school districts; receivership; mandatory consolidation

Plain English Breakdown

The official summary does not provide specific details about the procedures for electing a new governing board or how existing debts and liabilities are handled after consolidation.

School Districts; Receivership; Mandatory Consolidation

This bill requires small school districts with fewer than 300 students to consolidate with the closest district if placed in receivership by December 31, 2025 and remain there on the effective date.

What This Bill Does

• Requires school districts with less than 300 students that are put into receivership before December 31, 2025 and remain there to merge with the closest district as outlined in the bill.
• Outlines procedures for merging districts due to receivership, including how to elect a new governing board for the combined district.
• Specifies that terms of some existing board members continue until January 1 after the next general election following consolidation.

Who It Names or Affects

• Small school districts with fewer than 300 students that are placed in receivership before December 31, 2025 and remain there.
• County school superintendents who may call elections for consolidation based on voter petitions.
• Residents of affected school districts who can sign petitions to request consolidation.

Terms To Know

receivership

A situation where a state board takes control of a financially troubled school district and appoints someone to manage it.

consolidation

The process of merging two or more separate districts into one larger district.

Limits and Unknowns

• It is unclear how the consolidation will affect existing debts and liabilities of the merged districts.
• The bill's provisions for mandatory consolidation are set to expire on December 31, 2029.

Official Summary Text

SB1507 - 572R - Senate Fact Sheet

Assigned to
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PASSED BY COW

ARIZONA STATE SENATE

Fifty-Seventh
Legislature, Second Regular Session

AMENDED

FACT SHEET FOR
S.B. 1507

school districts;
receivership; mandatory consolidation

Purpose

Requires, until
January 1, 2030, a school district with a student count of less than 300
persons that the State Board of Education (SBE) places in receivership before
December 31, 2025 and remains in receivership on the effective date to
consolidate with the closest school district as outlined. Outlines procedures
and requirements

for consolidation due to
receivership, including procedures for the election of the school district
governing board (governing board) of the new school district. Requires, until July
1, 2029, a county school superintendent to call an election to determine the
question of consolidation after receiving petitions bearing the signatures of
at least two percent of the number of qualified electors and if other outlined
requirements are met.

Background

School District
Receivership

The SBE must review allegations of school district insolvency and gross
management and has jurisdiction over all petitions requesting that a school
district be placed in receivership and a receiver or fiscal crisis team be
appointed. If the SBE finds that a school district is insolvent or has engaged
in gross management, the SBE may place the school district in receivership and
appoint a receiver.

On appointment, a receiver must begin a full review and investigation of
the school district's financial affairs and submit a detailed report within 120
days of the appointment to the SBE that includes a financial improvement plan
and budget that details how the school district eliminate any continued gross
mismanagement and will achieve financial solvency. A financial improvement plan
approved by the SBE authorizes the receiver to: 1) override any of the school
district superintendent's or governing board's decisions concerning the
management and operation of the school district; 2) attend any governing board
and administrative staff meetings; 3) supervise the day-to-day activities of
school district staff; 4) place on extended leave, suspend or terminate for
cause the school district superintendent or chief financial officer without
providing a severance or buyout package; 5) authorize students to transfer to
other school districts not currently in receivership; 6) appoint a chief
educational officer, chief fiscal officer and independent public accountant for
outlined purposes; 7) reorganize the school district's financial accounts,
management and budgetary systems; 8) establish school district fiscal
guidelines and a system of internal controls; and 9) cancel or renegotiate
contracts as prescribed (
A.R.S. � 15-103
).

