The Iowa City Community School District is taking steps to improve its finances and its reputation after Moody's Ratings withdrew its rating due to a lack of information and district officials subsequently discovered a fiscal crisis.
The district, about 115 miles east of Des Moines, will restructure its financial oversight committee and hire a public relations firm.
"Prior to the application period, a number of community members informed the board of their interest in participating in the financial oversight committee, which we interpret as a positive sign of community engagement," Board Director Jennifer Horn-Frasier said by email. The application window closes at midnight on July 13.
At the June 25
"Right now, financial and technical expertise is only given 15% of the total amount of points [in the rating]. For me, given the context of this committee ... I want someone that tells me like it is," Director Mitch Lingo said. "Fifteen percent seems rather low."
The board agreed to change the rubric to give heavier weight to financial and technical expertise relative to other areas, such as community perspective and representation.
Director Charlie Eastham dissented. "I really don't like that idea. I think community perspective and representation is a premium and necessary attribute," he said. "It'll be too heavily on financial perspectives and overlooking community input. … We are an educational institution. We're not a financial management institution."
"We're in this mess because we did not take care of our finances," Lingo countered. "That's where the community perspective comes in in my mind, is the school board itself. We need the financial and technical expertise more so than anything else right now."
"The essence of this committee is to carry out fiduciary responsibilities," Director Ruthina Malone said. "They have to understand finances if they're going to carry out the purpose of why they're signing up with this committee."
Eastham nominated himself as the board representative to the financial oversight committee, which was unanimously approved.
After district officials unearthed cash flow problems, funds deposited into the wrong accounts and a 9% year-over-year increase in payroll costs, the board was forced to make cuts, and an
The exits included Deputy Superintendent Chace Ramey, Executive Director of Secondary Schools Lucas Ptacek and Director of Human Resources Nick Proud. Former Superintendent Matt Degner stayed in the district as executive director of secondary schools.
Horn-Frasier said the district is "on the road to recovery." Staff turnover and "inconsistent training and monitoring" contributed to the crisis, she said.
"Budget decisions were made using incorrect information. Auditors recently observed that FY24 audit results appear to be a symptom of insufficient monitoring rather than inherent financial weakness of the funds themselves," Horn-Frasier said. Mistaken transfers of funds and incomplete accounting during the period covered by the audit created budgeting errors.
The district is moving to implement best practices, properly train staff and ensure procedures are followed consistently, she said.
The board, which cut $7.5 million from the budget, spent $6,000 to hire PR firm Des Moines-based Wixted and Co., TV station
Horn-Frasier said the PR contract will be "a short engagement to improve two-way communication with the community."
Moody's placed the district on review due to lack of sufficient information in June 2024. In October 2024, it withdrew the district's underlying rating, a Moody's spokesperson confirmed.
The district did not file notice of the October 2024 rating change on the Municipal Securities Rulemaking Board's EMMA website until March 13, 2026, according to
Horn-Frasier said the board expects the FY2025 audit by the end of October. The district "anticipates being back on the standard audit schedule with the submission of the FY26 audit expected by the deadline of March 31, 2027," she said.
In its last rating report on the credit, released in June 2023, Moody's affirmed the district's Aa3 issuer rating and general obligation unlimited tax bonds rating, and assigned a negative outlook.
At that time, enrollment was growing and leverage was in line with medians. The district had thin financial reserves, but considerable revenue-raising flexibility from its cash reserve levy, Moody's said.
Still, Moody's highlighted a "trend of declining fund balance and cash." It added, "If reserves do not begin to meaningfully improve, the rating will likely move downward."
The district's enrollment decreased in 2023-24, dropping to 14,378 from 14,439 in the 2022-23 school year, according to the
The district's cash dropped by $53.19 million year-over-year in 2024 due to the spending of revenue bond proceeds.
Iowa City Schools' liabilities decreased $6.6 million in 2024, due mainly to principal payment on debt of $17.7 million. That was offset by an increase in the net pension liability of $8.94 million.
The district's general fund financial position grew by $8.9 million, but its general fund revenues of $208.9 million represented a $532,238 decline from the prior year's $209.48 million.
At fiscal year's end 2024, the district had $407.85 million in total long-term obligations outstanding, according to the report.
At an Iowa School Budget Review Committee meeting
A takeover by the state "is not currently under consideration," State Board of Education President John Robbins said by email.
"The School Budget Review Committee (SBRC) is currently working with the district to ensure that budgetary issues are appropriately addressed," he said. "If the SBRC reaches a point sometime in the future where the district is not taking appropriate and timely action, they may refer the issue to the state board."
The SBRC directed Iowa City Schools to send representatives to its next meeting in early October, according to Heather Doe, communications director for the Iowa Department of Education.
"Any district that incurs a negative unspent balance — meaning the district overspent its authority — or incurs a negative regular program balance — meaning the district's categorical balances are keeping the unspent balance positive — is already required to appear before the SBRC," Doe said by email.
She noted "the state Board of Education only exercises its option to assume temporary oversight and operational authority when a district has failed to make sufficient progress on required performance measures outlined in corrective action plans."
Doe said Iowa City Schools "may be directed to develop, submit for approval and implement a correction action plan" depending on the updated FY2026 year-end financials due Sept. 15.
Interim Superintendent Amy Kortemeyer did not respond to requests for comment.
