A new Reason Foundation report finds Fort Bend Independent School District in Texas is the most financially distressed large district in America, triggering seven red flags in an assessment of eight key financial measures that evaluate both long-term fiscal stability and short-term cash availability. The analysis, which examined the 100 largest public school districts in the United States, reveals that these districts collectively report approximately $1.27 trillion in liabilities while educating tens of millions of students and employing hundreds of thousands of staff members.
At the close of the 2023 fiscal year, Fort Bend ISD owed $2.37 billion in total liabilities but held just $2.05 billion in assets, meaning its debts exceeded assets by 15.3 percent. Per student, Fort Bend ISD's liabilities reach $29,690, and the district was among only seven large districts nationwide to spend more than it collected in revenues during the year. Gwinnett County Board of Education in Georgia earned six fiscal red flags, the second-worst showing among school districts, with liabilities totaling $5.80 billion against assets of $4.08 billion and an unrestricted net position deeply in the red at negative $2.09 billion. Four districts—Frisco Independent School District north of Dallas, Omaha Public Schools in Nebraska, the Chicago Board of Education, and Denver Public Schools—have five fiscal red flags each. Chicago Public Schools holds the largest negative unrestricted net position among all school districts at negative $17.47 billion, while its liabilities of $30.13 billion amount to $93,669 per student. Los Angeles Unified and seven other districts carry four red flags. On average, large school districts trigger 2.4 red flags, which is the highest figure among all levels of government studied.
The report applies eight standardized financial measures compiled from audited annual comprehensive financial reports of more than 20,000 local government entities. Entities that exceed the objective standard on any measure receive a red flag, indicating a concerning trend. According to the authors, a single red flag doesn't necessarily signal an immediate fiscal crisis, but each one points to structural weaknesses that deserve urgent attention, while multiple red flags may indicate an entity is in a precarious financial position in both the short and long term. The most common red flag among large school districts is a negative unrestricted net position, which affects 83 of the 100 most populous districts. The second most common issue is that 57 districts hold more than $20,000 in outstanding liabilities per student, while 31 districts hold more debt than assets.
Large school districts manage an extensive array of mandated and discretionary functions beyond core instruction, including school meal programs, comprehensive special education services, athletics and extracurricular activities, bus fleet management, technology infrastructure, and large-scale pension plans and other post-employment benefit systems that promise retirement income to employees and, in many cases, lifetime retiree health coverage. The report notes that large school districts have a highly mixed track record of delivering these services while managing their financial position. There are few clear geographic trends for fiscal health, with Texas's 20 largest districts ranging from one to seven red flags and Florida's 17 largest districts ranging from one to four red flags. The only clear pattern appears in Utah, where each of the four large school districts triggers just one red flag.
The Reason Foundation concludes that America's large school districts perform worse financially than all other units of state and local government, but fiscal stress isn't inevitable. Baltimore City Public School System and Rutherford County Schools in Tennessee both trigger zero red flags, providing clear examples of short-term and long-term fiscal health as a counterpoint to districts facing extreme pressure. Baltimore City Public Schools owed just $516 million in total liabilities but held $2.45 billion in assets at the close of fiscal 2023, with liabilities amounting to only $7,072 per student. Most school districts fall somewhere in the middle, showing a range of troubling indicators in either short-term liquidity or long-term solvency.