Mountain Empire Unified School District — the sprawling San Diego County district that has struggled financially for years due to a range of problems shared with other rural districts — has been labeled high-risk for fiscal insolvency by the state agency that oversees school district finances.
The district’s “high risk” label comes from its having had three consecutive so-called qualified interim reports. In other words, the district, on budget reports throughout the year, has indicated it might not meet budget needs for the current fiscal year or the next two.
The district has been in deficit spending for the last three years but had begun a deficit-spending pattern even before the COVID-19 pandemic, the state analysis said.
The report acknowledged some of Mountain Empire’s challenges, including limited funding and high travel costs, but said it needed stronger control, better documentation and enhanced fraud protection.
“The district faces unique challenges as a small, remote district on the U.S.-Mexico border, including limited funding for facility maintenance, difficulty attracting and retaining staff, and staffing constraints due to geographic isolation,” the analysis said. “Long travel times to and from sites increase transportation costs and further limit the amount of maintenance and repair work that can be completed each day with a small staff.”
The school district, which is geographically vast and encompasses the southeastern corner of the county, suffers from issues many rural school districts face: deferred maintenance of facilities, staffing struggles and long travel times for the student body.
Mountain Empire has tried and failed to get voters to approve a bond measure to help. Last month, the district was granted $4.6 million by the state to help rebuild its high school, after a three-year fight. The funding will help hire contractors to draw designs for a new campus, as well as preliminary engineering reports for other campuses.
In its new report, the state’s Fiscal Crisis and Management Assistance Team — formed by state legislative action in the early 1990s to help local education agencies with their financial practices — used 20 indicators, with sub-categories, to indicate risk or potential insolvency.
Its analysis based on those indicators gave Mountain Empire a score of 28.7%, putting the district at the lower end of moderate risk on that fiscal score alone. By this measure, a high risk score would be at least 40.0%.
But other factors besides those 20 indicators can push a district into the “high risk” category. Those factors can include what FCMAT calls a “material weakness,” such as having too little money in reserve, or conditions such as the key one Mountain Empire met — having three qualified interim reports in a row.
Robbie Montalbano, FCMAT’s chief analyst, said Tuesday evening at the district’s board meeting that districts that work to address the issues can turn around.
“It’s very obvious when you hit that number of qualified interims (reports), it’s going to take a while to get things straightened out,” she said. “You all are doing what you need to do, and you’re taking those actions, you’re having those conversations.”
Superintendent Patrick Keeley said in a Thursday afternoon phone call that Mountain Empire is working to address the issues but that it’s important for the state to spend time in school districts to understand their specific contexts.
“It’s important sometimes to have outside eyes look at your policies, your procedures,” he said. “I think there’s a recognition of some of our unique circumstances out here, as well.”
He gave the example that transportation takes up around 7.5% of their budget. For most school districts, it’s around 2% to 3%.
The loss of COVID-19 era federal funding, dropping enrollment, chronic absenteeism have created the “the perfect storm for some for some challenging financial situations,” he said.
The district had been making moderate enrollment gains for years, but enrollment dropped in the 2024-25 school year, the FCMAT analysis said. The district had also lost some attendance when school returned to in-person instruction during the pandemic but has since rebounded.
Keeley said that they had also had to make some painful staffing cuts.
Last month, the board approved layoffs for eight teaching jobs and almost three full-time equivalent classified positions, along with furlough days.
Keeley said the district was also looking into all of its software in an effort to find cheaper alternatives. “We’re in a constant state of looking for different funding sources and grant programs,” he said.
Mountain Empire is the only San Diego County district among the 32 statewide on California’s list of agencies with qualified certifications.
Another seven California districts appear on the negative certifications list, which means the agencies will not meet financial obligations for fiscal 2024-25 or 2025-26 based on current projections. No local districts are on that list.
Originally Published: April 19, 2025 at 5:00 AM PDT
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