School
District Consolidation

On the request of two or more governing boards in the same or adjacent
counties, or on receipt of petitions signed by residents of two or more school
districts in the same or adjacent counties as outlined, the applicable county
school superintendents must call an election within 10 days to determine the
question of consolidation. Statute allows the consolidation of school
districts: 1) to change the boundaries of a school district to include any part
of an adjacent school district; 2) if all the common school districts within
the boundaries of an existing union high school district desire to consolidate
into one common school district; 3) if two or more adjacent school districts of
the same type desire to consolidate into one school district; 4) if a common
school district that is not a part of a high school district desires to
consolidate with an adjacent unified school district; 5) if two or more common
school districts desire to consolidate into one school district and unify the
consolidated district with a union high school district to form a unified
school district; or 6) to change the boundaries of a school district that
receives an annual achievement profile letter grade of A or B to include
another school district within 20 miles. The governing board members of the
previously existing school districts must serve as the governing board members
of the consolidated school district until January 1 following the next general
election, however, the governing board members' powers are limited to the
maintenance and operation of the previously existing school districts and
compliance with the consolidation plan.

School district consolidation does not consolidate or pool the liability
of the former school districts into the resulting school district. Any
outstanding indebtedness a school district incurs before consolidation must be
repaid without interruption according to existing debt schedules. If only one
of the school districts to be consolidated has authorization for an override,
the override authorization only applies to that school district and only
property located within the previous boundaries of that school district must
pay taxes to support the override (A.R.S.

��
15-430

and
15-459
).

There is no anticipated fiscal impact to the state General Fund
associated with this legislation.

Provisions

Requirements
for Consolidation due to Receivership (Repeals on January 1, 2030)

1.

Stipulates that, if the SBE places a school district with a student
count of less than 300 in receivership on or before December 31, 2025, and the
school district is in receivership on the effective date, the school district
must consolidate with the closest school district.

2.

Determines
that the closest school district is the school district that:

a)

meets one of the following:

i.

adjoins the school district in receivership;

ii.

if
there is no adjoining school district and only one school district is adjacent
to the school district in receivership, the adjacent school district; or

iii.

if there is no
adjoining school district and more than one school district adjacent to the
school district in receivership, the adjacent school district with the shortest
distance between its boundaries and the boundaries of the school district in
receivership; and

b)

provides instruction to students in:

i.

elementary grades, if the school district in receivership is a common
school district; or

ii.

secondary grades, if the school district in receivership is a high
school district, a union high school district or a unified school district.

3.

Determines that the terms of the governing board members of the
previously existing school district that is not in receivership do not expire
on the effective date of the consolidation and continue until January 1
following the next general election.

4.

Determines that the terms of only the two governing board members of the
previously existing school district in receivership who received the highest
number of votes casted during the last general election do not expire on the
effective date of consolidation and continue until January 1 following the next
general election.

5.

Specifies that the governing board members of the previously existing
school districts must serve as the governing board of the new school district
until January 1 following the next general election held after the
consolidation as prescribed.

6.

Requires, at the next general election held following the consolidation
and each general election thereafter, five members to be elected to the new
school district's governing board.

7.

Requires the new school district governing board members to take office
on January 1 following the general election.

8.

Requires
the governing boards of each previously existing school district to:

a)

prepare a list of assets for the previously existing school districts
before the end of the fiscal year in which the consolidation occurs; and

b)

set
aside sufficient assets or provide other means to satisfy the liabilities of
the previously existing school district.

9.

Requires the new school district governing board to approve the final
division of all assets not later than 30 days after the lists of assets are
prepared as outlined.

10.

Specifies
that the area within the geographic boundaries of each previously existing
school district remains subject to property taxes levied for bonds issued by
the school district and any other outstanding debt that was lawfully incurred
before the consolidation and that is not otherwise satisfied.

11.

Determines that the school
district's appointed receiver:

a)

does not have the powers authorized by a financial improvement plan;

b)

must submit to the new school district governing board a copy of the
detailed report, financial improvement plan and budget that the receiver
submits to the SBE;

c)

must advise the new school district governing board on how the school
district may eliminate any continued gross financial mismanagement and achieve
financial solvency; and

d)

may
recommend that the new school district governing board take any actions that
the financial improvement plan authorizes.

12.

