The number of Colorado school districts tagged with one or more indicators of financial “stress” has dropped slightly in the past year, the state auditor reported Tuesday.

The latest Fiscal Health Analysis of the state’s 178 districts found that 70 districts missed one or more of the five benchmarks used by the auditor’s staff to gauge financial health. Last year 76 districts missed one or more benchmarks.

Missing benchmarks isn’t usually considered an indication of financial management issues. “Missing the benchmark may not necessarily mean there’s a problem,” said Gina Faulkner of the auditor’s office.

“We don’t necessarily have a problem with the indicators, but we want to hear the story behind it,” state Auditor Dianne Ray told members of the Legislative Audit Committee.

In recent years the story behind the benchmarks often has been districts making decisions in response to tight state support for K-12 schools. For instance, some districts have chosen to dip into reserves to cushion the impact of state budget cuts.

Missing benchmarks is “triggered because of very thoughtful, intentional decisions by school districts,” Jennifer Okes, director of public school finance for the Department of Education, told the committee. “They don’t take these lightly.”

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The five indicators

  • Ratio of general fund assets to liabilities
  • Adequacy of revenue available for debt payments
  • General fund ending balance
  • Amounts added to reserves
  • Annual change in general fund balance

State auditors review three years of individual district audits to compile the report. This year’s document covered from 2011-12 to 2013-14.

The report noted that the most common missed benchmarks involved reserves and year-to-year changes in a district’s general fund.

The report found that 28 districts missed two or more benchmarks, and of those, “Twenty school districts reported that they have experienced the effects of the reductions in state school finance funding.” The other reason cited by some of those districts was the cost of needed building repair and maintenance.

The 28 districts with multiple benchmarks “showed some sign of fiscal strain,” said Crystal Dorsey of the auditor’s office.

Okes notes that “many of these districts are small rural districts, and many have declining enrollment.” She said half have enrollment of 400 students or fewer.

Only one district, Pueblo 70, missed four of the five benchmarks. Superintendent Ed Smith described some of his district’s challenges to the committee.

“It’s a combination of things,” he said, including planned spending of reserves for the last five years and incorrect income projections last year. “It’s a delicate balance” to juggle finances and classroom quality. The 9,200-student district is on a four-day week, and “the only place left for us to cut is in the classroom.” Smith said.

Four districts missed three benchmarks, Adams 50, Alamosa, Englewood, and Silverton.

Ray said a key function of the report “is to start those discussions” about finances in districts and between districts and CDE.

Okes noted that 15 of the 20 districts reported as missing two or more benchmarks in 2014 have improved their financial situations this year.