Auditor General names TUSD among highest financial‑risk districts; CFO lays out $10M near‑term cuts and multi‑year plan

Arizona Auditor General staff told the Tucson Unified School District governing board on Jan. 27 that their annual financial‑risk analysis places TUSD among the state’s highest‑risk districts, and district leaders described specific corrective steps.

Megan Heager, director of the Auditor General’s Accountability Services Division, and Amanda Wynn, senior accountant, explained the office’s methodology and walked the board through ten financial measures the state monitors. They told the board Tucson USD registered six high‑risk measures for fiscal year 2025, driven primarily by a 3.68% one‑year enrollment decline and a nearly 9% four‑year decline in weighted student counts, steep reductions in operating and capital budget‑limit reserves, negative operating margins, and a 42% one‑year drop in general‑fund balance. The Auditor General also flagged that Tucson transferred a large share of capital monies into operations in recent years, a practice they treat as a risk indicator when it becomes recurring.

"The district has been identified as among the highest financial risk school districts in Arizona," Heager said, noting the office’s website provides drill‑downs and district‑level narratives and that the Auditor General requires high‑risk districts to submit an action plan.

CFO Ricky Hernandez presented the district’s corrective action plan and mitigation measures that the district has already begun to implement. Hernandez said some steps have already improved the district’s fund balance by roughly $16 million through corrections to revenue apportionment. Near‑term actions he listed included:

• Ending recurring transfers of capital monies to cover operating expenses and returning $7 million to capital in FY27 and an additional $3 million in FY28;

• Hiring an external enrollment firm (Casa K12) on a performance contract and launching targeted media and outreach campaigns and expanded transportation to stabilize enrollment;

• Instituting zero‑based budgeting in desegregation funds, department budget reductions and a hiring freeze; and

• A proposed permanent $10 million reduction in the non‑desegregation portion of the M&O budget for FY27 as the first ‘bite’ at an estimated multi‑year structural shortfall projected to approach $27–28 million by FY30.

Hernandez said the district expects to reach the $10 million target by combining central department reductions (about $3.6M), five departments taking modest reductions (about $800K), a 7% reduction across other departments (about $2.8M), additional reductions to be presented soon (about $4.1M), and anticipated attrition/turnover savings (about $2.3M).

Board members pressed both the Auditor General and the CFO about timelines, whether the planned remedies are structural or one‑time, and the risk of eventual receivership. Auditor General staff said their designation is informational — timing to exit the high‑risk category varies by district — and noted overspending is the most common path to statutory receivership. Hernandez and board members discussed longer‑term structural options such as potential school reconfigurations, rebalancing the district’s geographic footprint and other steps to align facilities to current enrollment patterns.

The board approved a related procurement for security window film for 13 schools and voted to extend Superintendent Trujillo’s contract for three more years (the contract extension passed 3–2). The board also pulled item 6.3 (Native American policies and procedures) for additional information and asked staff to post the Auditor General action plan on the district page and return with requested follow‑up.

The administration said it will return on Feb. 10 and Feb. 24 with additional budget reduction details, FTE and attrition calculations, and a capital improvement plan, and asked the board to provide direction on override‑funded positions and the proposed cuts.