Directs the SBE to dismiss
the receiver 30 days after:

a)

the Office of the Auditor General (OAG) certifies that the school
district has been financially solvent for one fiscal year;

b)

the OAG certifies that the school district's financial records are in
compliance with the Uniform System of Financial Records and generally accepted
accounting principles;

c)

the receiver certifies that the new school district is not engaged in
gross mismanagement;

d)

the SBE determines that the new school district is able to pay its debts
as those debts become due; and

e)

the
new school district governing board notifies the SBE that the advice and
professional services of the receiver are no longer necessary.

Modified Petition
and Election Requirements for Consolidation (Repeals on July 1, 2029)

13.

Stipulates that the
applicable county school superintendents must call an election to determine the
question of consolidation after receiving school district consolidation petitions
bearing the signatures of at least two percent of the number of qualified
electors who reside in each of two or more school districts in the same or
adjacent counties, if:

a)

the combined student count of the school districts or parts of the
school districts is between 8,000 and 8,400; and

b)

the
county school superintendents of the affected counties received the petition by
December 31, 2028.

14.

Applies
the statutory requirements relating to school district consolidation to school
districts that consolidate due to the modified petition and election
requirements.

Miscellaneous

15.

Specifies
that, if a school district participates in a career technical education
district (CTED) and consolidates due to being placed in receivership as
outlined, the new school district must automatically continue to participate in
the CTED in the same manner as the previously existing school district.

16.

Makes
technical changes.

17.

Becomes
effective on the general effective date.

Amendments Adopted by
Committee

1.

Narrows the requirements relating to consolidation due to receivership to
apply only to school districts that were placed in receivership before December
31, 2025, and remain in receivership on the effective date.

2.

Removes the requirement for a high school or union high school district
in receivership to consolidate with a common school district within its
boundaries.

3.

Requires the governing board of each previously existing school district
to prepare a list of the school district's assets and provide means to satisfy
its liabilities as outlined.

4.

Requires the new school district governing board to approve the final
division of assets as outlined.

5.

Subjects the geographic area of each previously existing school district
to the property tax levied for bonds issued and any other outstanding debt that
was lawfully incurred before consolidation.

6.

Repeals the requirements relating to school district consolidation due
to being placed in receivership on January 1, 2030.

7.

Requires the applicable county school superintendents to call an
election to determine the question of school district consolidation after
receiving petitions bearing the signatures of at least two percent of the
number of qualified electors and if other outlined requirements are met.

8.

Applies the statutory requirements relating to school district
consolidation to school districts that consolidate due to the modified petition
and election requirements.

9.

Repeals the modified petition and election requirements for
consolidation on July 1, 2029.

10.

Specifies
that a school district that participates in a CTED and consolidates due to
receivership must continue participating in the CTED in the same manner as
before consolidation.

11.

Makes
technical and conforming changes.

Amendments Adopted by
Committee of the Whole

1.

Determines that only the terms of the two governing board members of the
school district in receivership who received the highest number of votes casted
during the last general election do not expire and continue until January 1
following the next general election.

2.

Makes technical changes.

Senate Action

ED���� 2/18/26���� DPA��� 6-0-1

Prepared by Senate Research

March 3, 2026

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Current Bill Text

SB1507 - 572R - S Ver

Senate Engrossed

school districts;
receivership; mandatory consolidation

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SENATE BILL 1507

AN
ACT

amending title 15, chapter 1, article 1,
Arizona Revised Statutes, by adding section 15-103.01; amending section
15-397, Arizona Revised Statutes; repealing section 15-103.01,
Arizona Revised Statutes, as added by this act; relating to public schools.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it
enacted by the Legislature of the State of Arizona:

Section 1. Title 15, chapter 1, article 1,
Arizona Revised Statutes, is amended by adding section 15-103.01, to read:

START_STATUTE
15-103.01.

Small school districts; receivership; consolidation as a matter
of law; new governing board; division of assets and liabilities for previously
existing districts; powers and duties of receiver

A. Notwithstanding any other law, if
the state board of education places a school district in receivership pursuant
to section 15-103
on or before December 31, 2025
and the school district is in receivership on the effective date of this
section and
if the school district has a student count of
less than three hundred, the following school districts are consolidated into
one school district as a matter of law:

1. If the school district in
receivership is a high school district or a union high school district, the
school district in receivership
AND the closest school
district.

