact aid
0
Small school adjustment
0
Voter-approved budget overrides
0
Total less common revenues per pupil
0

Analysis results

Summary of risks identified:

The District overspent its operating budget limits every year since fiscal year (FY) 2017, overspending its FY 2020 operating budget limit by over $1.9 million. Although the District had substantial cash reserves before overspending its budget, by not reducing spending below available revenues (i.e., negative operating margin), its spending exceeded its available General Fund resources by more than $100,000 at the end of both FYs 2019 and 2020. Additionally, the District’s weighted student count has fluctuated since FY 2017, including an 11 percent decline since FY 2020, further reducing its student-count-generated revenues and budget limits. If the District does not react to reduce expenditures, its budgetary overspending and cash deficits may worsen. On average, the District has redirected 69 percent of its capital monies to operations since FY 2019, including 100 percent in its FY 2021 budget to date, to lessen the operating budget overspending. However, those redirected monies contributed to the District overspending its capital budget limit in FYs 2019 and 2020, limiting the District’s ability to meet its future capital needs. The District was notified in November 2020 that it is one of the highest-risk districts based on the most recent financial and student count data. We will begin periodic meetings with the District in early 2021 to discuss more about the actions it has taken or is evaluating to lessen its financial risk.

District response:

Decrease in Funding

  • Safford Unified School District passed a 5% M&O override in 2008 to assist in providing competitive compensation and benefit packages. Attempts to renew the override failed in 2015 and 2020. However, at the fault of the business management, expenses centered in wages were maintained and caused an over-expenditure of operational funds.
  • A decline in weighted student count over the past five years from 3,388 to 2,998, (-11.4%).
  • The increase in Arizona’s minimum wage is creating an increase in classified pay of approximately $650K each year for which there was no dedicated revenue increase to fund the spending.
Projected Ideas for Resolution
  • Safford Unified School District’s Governing Board is aware of the over spending issues centered in the above decreases in funding. Other than general discussion, any definitive items or plans have not yet been formulated to present for its review / approval for resolution at this time. However, the following bullet points will be implemented as reflected below.
  • The appropriated Education Stabilization Grant will provide Safford Unified School District with $1,235,855.75 in funding of which approximately $800K+ is projected to be injected into the District’s M&O budget to cover certified teaching salaries during the period of distance learning. Projected implementation date is prior to 12/30/20.
  • Three CTE teacher prep period buyouts can be transferred from M&O budget to CTE funding sources for an approximate savings of $30K. Projected implementation date is prior to 12/30/20.
  • An assumption of how the passage of Proposition 208 may positively impact the various areas of operation expense coverage is yet to be determined however, it is hopeful that it will have a positive impact. An implementation date cannot be projected at this time due to the terms and conditions of the Proposition not yet being made available to the school district.
These are a few primary concerns/projected resolutions for Safford Unified School District’s state of financial risk. As a District Administration, we are looking forward to working with the Arizona Auditor General’s Office for guidance and direction to work through this issue.

Change in weighted student count
-11.2% -11.5%
(1-year) (4-year)
Fiscal year Group A WSC
2021 2,998
2020 3,376
2019 3,342
2018 3,347
2017 3,388
Operating budget limit reserve
-79.9% -100.0%
(1-year change) (3-year change)
Fiscal year Balance
2020 ($1,932,869)
2019 ($1,074,639)
2018 ($1,655,983)
2017 ($656,122)
Capital budget limit reserve
0.1% 29.0%
(1-year change) (3-year change)
Fiscal year Balance
2020 ($61,592)
2019 ($61,640)
2018 ($8,146)
2017 ($86,791)
General Fund operating reserve ratio
-0.6% -0.8%
FY 2020 unaudited 2019 audited
Fiscal year Balance Expenditures
2020 unaudited ($111,148) $17,834,625
2019 audited ($154,427) $18,843,145
General Fund operating margin ratio
2.0% -6.1%
FY 2020 unaudited 2019 audited
Fiscal year Revenue Expenditures
2020 unaudited $18,199,248 $17,834,625
2019 audited $17,767,213 $18,843,145
General Fund change in fund balance
77.2% -100.0%
FY 2019 to FY 2020 unaudited 2018 to 2019 audited
Fiscal year Change amount
2019 to 2020 unaudited $377,191
2018 to 2019 audited ($1,076,952)
Capital monies redirected to operations
100.0% 41.6%
(FY 2021) (5-year average)
Fiscal Year Capital monies Amount redirected
2021 $1,148,639 $1,148,639
2020 $475,314 $275,314
2019 $473,342 $236,671
2018 $169,433 $0
2017 $426,403 $0
Small school budget limit adjustment

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

Fiscal year Adjustment
2021 $0
2020 $0
2019 $0
2018 $0
2017 $0
Frozen tax rate

District's primary property tax rate is not frozen.

Receivership

District is not in receivership.