Arizona education board places Isaac School District in Phoenix under receivership: Here's what to know
PHOENIX - The Isaac School District announced on Jan. 14 that the Phoenix district has been placed under receiver by the Arizona State Board of Education.
"The receiver will work with district leadership to assess current challenges and implement strategies to strengthen our schools," the district wrote.
Here's what to know about the situation.
Where is Isaac School District located?
The Isaac School District covers an area of 6.8 square miles bordered by Van Buren Street to the south, Indian School Road to the north, 51st Avenue to the west, and 27th Avenue to the east.
The district's website lists seven elementary schools, two middle schools, one K-8 school, and an online prep academy.
Why is Isaac School District being placed under receivership?
The Arizona Department of Education said the school district is "somewhere between $12 million - $15 million underwater."
By the numbers:
Per a Dec. 31, 2024 letter sent to Superintendent of Public Instruction Tom Horne by Maricopa County School Superintendent Steve Watson, the district has a total overexpenditure of approximately $12.6 million.
Additionally, the letter states that Isaac School District has a negative balance of approximately $6.6 million in relation to a federal program that aims to provide discounted phone and internet services to eligible schools. The letter states the expenses would need to be "corrected to an appropriate fund" if the district does not have adequate financial claims to support the expenditures, which will increase the overspend even further.
Per the minutes from the state board of education meeting, the state board of education voted unanimously to place the district under receivership.
What is a receivership?
Receivership, as it relates to school districts, is governed by Arizona law.
Dig deeper:
Under state law, the state board of education will give the school district a chance to respond in a public meeting to allegations of insolvency and gross management, and the board can find a school insolvent if the board finds one of more of the following:
- The district is not able to pay debts as they are due, or during the usual course of business.
- The salaries of teachers or other employees within the district remain unpaid for 45 days.
- Tuition due to another school district or other state institutions remains unpaid on or after Jan. 1 of the year following the school year it was due, and there are no disputes regarding the amount or the validity of the claim.
- The district has defaulted on bond or bond interest payments, or has defaulted on payment of rentals due to federal, state or private entities for 60 days, and no action has been taken within that time to make payment.
- The district has contracted for loans that are not authorized under law.
- The district has accumulated, and has operated with a deficit that equals 5% or more of the district's revenue control limit for any fiscal year within the past two fiscal years.
- The school district's warrants have not been honored for payment by the school district's servicing bank or by the county treasurer, and the warrants have been left unpaid for more than 60 days.
The law also states that if the circumstances listed above are the result of the state failing to make "any payments of monies due [to] the school district at the time payment is due," the school district will not be deemed insolvent.
What can a receiver do?
Under law, the state board of education develops and adopts a list of qualified receivers.
What's next:
When a receiver is appointed to a school district, they are legally required to start a "full review and investigation of the school district's financial affairs." Within 120 days after the receiver is appointed, they will send a detailed report to the state board of education that includes a financial improvement plan and budget "that details how the school district will eliminate any continued gross financial mismanagement and achieve financial solvency."
Per the law, the plan will also include a timeline for the district to achieve financial solvency.
The law also states that the financial improvement plan, as approved by the state board, may authorize the receiver to
- Override any decisions made by the district's governing board, the district superintendent, or both, with regard to the management and operation of the school district, and initiate and make decisions regarding the management and operation of the school district.
- Attend any and all government board and administrative staff meeting.
- Supervise school district staff's day-to-day activities, including the reassignment of duties and responsibilities of staff members that, as the receiver determines, best suits the district's needs.
- Put the district superintendent and/or the district's chief financial officer on extended leave or suspension. The receiver an even terminate the two, for cause.
- Authorize students in schools operated by the district to be transferred to schools operated by another school district that is not currently in receivership.
- Appoint a chief educational officer who will have the powers and duties of a school district superintendent.
- Appoint a chief fiscal officer who have the powers and duties accorded to the district's chief school business official, as well as "any other duties regarding budgeting, accounting and other financial matters that are assigned to the school district by law."
- Appointed a competent, independent public accountant to audit the district's accounts.
- Reorganize the school's finances, management and budgetary systems.
- Establish fiscal guidelines and a system of internal controls as a way to improve financial responsibility and reduce financial inefficiencies.
- Cancel or renegotiate any contracts under which the district or the governing board is a party to, except "certificated teachers who have been employed by the school district in the capacity of a certificated teacher for more than one year immediately before the date the receiver was appointed," if the cancelation or renegotiation will produce "needed economies in the operation of the district's schools."
- Refusing to reemploy "any certificated teacher who has not been employed by the school district for more than the major portion of three consecutive school years."
What does a receivership not do?
The law states that a receiver can't give severance or buyout packages to the district superintendent or chief financial officer, if the district is placed into receivership by the state board.
Also, the law states that a receivership will not interfere with the election or reelection of the district's governing board members, nor will it affect the district's ability to declare bankruptcy under federal law.
When can a receivership end?
Arizona law states that the state board of education can remove a district from receivership, dismiss the receiver and any officer or employees the receiver appointed, 30 days after all the following happened:
- The state's Auditor General certifies that the district has been financially solvent for one fiscal year.
- The district's financial records are certified by the Auditor General as being "in compliance with the uniform system of financial records and generally accepted accounting principles."
- The district is determined by the receiver to be "no longer engaged in gross mismanagement."
- The state board has determined that the district is able to pay its debts, as they come due.
Will students be affected by the receivership?
The school district says "day-to-day operations of our schools will continue as usual."
What they're saying:
"Our teachers and staff remain dedicated to supporting our students, and our priority continues to be providing a safe and enriching learning environment for all," a portion of the statement reads.
How many Arizona school districts have been placed under receivership?
The Arizona Auditor General's Office says school districts are rarely placed in receivership.
What they're saying:
"In fact, since 2005, the [state board of education] has placed only seven districts in receivership. As of December 2023, all but 1 of those districts have successfully exited receivership by adjusting their spending to align with their revenues and eliminating the impact of their prior overspending and cash deficits," its website says.