PHOENIX — Concerns regarding financial issues at the Isaac Elementary District began to emerge shortly before a special Arizona State Board of Education meeting on January 14, 2025. However, documents and school board meetings examined by ABC15 Investigators suggest that the district’s financial troubles have been developing for years.
“When we received those red alerts, we trusted that the CFO was managing the problem,” said Patricia Jimenez, the President of the Isaac School Board, in an interview with ABC15 this month.
In January, Lynn Lang, the Chief Financial Officer of Isaac, along with Superintendent Mario Venture, resigned just days after the State Board of Education meeting that resulted in the district being placed under state receivership, meaning the state would appoint an official to supervise and manage the district’s operations.
The appointed receiver would also handle financing, governance, and academic programs, according to a letter issued by the Isaac School District to the school community.
The State Board of Education voted for the intervention after reviewing the district’s combined over-expenditures, which were estimated at the time to be between $12 and $16 million.
However, a later estimate by the county treasurer placed the district’s debt at $28 million.
“It’s a complete disaster, and likely one of the biggest blunders in school finance we’ve ever encountered,” said John Allen, the Maricopa County Treasurer.
Previous warnings about finances
The ABC15 Investigators discovered that Jimenez and the four other members of the Isaac School Board had received numerous letters and reports from external agencies over the years, pointing out various financial issues.
Some letters dating back to 2021 informed the district that its budgets overestimated tax revenues for the schools. Others cautioned that the district’s audited financial reports were overdue by several months. Additionally, one report raised concerns about the accuracy of the district’s 2023 annual financial report, highlighting almost 30 instances where state accounting standards were not adhered to.
The ABC15 Investigators also interviewed Harry Garewal, a member of the Isaac School Board, following the district’s meeting on March 6.
When asked if anyone had considered a more detailed review of the school’s budget, Garewal recommended examining previous meeting minutes.
The ABC15 Investigators reviewed several past school board meetings, where they found that then-CFO Lang had alerted the board to the school’s financial difficulties as early as 2021.
“As we are all aware, we are currently facing a negative cash balance,” Lang stated during a November 2021 school board meeting.
Lang described a 28% decrease in school enrollment over four years, noting that state and federal funding is tied to the total number of students.
“We have methods to ensure our financial stability each year,” Lang reassured the board in the 2021 meeting.
In 2022, the board approved tax anticipation notes, short-term loans totaling $15 million, to cover operational expenses.
“Due to prior years of frozen tax rates and lower-than-expected revenues, we find ourselves facing a negative cash balance,” Lang explained during a 2022 school board meeting.
For five consecutive years, the State Auditor General placed the Isaac School District on a high-risk financial watchlist.
In August 2024, members of the Auditor General’s Office appeared in person at a school board meeting to inform the board about necessary improvements. At that meeting, Garewal emphasized, “We need to implement some improvements.”
Future of the school board
Five months after the state auditors’ briefing, Isaac Schools was unable to process payroll for its teachers, rendering the district financially insolvent and in need of a bailout to continue operations.
“I’m not sure if it was willful ignorance, benign neglect, or outright malfeasance,” stated state Representative Matt Gress.
Gress, a Republican, has put forward a bill in January aimed at removing all current members of the Isaac School Board. This bill successfully passed the House and was recently approved by a Senate committee.
“We established this school district with the intent of educating children, and we relied on those school board members to ensure proper oversight,” Gress remarked. “They have failed, and now they must face the consequences.”
Gress expressed to ABC15 that the situation at Isaac should prompt other school districts to seek savings and make necessary cuts in light of declining enrollment.
Jimenez, the current president of the Isaac School Board, argued against legislative intervention in removing school board members.
“I refuse to back down, as I’m committed to fighting for this district,” Jimenez asserted, adding that any decisions about board membership should rest with Isaac School District voters, who have the option to request a recall election.
“I recognize that we overspent, but this is a low-income community,” Jimenez stated. “Our schools are quite old. All the expenses were incurred to improve our facilities and provide more for our community.”
At present, there are several investigations ongoing into Isaac’s overspending. The state-appointed receiver currently manages the district’s $43 million budget.
Since the takeover, the receiver has identified $2 million in savings for this academic year and is also revising annual financial reports from the past three years to rectify any inaccuracies.
