Dive Brief:
- Only two of the nation's 100 largest school districts are free of fiscal "red flags," such as carrying more debt than assets, according to a recent analysis by the Reason Foundation, a libertarian think tank.
- The two are: Baltimore City Public Schools, which owed $516 million in total liabilities but held $2.45 billion in assets when fiscal year 2023 ended, and Tennessee’s Rutherford County Schools, with just $143 million in debt versus $1.08 billion in assets.
- The 100 large school districts, which averaged 2.4 red flags, had the worst financial performance at any government level examined in the Reason Foundation analysis. The report looked at states, counties and cities in addition to school districts.
Dive Insight:
For school districts and other entities exhibiting fiscal red flags, each one deserves "urgent attention," and multiple red flags means an entity could be in a "precarious financial position in both the short- and long-term," the Reason Foundation said in its report released this month.
Its analysis — based on audited annual comprehensive financial reports of more than 20,000 local government entities — looked at eight long and short-term indicators, including debt ratio, liabilities per capita, and cash as a percentage of assets.
Texas' Fort Bend Independent School District showed the most fiscal red flags — seven — of the 100 large school districts analyzed. By the end of FY23, Fort Bend ISD owed $2.37 billion in total liabilities but had only $2.05 billion in assets, the report said.
The district's liabilities amounted to $29,690 per student, and its cash reserves accounted for just 5% of its assets, the Reason analysis showed.
Earlier this year, Fort Bend ISD said it would close or consolidate seven elementary schools starting in 2026-27 because of a $56.4 million budget deficit driven by enrollment drops.
Gwinnett County Board of Education in Georgia exhibited six fiscal red flags, according to the analysis. The district had $5.8 billion in total liabilities and $4.08 billion in assets by the end of FY23. Gwinnett’s liabilities amounted to $31,918 per student, and it spent $66 million more than it took in as revenues in FY23, leading to a per-student deficit of $364.
Most of the other large school districts examined showed one to five fiscal red flags, which the analysis called "a range of troublesome indicators on either short-term liquidity or long-term solvency."
The report found no clear geographic trends stemming from the analysis, except that four large school districts in Utah each had just one fiscal red flag — in each case for having questionably high amounts of receivables relative to other assets.
The most common red flag among large school districts — shown by 83 of the 100 large school districts — was a negative unrestricted net position, which indicated insufficient discretionary resources.
