Earlier this week, representatives from the Douglas County School District appeared before the State Department of Taxation, where they narrowly avoided having the state take over fiscal management of the entire district due to their “severe” financial crisis.
However, the Committee on Local Government Finance rejected a two-year timeline proposed by the district to “fix” the budget, with committee members emphasizing that the district cannot wait, because it is violating the law by spending money it does not have.
The committee told district representatives they needed to fix the financial issues this year or risk losing control of their fiscal management to the state.
While all municipalities within the state of Nevada, ranging from cities to school districts and everything in between, have been panic-crunching numbers since Nevada’s economy tanked earlier this year, the Douglas County School District has been relatively quiet about its own crisis — until now.
The district had a deficit (a negative balance) of $12.76 million as of June 30, 2025, following two net decreases of $3.35 million in Fiscal Year (FY) 25 and $2.09 million in FY24.
Other school districts have been able to remain in the positives, but with significant changes to their overall budgets, including freezing vacant positions, slashing funds, and ongoing school facility consolidations, among others.
It should be noted that these topics are all under discussion, as noted during the meeting, and that no decisions have been made at this time, as noted by President Yvonne Wagstaff.
“I think it’s important for our community to know that no decision has been made,” Wagstaff said. “So the rumors that are going around that we’re closing schools, that we’ve made decisions, I’ve heard that we’re closing schools as of January and none of those decisions are true. And so I think it’s important for our community to know that we take this very seriously.”
The Carson City and Washoe County School Districts, among others, have already been working ahead on their 2026 and 2027 fiscal year budgets, knowing that the financial crisis the state is facing isn’t projected to lift anytime soon.
Carson City’s FY25 (our current fiscal year) has a structural deficit of $3.9 million and is projected to increase to $5.4 million by the FY 2026, while Washoe County had a predicted deficit of over $18 million in FY 2026.
For many school districts and cities/counties, part of the bleak financial outlook is the fact that in recent years, employees have received much-needed salary increases, but revenues haven’t increased alongside them.
For the schools, enrollment has been declining for some time due to the fact that nationwide, people are having fewer children and when they do, they are having them later in life. High housing costs mean populations are skewing older, especially with retirees moving from more expensive communities to Nevada to take advantage of what they see as lower costs.
Douglas County has been one of the largest increases of this phenomenon, with the percentage of the population being aged 65 and older making up only 7% in 1970, to 15% in 2000, to a whopping 26% projected in 2026.
All that is to say that with the per-pupil funding model the state employs, fewer children = less money to schools, while costs due to inflation and cost of living continue to rise.
Since the 2019-2020 school year, enrollment has declined by approximately 15%, or roughly 862 students.
Compensation costs increased by 11% first in the FY 2023 year, then again by 4% in the FY 24 year. Historically, expenditures for special education have also outpaced actual state funding, meaning the general fund has had to transfer $1.6 million to cover these excesses as special education funding is mandated, even if the state isn’t providing it.
The district had to meet this week with the state’s Department of Taxation — and, due to the criteria being met, discussions were held as to whether or not they’d be forced to skip over the designation of “fiscal watch” and be placed directly into Severe Financial Emergency, which could remove all decision-making authority from the school board.
An audit came back “clean,” meaning there were no issues as far as accounting methods went, but it noted that there is “substantial doubt about the district’s ability to continue.”
To maintain cash flow and meet payroll obligations, the district had to withdraw $4.5 million from its investment pool, a measure that hasn’t been taken in many years. While there is a balance of $10.8 million in the investment pool, staff explained that these funds cannot be used to cover the deficit because it’s a compilation of all district funds, including restricted bond money and capital project funds as well as money that can only be put towards certain funding mechanisms under state and federal laws.
While they can draw on some of it liquidly, as they did for the $4.5 million needed for cash and payroll, they said it doesn’t fix the main issue at hand: the district has more expenses than revenue. If they were able to continue to draw on that fund, it would mean that the next time the deficit comes, they wouldn’t be able to pay teachers or their power bills.
Members of the public who provided comment were concerned and asked for additional context and clarity with the community.
DCSD Parent Chris Masterson noted a presentation included a 97% increase in general admin expenditures, but did not include any hard numbers. He added that a 97% increase on $1,000 is very different than $5 million, and the community deserves to fully understand the breakdown of these expenses and where they are going.
This was later addressed in the meeting, and staff said it was because previously, there were only two positions funded through that admin designation. Two additional positions have been added to that designation, including a front desk position, and a director of marketing position which is now titled as the Family Engagement Specialist and Communication.
One member of the public who has three DCSD students told the board they should recoup the costs paid to Joey Gilbert during his disastrous tenure as board counsel, which cost the district, according to the commenter, nearly $845,000.
Proposed solutions
It should be noted that the board is currently in the information-gathering stage, meaning nothing has been voted upon yet. And, if the state designates them as severe enough to take over management of the district, they may not be able to make these decisions at all going forward.
Operational adjustments in place or planned by staff:
Hiring Freeze: Currently, a temporary hiring freeze has been implemented for all vacant budgeted positions.
Staffing allocation revision: A reduction of 47 positions has been planned for the FY26 budget, primarily eliminating vacant positions and not refilling them.
