PHOENIX — Rumblings of financial trouble at the Isaac Elementary District surfaced in the days before a special Arizona State Board of Education meeting on January 14, 2025. However, according to documents and school board meetings reviewed by the ABC15 Investigators, the district’s financial crisis was years in the making.
“When we received all those red alerts, you know, this is what's going on, we trusted that the CFO took care of the problem,” Patricia Jimenez, the Isaac School Board President, told ABC15 this month.
Isaac’s Chief Financial Officer Lynn Lang and Superintendent Mario Venture both resigned in January, just days after the State Board of Education meeting where the district was placed into state receivership, meaning the state would appoint a receiver to oversee and manage the district’s operations.
The receiver would also oversee financing, governance, and academic programs, according to a letter the Issac School District addressed to the school community.
The Board of Education voted for the intervention after discussing the district’s combined over-expenditures, which, at the time, were estimated to be around $12 to $16 million.
However, the county treasurer later estimated the district was $28 million in debt.
“It's a total mess, and probably one of the biggest school screw-ups we've ever had,” John Allen, the Maricopa County Treasurer said.
Past financial warnings
The ABC15 Investigators found that Jimenez, and the four other Isaac School Board members, had received letters and reports from outside agencies over the past several years, flagging several issues regarding Isaac’s finances.
Some of the letters, dating back to 2021 told the district its budgets overestimated tax dollars going into the schools. Others warned the district’s audited financial reports were months overdue. Additionally, one questioned the accuracy of the district's 2023 annual financial report, with the Arizona Auditor General finding nearly 30 deficiencies where state accounting rules weren’t followed.
The ABC15 Investigators also spoke with Harry Garewal, an Isaac School Board member, after the district’s March 6 meeting.
When asked if anyone considered combing through the school’s budget numbers more thoroughly, Garewal suggested looking back at previous meeting minutes.
The ABC15 Investigators watched dozens of past school board meetings, where we discovered that then-CFO Lang made the board aware of the school’s financial situation as far back as 2021.
“As we are all very well aware, we are in a negative cash balance,” Lang said in a November 2021 school board meeting.
Lang explained how school enrollment had dropped 28% in four years. State and federal school funding is based on the total number of students.
“We have our ways to make sure we are okay cash-wise every year,” Lang assured the board in the 2021 meeting.
In 2022, the board approved tax anticipation notes. The short-term loans, totaling $15, covered the bills.
“Due to prior years of frozen tax rates and lower than anticipated revenues, we continually run into a negative cash balance,” Lang said at a 2022 school board meeting.
For five years, the State Auditor General put the Isaac School District on its high-risk financial watchlist.
In August 2024, members of the Auditor General’s Office even attended a meeting in person to brief the school board. At that meeting, Garewal said, “There are some improvements we need.”
School board’s future
Five months after the state auditors briefing at the Isaac School Board meeting, Isaac Schools could not make payroll for its teachers. The district was financially insolvent and sought a bailout to remain open.
“I don't know if it was willful ignorance, benign neglect, or active malfeasance,” said state Representative Matt Gress.
Gress, a Republican, introduced a bill in January that would remove all of Isaac’s current school board members. The bill has passed the House and was approved by a Senate committee this week.
“We created that school district for the purpose of educating kids, and we entrusted those school board members to provide adequate oversight,” Gress said. “They failed. Now they'll have to pay the consequences.”
Gress told ABC15 that what happened at Isaac should serve as a wake-up call to other school districts to find savings and make necessary cuts if they have declining enrollment.
Jimenez, Isaac’s current school board president, said the legislature should not dictate who should be removed from a school board.
“I'm not going to quit, because I'm going to fight that nobody takes this district away,” Jimenez said, adding the decision should be made by Isaac School District voters, who can request a recall election.
“I know that we overspent, but, this is a low-income community,” Jimenez said. “Our schools are very old. All those expenditures that we did was [sic] to fix our schools, to do more things for our community that we have done.”
Currently, there are several ongoing investigations into Isaac’s overspending. The state-appointed receiver now oversees the district’s $43 million budget.
Since taking over, the receiver has found $2 million in savings for this school year. The receiver is also redoing annual financial reports from the past three years to correct any inaccuracies.
