By Shaina Cole | Contributing Writer, Rocky Mountain Voice
For years, the story of a Colorado school district in fiscal trouble has looked the same. Small. Rural. A few hundred students on the plains or up a mountain valley, squeezed by declining enrollment and a thin local tax base.
This year the Office of the State Auditor put three very different names on that list: Cherry Creek, Colorado Springs 11, and Poudre. Three of the largest, most visible districts in the state, each newly flagged after missing two benchmarks tied to operating margins and a shrinking fund balance.
The report, dated July 30, tracks the financial health of all 178 Colorado school districts across the three years ending June 30, 2025. It runs six ratios against each district. Miss two or more and you land on a short list that gets a full write-up, a chart, and a formal explanation from district officials.
Thirteen districts made that list. The number that missed at least one benchmark climbed to 43, up from 35 the year before.
Three big districts on a mostly rural list
The auditor’s own map still shows most of the flagged districts sitting in rural Colorado. Six of the 13 have fewer than 2,000 students. But the report says plainly that “various economic conditions have adversely affected districts of all sizes and geographic areas across the state,” and the roster this year backs that up.
Cherry Creek 5 enrolls 51,204 students. Colorado Springs 11 enrolls 24,870. Poudre R-1, in Larimer County, enrolls 32,156. All three carry a “▲” in the auditor’s table, marking a district that either appeared on the two-or-more list for the first time or jumped from fewer missed benchmarks.
Thirteen Colorado school districts missed two or more of the auditor’s fiscal-health benchmarks over three years. A triangle marks a first appearance or a jump from fewer misses.
(Source: Colorado Office of the State Auditor, Report 2648S)
By the auditor’s count, all 13 tripped the Operating Margin Ratio — the plainest of the six. It measures whether a district spent more than it took in. A negative number means expenditures ran ahead of revenue, and the difference came out of reserves.
Twelve of the 13 also missed the Change in Fund Balance Ratio, which tracks the general fund balance shrinking over time.
The districts call it a choice
What the three big districts told the auditor is worth reading closely, because none of them described a funding shortfall. They described the drawdowns as planned or explainable.
Cherry Creek said its missed benchmarks were driven by “the planned, one-time use of fund balance to support employee compensation increases and strategic investments.” The district said its board “prioritized maintaining competitive salaries” in a tight labor market, and that growth in specialized programming and staffing, “particularly within the Department of Special Populations,” pushed spending past sustainable levels. Its general fund balance fell from roughly $99.5 million to $71.2 million over the three years.
Colorado Springs 11 described a deliberate strategy. Its slide reflected “a deliberate use of reserves using a Board-approved strategy to reduce historically elevated reserves.” The district walked through the arithmetic. Between 2018 and 2023, its general fund balance had grown from about $40.2 million to a peak of $126.1 million. The drawdown since, to $93.9 million in 2025, was “a planned, controlled use of reserves rather than financial stress.” The district noted the ending balance still sits far above its board-required 4 percent minimum.
Poudre described its numbers as “a normalization of reserves that were strategically built up during the pandemic, not structural deficit.” The district’s fund balance dropped $12.9 million, ending at $48.6 million. Poudre itemized where the money went. Legal settlement payments accounted for $6.2 million. Extra-duty stipend costs added $1.6 million. There was a one-time 5 percent base compensation payment to all staff, a $450,000 increase in self-insurance pool rates, and roughly $400,000 in bus-driver overtime.
Read together, the explanations describe salary decisions, settlement payments, and reserves that Colorado Springs and Poudre say had grown unusually high, or were built up during the pandemic, and were later drawn down on purpose.
Whether that’s prudent management or a bill coming due depends on what the next audited year shows. The auditor is careful to note the report can’t see current-year budget cuts, since those won’t surface until December 2026.
More money, more districts flagged
In fiscal 2025, the final year the auditor’s analysis covers, the Budget Stabilization Factor, the mechanism that held back roughly $10 billion in school funding since 2011, hit zero after lawmakers passed SB24-188.
The state put about $5.6 billion into district programs that year. Local funding kept climbing after that. From fiscal 2025 to fiscal 2026, statewide assessed property values jumped 10.2 percent, sending an additional $421.7 million in local money to districts.
And in the fiscal 2025 analysis, the count of districts missing at least one benchmark went up, not down.
The Colorado Department of Education’s explanation points to costs outrunning revenue, declining enrollment, and the end of federal pandemic aid. It also flags a quieter pressure.
Twenty-nine districts are being “held harmless” under the new school finance formula, meaning their funding is held at the 2024-25 level. That’s about one in six districts statewide. Most of them have been held flat for two years running.
Those districts serve roughly 52,000 students, absorbing rising costs without an increase in formula funding since 2024-25.
What the next year has to show
The auditor doesn’t call a missed benchmark proof of trouble. It calls it a signal, a reason for a board to ask why.
Several of the flagged districts said the spending was one-time and won’t repeat.
Cherry Creek says it plans to rebuild reserves over time. Colorado Springs 11 says its drawdown was deliberate and that its remaining reserves still sit well above the board-required minimum.
The test is the audited number for the fiscal year that ended in June, which won’t appear in the auditor’s fiscal-health analysis until its next report.
If the declines keep going past the point districts described as planned or one-time, the explanations get harder to sustain. If the balances level off, the next audit backs the districts’ case that the draws were temporary.
Either way, a fiscal-health list still dominated by rural districts now carries three of the state’s largest school systems.