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Litchfield school leaders warn special-education costs and utilities could push reserves below policy targets

Litchfield Elementary School District Governing Board · November 19, 2025
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Summary

CFO Michael Vaughn told the Litchfield Elementary School District board that special-education costs and rising utilities are driving projected M&O overspending of $3.9M–$4.5M; he recommended a short-term shift of $500,000 to Medicaid and targeted expense reductions to protect reserves.

Litchfield Elementary School District officials told trustees on Nov. 18 that special-education costs and higher-than-expected payroll and utility expenses are placing growing pressure on the district’s operating budget.

In a data-heavy presentation, CFO Michael Vaughn said the district is forecasting an overspend of between $3.9 million and $4.5 million on maintenance and operations (M&O) recurring resources for 2026. He said special-education services — especially contracted staff and tuition for students placed outside the district — are a primary driver. “Special education costs are actually on track to be 2,000,000 over from last year,” Vaughn said.

Why it matters: the district’s board policy and the Governmental Finance Officers Association risk-based model call for reserves in the range of about 3.12 to 3.9 months of operating revenues. Vaughn said Litchfield ended last year at roughly 4.1 months, but without changes reserves could fall under the policy floor by 2027.

What officials proposed: Vaughn ran three scenarios. The first assumes a $3.9 million overspend and leaves reserves tracking downward; a second, more conservative scenario assumes $4.5 million in overspending. A third scenario keeps the initial overspend but shifts roughly $500,000 of special-education M&O spending into the Medicaid fund and moves one-time state revenues into M&O for 2026 — a move Vaughn described as a short-term, not long-term, structural fix.

Board reaction and follow-up: Trustee Moran pressed for clarity on the special-education numbers and their fiscal impact, calling the unfunded portion “difficult to swallow” and urging state action. “I don’t like us being above our upper limit,” Moran said, but she also signaled support for targeted responses. Vaughn and other staff outlined next steps: tighter overtime monitoring, pursuing high-cost special-education grants from the Arizona Department of Education, examining alternatives to contracted substitutes, pushing open enrollment where capacity exists, and continuing participation in regional study groups on cost containment.

Vaughn also highlighted other external pressures: a pending APS rate-case that seeks a double-digit percentage increase and a separate water provider request to raise water charges by 38.4% (and 53% for wastewater), both of which are not yet included in the forecast. He recommended the board pursue a structurally balanced budget for 2027, preserve competitive compensation where possible, and maintain a transparent timeline for contract issuance.

Next steps: staff will return with a more detailed multi-year forecast, grant-application work for high-cost special-education reimbursement, and proposals for controllable expense reductions and strategies to protect reserve levels.

Sources: Presentation and Q&A with Michael Vaughn, CFO, and board discussion at the Nov. 18, 2025 Litchfield Elementary School District Governing Board meeting.