School district financial risk analysisDecember 2020

District

Demographic information

Less common revenues

County: Maricopa County
Operational peer group (FY 2020): 8
Legislative district(s): 19, 29, and 30
FY 2019 FY 2020
Students attending: 6,002 5,613
Number of Schools: 10 10
FY 2020
Desegregation
4,951,154
Federal impact aid
0
Small school adjustment
0
Voter-approved budget overrides
5,112,090
Total less common revenues per pupil
1,793

Analysis results

Summary of risks identified:

The District’s weighted student count has declined 27 percent since fiscal year (FY) 2017, reducing its student-count-generated revenues and budget limits. By not cutting spending below available revenues (i.e., negative operating margin), the District diminished its General Fund balance while also reducing its operating budget limit reserve. Although the District’s unaudited FY 2020 annual financial report indicated that General Fund spending was within revenues, the District reported a deficit General Fund balance of more than $4 million in its FY 2019 audited financial statements even after adjustment for excess fund balance in its Unrestricted Capital Outlay Fund. In FYs 2017 through 2019, the District’s operating budget limit reserve decreased 57 percent. The District’s primary property tax rate was frozen for FY 2021 and had been frozen in FYs 2017 through 2019 as well, due in part to levying for desegregation spending. The District’s FY 2021 desegregation budget was not fully funded by property taxes or additional State aid due to its frozen tax rate and a related court case disputing the property tax type required to fund desegregation spending. If the District continues to spend up to its allowed budget capacity, using lines of credit or other borrowing to accommodate its cash deficit, the District’s General Fund deficit may worsen, and its borrowing costs will likely continue to grow. In FYs 2019 and 2020 the District reported short-term borrowing costs of nearly $251,000 and $217,000, respectively. The District’s capital budget limit reserve declined 99 percent since FY 2017 to approximately $5,200 at June 30, 2020, making it difficult for the District to respond to future capital needs.

District response:

Isaac School District continues to operate within its student-count-generated budget limit. The district uses current enrollment, 3-5 years of historical enrollment data and information from a district demographic study to project enrollment and ADM for the upcoming budget year. Adjustments and reductions to expenditures each year ensures that the district operates within the calculated budget limit. To match the decline in enrollment, the district eliminated 111 positions from FY2019 to FY2021, including 88 teacher positions, 9 administrator/manager positions, 11 hourly support services positions and 3 student support positions. The district also reduced expenditures by contracting security services and reducing employee benefit costs. Over all from fiscal year 2019 to 2021, the district has reduced expenditures in the general fund by over $3.9 million dollars, adjusted for the teacher salary increases provided by the governor. The district is committed to continue providing services for the whole child; including counselors, reading interventionists and after school sports and enrichment activities, at no cost to the family. Continuing to provide these programs has reduced the overall budget reserve, however a large budget reserve carried from year to year provides no benefit to the students. Each year contingency funds are included in the budget for unexpected expenses, to compensate for the decreasing budget reserve. The capital budget reserve has declined due to the district responding to current capital needs. Each year the district will need to use the capital allocation to meet critical capital needs due to the many years of reduced capital funding.

The negative cash balance in the general fund is due to the district being subject to a frozen tax rate for 5 out of the last 6 years. A slow recovery of the district’s assessed valuation following the economic recession caused the state to freeze the primary tax rate lower than the rate calculated to raise the revenue necessary for the calculated budget limit. Each year the district secures additional funding, through a line of credit or by selling Tax Anticipation Notes (TANS), to have the cash available to cover the expenses within the budget limit. In fiscal year 2020, the district’s revenue exceeded expenditures in the general fund due to an increase in the assessed valuation. Moving forward the district should be able to generate the revenues needed to cover the budget limit, year to year, however there is currently no avenue for the district to obtain the additional revenue to reduce the negative balance. To ensure the district can spend to the student-count-generated budget limit, the district will continue to secure additional funding and pay the associated costs.

Change in weighted student count
-11.4% -26.6%
(1-year) (4-year)
Fiscal year Group A WSC
2021 5,772
2020 6,512
2019 6,961
2018 7,445
2017 7,862
Operating budget limit reserve
-5.1% -57.1%
(1-year change) (3-year change)
Fiscal year Balance
2020 $230,289
2019 $242,755
2018 $245,229
2017 $536,191
Capital budget limit reserve
-90.6% -99.2%
(1-year change) (3-year change)
Fiscal year Balance
2020 $5,191
2019 $55,470
2018 $488
2017 $690,691
General Fund operating reserve ratio
-17.4% -13.6%
FY 2020 unaudited 2019 audited
Fiscal year Balance Expenditures
2020 unaudited ($7,462,698) $42,872,558
2019 audited ($6,068,882) $44,540,985
General Fund operating margin ratio
2.2% -1.8%
FY 2020 unaudited 2019 audited
Fiscal year Revenue Expenditures
2020 unaudited $43,846,084 $42,872,558
2019 audited $43,733,886 $44,540,985
General Fund change in fund balance
10.6% 1.9%
FY 2019 to FY 2020 unaudited 2018 to 2019 audited
Fiscal year Change amount
2019 to 2020 unaudited $888,214
2018 to 2019 audited $114,528
Capital monies redirected to operations
18.8% 18.9%
(FY 2021) (5-year average)
Fiscal Year Capital monies Amount redirected
2021 $2,122,528 $400,000
2020 $1,831,729 $300,000
2019 $1,024,054 $0
2018 $379,379 $225,000
2017 $395,330 $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 has been frozen since FY 2021.

Receivership

District is not in receivership.