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Massive district deficits reported in Arizona

Posted at 8:01 PM, Jan 22, 2016
and last updated 2016-01-22 22:01:42-05
Massive school district deficits in just one year across the state. Most in the tens of millions and a few in the hundreds of millions. 
 
What is going on?
 
Districts have been preparing for this for more than a year when they knew -- for the first time -- they would be required to "report" unfunded pensions in financial statements to improve accounting for each district and to enhance transparency. Why are you only hearing about it now?  Districts, KGUN9 has learned, have been working on how best to tell the public because to suddenly see the large deficits on paper is shocking.
 
The new accounting reporting standard is all in an effort to avoid a pension disaster, like the meltdown seen in Illinois, the least funded state retirement system in the country, totaling $111 billion of pension debt.
 
The Governmental Accounting Standards Board now requires districts to report unfunded pensions as an existing liability, rather than a future one.
 
Take TUSD, the second largest district in the state. It reports a positive $57 million of unrestricted funds in 2014 and then drastically swings to a negative $400 million in 2015 -- reducing the district's total net amount from $572 million in 2014 to $133 million in 2015. 
 
                                        Tucson Unified School District
                                                 Unrestricted Funds 
                                    2014                                              2015
                             $57,072,295                            - ($401,875,725)
 
 
Unfunded pension amounts similar to Mesa Unified -- the largest district in the state. 
 
                                          Mesa Unified School District
                                                 Unrestricted Funds 
                                    2014                                              2015
                              $115,482,930                         - ($423,502,218)
 
So what does this mean for districts and taxpayers?
 
Ricky Hernandez is CFO of the Pima County Schools Superintendent's Office said, "It's really just an accounting disclosure to be transparent to the public on what this is supposed to be." A snapshot of the state education retirement costs and obligations to their current and former employees.
 
All districts financial reports show deficits in the millions.Take a look at the Vail District. About 4 million dollars in 2014 dramatically dips to negative 82 million in 2015.
 
                                        Vail Unified School District
                                                 Unrestricted Funds 
                                  2014                                              2015
                             $4,421,507                             - ($82,226,510)
 
But Superintendent Calvin Baker says it doesn't change how the district operates -- meaning it's status quo for now. "If you take away the required reporting of future retirement payments then we would show a 4 to 6 million dollar asset (in 2015)," he said. 
 
Hernandez says the Arizona State Retirement System for districts is healthy. That's because over the past several years districts and educators have contributed more to the pension fund -- from 2 to about 11 percent -- required by law. The pension system's assets were hit by the 2008 recession and added to the system's costs. "Everyone is required to contribute to the state retirement system. You can't skirt that like you can in other states," said Hernandez. 
 
Right now, the new reporting doesn't affect retirement contribution rates, only the financial reporting style. But any change in the way these obligations are handled could expose local districts to even greater liability and expense.
 
If contributions jump a few percentages higher, Hernandez said, "those are the larger budgetary impacts that school districts and other jurisdictions are going to have to look at. You have the level of staffing. You still have to contribute to them. So what does that mean? You may end up having to cut staff or you may end up cutting services if those dollars don't exist for that year's contributions."

 
Other district CAFR 2015 reports:
 
                                      Flowing Wells Unified School District
                                                 Unrestricted Funds 
                                    2014                                               2015
                                $5,010,342                              - (35,881,862)
 
 
                                    Catalina Foothills Unified School District
                                                 Unrestricted Funds 
                                     2014                                              2015
                                $3,302,247                              - (35,593,736)
 
                                     
                                          Sahuarita Unified School District
                                                   Unrestricted Funds 
                                     2014                                                2015
                                $(886,798)                                - (39,331,835)
 
Marana, Amphi, Nogales and Sunnyside Unified School Districts have yet to post their CAFR 2015 reports on their website.