Budget consultant warns Liberty Elementary District of projected $2.4 million shortfall; urges hiring freeze, PO reviews

Ken Hicks, a budget consultant and chief financial officer at Tolleson Union High School District, told the Liberty Elementary School District governing board during a Feb. work session that the district "has not overspent," but it does have a projection that it will overspend by the end of the fiscal year.

The consultant, who said he was providing unpaid help while the district transitions staff, urged several immediate actions: a hiring freeze, systematic review and reduction of open purchase orders (POs) to lower encumbrances, monthly monitoring of average daily membership (ADM), and routine budget revisions — ideally in December rather than waiting until May. "We should be doing December budget revisions whether ADE says you are required to or not," Hicks told the board.

Why it matters: Liberty's operating reserves and the district's general-fund position were flagged later in the meeting by the Auditor General as areas of elevated risk. The consultant said routine, earlier budget reconciliation helps avoid last-minute use of reserves and gives the board clearer oversight of spending choices.

Key details

- Projection and reserves: Hicks described a projected year‑end overspend (discussed elsewhere in the meeting as roughly in the low millions) driven primarily by current encumbrances and spending trends. He said the district's encumbrances — POs representing committed future spending — are the principal signal that the district could exceed its budget limit if left unadjusted.

- Purchase orders and encumbrances: Hicks recommended a systematic review of open POs and reducing encumbrances where possible. He described an example of reducing a PO with $200,000 total but only $40,000 spent so far, trimming the remaining encumbrance to reflect likely future outlays.

- Hiring and positions: Hicks and board members discussed closing vacant positions and then reopening them only after justification. "We start with no," Hicks said of the approach to new hires and then evaluate requests that are justified. Board members repeatedly emphasized that some positions remain essential and that attrition is not an automatic substitute for strategic staffing decisions.

- ADM and revenue outlook: Hicks walked the board through Arizona Department of Education ADM reports. He cited ADE's published figures for prior years (FY23 ADM 4,199.6826; FY24 4,202.6487) and an interim January report showing FY25 ADM at about 4,279.75. He stressed that ADM continues to change each month and that funding estimates must be monitored monthly to keep the budget aligned with actual pupil counts.

- Medicaid reimbursements (MIPS): Hicks explained school-based Medicaid reimbursements are reimbursement revenue, not a cash source the district must spend; they are generally limited to maintenance-and-operations-type costs. He said the district "does not pay anything out of there unless we want to pay anything out of there. So it is purely a reimbursement of revenue coming in." Board members asked for clearer reporting on what the Medicaid reimbursements have been used for historically and whether shifts of eligible expenses could reduce the projected shortfall.

Board direction and next steps

Hicks recommended continuing the hiring freeze, aggressively reviewing and closing unnecessary POs, projecting ADM monthly, and coordinating a board-level discussion to prioritize cuts and preserve as much capital/reserve as feasible. He also said a second consultant will visit soon and that the district should not take final staffing or compensation actions until it has a clear, updated projection of FY25 and preliminary planning for FY26.

Quotes

"We have not overspent. What we have is a projection that we will overspend," Ken Hicks said, urging the board to reduce encumbrances and improve monthly financial monitoring.

"We should be doing December budget revisions whether ADE says you are required to or not," Hicks told the board.

What the board asked for

Board members requested a spreadsheet showing current projected overages and which line items or POs are being reduced so members can track the number coming down. Multiple board members also asked administration to present specific, numeric reduction options for the board to consider before April and to return to the board regularly with encumbrance and payroll impacts.

Speakers

- Ken Hicks — budget consultant; Chief Financial Officer, Tolleson Union High School District (consultant) - Dr. Kurt Monroe — Superintendent, Liberty Elementary District - Crystal Mosier — Lead accountant, Liberty Elementary District - Dane Bolden — Executive Director of Business Services, Liberty Elementary District (mentioned/participated) - Chris Kenyon — Governing Board member - Sarah Schmidt — Governing Board member - Brian Cicerone — Governing Board member - Kelly Zimmerman — Governing Board Vice President

Clarifying details

- FY23 ADM (state finalized): 4,199.6826; FY24 ADM (state finalized): 4,202.6487; interim FY25 (Jan 15 snapshot): 4,279.7517 (Hicks cited ADE monthly reports) - Hicks said the district's FY24 revenue was roughly $34.9 million vs. $37.3 million in spending (discussed later by the Auditor General). The consultant characterized the immediate problem as a projected overspend rather than an already completed overspend. - Hicks said encumbrances and open POs were the primary near-term driver of projected overages and gave examples of trimming POs to realistic expected expenditures.

Searchable_tags:["budget","encumbrances","ADM","hiring_freeze","Medicaid_reimbursement","Liberty Elementary District","fiscal_risk"]

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