Critical shortage positions: Six of the seven critical shortage teaching positions were reduced.
Textbook freeze: Planned textbook adoptions approved at $250,000 have been frozen.
Structural and facility changes under discussion by the board:
School consolidation: The board discussed cost savings of consolidating schools with low capacity such as C.C. Meneley and Scarselli which are operating at roughly 50-60% of total capacity.
Lake Schools: A discussion was held regarding the high cost per pupil at Lake Tahoe schools like Zephyr Cove and Whittell compared to the valley schools. However, both public comment and board discussions warned that changes could result in losing students to California or private schools, as well as there being legal restrictions on land trusts, and safety concerns on transportation if lake students were instead brought to the valley for school.
Lake schools have higher costs than valley schools due to their low enrollment combined with a high teacher retention rate, meaning teachers and staff have been there for much longer than their valley peers, which means their salaries and benefit packages reflect their seniority.
Zephyr Cove operated at 32% capacity with 153 students, and Whittell operates at 28% capacity with 140 students.
Public comment noted there is a difference of about $20,000 in per pupil spending between lake schools and Douglas High School.
“It is hard for me as a teacher and a parent to look at the kids that I see every day and my own children and say, ‘you are worth one third as much as some of the other students in the district’”, DCSD teacher Katie Jensen said. “The fact that we spend one third as much on these kids and three times as much on some kids who have less programs, less access to some of the other opportunities is hard just mathematically.”
However, some other commenters noted that the lake schools and their small class sizes with experienced teachers are one of the reasons that Douglas has the reputation for being “better” academically than other districts in the area, as they are five-star schools with high AP pass rates. But another commenter argued that the district is essentially providing private school for kids with public funding that should instead be refocused on the rest of the valley schools.
Four-day school week: The board requested an analysis of the potential cost savings of moving secondary schools to a four-day school week.
During the November meeting, the board had requested it to be included, and public comment brought it up again. Jeremy Height, a teacher of 19 years with the district, advocated for the board to add the discussion to the next meeting, as the 4-day schedule had “worked wonders” at Lake schools and could offer significant savings in things like transportation, janitorial, secretarial costs, and more.
Asset liquidation: The board discussed selling the district office and moving admin to empty school buildings if consolidation were to occur, or selling water rights, though proceeds from facility sales generally are required to go to facility costs rather than the general fund.
New revenue streams: The district is now implementing Medicaid billing for services and is exploring revenue from parking agreements and bus advertising.
Watch the special meeting here:
Committee meeting
Superintendent Frankie Alvarado attended the committee meeting and announced the district is considering school consolidations to capture around $1 million per consolidation, with the “big decisions” slated to be made in a special session scheduled for early February.
Alvarado said after taking the superintendent position with the district in July 2024, he met with the auditor and “there were definitely some red flags and indicators of risk and of potential fiscal insolvency,” and that they recognized their expenditures were outpacing their revenue, and revenue “has truly been stalled.”
Alvarado told the committee that between fiscal year 2024 and 2025, there were 29 positions added to the district, a deficiency that was “within our internal control processes,” because there wasn’t a management of positions between human resources and business [departments] and no reconciliation process. He said they quickly worked with their leaders and started working on identifying positions to reduce, as well as identifying teachers who would be eligible for retirement in three to five years.
Alvarado said the high turnover in the superintendent position as well as “many cabinet-level positions” is the reason why internal control deficiencies exist.
Committee members sympathized with Alvarado for walking into an unstable financial situation, and were supportive of him attending himself as opposed to only sending accounting representatives, but their directives reflected the severity of the situation.
“You have got to get rid of this deficit fund balance; that’s imperative,” Chairman Marvin Leavitt said. “Whatever you have to do, you need to get rid of that because if you don’t, the time’s going to come when you simply do not have enough cash, or you end up having cash on your books, but it should belong to some other fund and you’re spending the money that belongs to another fund for your general fund, which is illegal.”
They issued the following directives and expectations for the district:
1. Return in February/March: The district is ordered to appear before the Committee again at the next meeting (tentatively scheduled around February 10) to provide a progress report.
2. Provide Real-Time Deficit Numbers: The Committee requires an exact number regarding where the fund deficit stands at that specific moment in time, rather than just projected end-of-year figures.
3. Demonstrate Cash Flow Legality: The district must prove it is cash flowing its operations properly and not utilizing restricted funds (money belonging to other specific funds) to pay General Fund obligations.
4. Revisit Collective Bargaining Agreements: The Committee strongly suggested the district engage with bargaining groups to revisit contracts. Member Suzinski noted that recent salary increases are “fighting against” the need to right-size staffing and that the fiscal emergency requires immediate contract adjustments.
5. Report on Consolidations: The district must provide updates regarding school consolidations.
“We do not want to see you go into a severe financial emergency,” Chairman Leavitt said. “We do not want to see you as anything different than you are right now. I understand that if you don’t see improvement and you continue to have this, that’s in your cards.”
A special meeting will be held in January and another in February to discuss future steps.
You can watch the committee meeting below:
By Kelsey Penrose, CarsonNow.org