2. If the school district in
receivership is not a high school district or a union high school district, the
school district in receivership and the closest school district.

B. For the purposes of subsection A
of this section, the closest school district is the school district that both:

1. Meets one of the following:

(
a
) Adjoins the
school district in receivership.

(
b
) If there is
no adjoining school district and only one school district is adjacent to the
school district in receivership, the adjacent school district.

(
c
) If there is
no adjoining school district and more than one school district is adjacent to
the school district in receivership, the adjacent school district with the
shortest distance between its boundaries and the boundaries of the school district
in receivership.

2. Provides instruction to students
in:

(
a
) Elementary
grades, if the school district in receivership is a common school district.

(
b
) Secondary
grades, if the school district in receivership is a high school district, a
union high school district or a unified school district.

C. The terms of the governing board
members of the previously existing school district that is not in receivership do
not expire on the effective date of the consolidation and continue until
January 1 following the next general election, and the terms of only THE TWO
GOVERNING BOARD MEMBERS OF THE PREVIOUSLY EXISTING SCHOOL DISTRICT IN
RECEIVERSHIP WHO RECEIVED THE HIGHEST NUMBER OF VOTES CASTED DURING THE LAST
GENERAL ELECTION DO NOT EXPIRE AND CONTINUE UNTIL JANUARY 1 FOLLOWING THE NEXT
GENERAL ELECTION, during which time the members of the governing boards of the
previously existing school districts shall serve as the governing board of the
new school district.� At the next general election held following the
consolidation and thereafter, five members shall be elected as prescribed by
section 15-427, subsection B. The new board shall take office
on January 1 following the general election.

D. The governing board of each
previously existing school district shall prepare a list of assets for the
previously existing school district before the end of the fiscal year in which
the consolidation occurs.� The governing board of each previously existing
school district shall set aside sufficient assets or provide other means to
satisfy the liabilities of the previously existing school district, and the new
governing board shall approve the final division of all assets not later than
thirty days after the lists of assets are prepared pursuant to this
subsection.� The area within the geographic boundaries of each previously
existing school district remains subject to property taxes levied for bonds
issued by the school district and any other outstanding debt that was lawfully
incurred before the consolidation and that is not otherwise satisfied pursuant
to this subsection.

E. Notwithstanding section 15-103,
the receiver who is appointed by the state board of education:

1. Does not have the powers
prescribed in section 15-103, subsection F.

2. Shall submit to the governing
board of the new school district a copy of the report, financial improvement
plan and budget that the receiver submits to the state board of education
pursuant to section 15-103.

3. Shall advise the governing board
of the new school district how the school district may eliminate any continued
gross financial mismanagement and achieve financial solvency.

4. May recommend that the governing
board of the new school district take any of the actions listed in section 15-103,
subsection F.

F. Notwithstanding section 15-103,
subsection J, the state board of education shall dismiss the receiver thirty
days after all of the following occur:

1. The auditor general certifies that
the school district has been financially solvent for one fiscal year.

2. The auditor general certifies that
the school district's financial records are in compliance with the uniform
system of financial records and generally accepted accounting principles.

3. The receiver certifies that the
new school district is not engaged in gross mismanagement.

4. The state board of education
determines that the new school district is able to pay its debts as those debts
become due.

5. The new school district governing
board notifies that state board of education that the advice and professional
services of the receiver are no longer necessary.

END_STATUTE

Sec. 2. Section 15-397, Arizona Revised Statutes, is amended to read:

START_STATUTE
15-397.

Effect of unification or consolidation of participating school
districts

Notwithstanding sections 15-395 and 15-395.01, if a
school district
that
was participating in a career
technical education district at the time that the school district was unified
or consolidated pursuant to chapter 4, article 3 of this title
OR
CONSOLIDATED PURSUANT TO SECTION 15-103.01
, the successor school
district that results from that unification or consolidation shall
automatically continue to participate in that career technical education
district in the same manner as the former school district that was unified or
consolidated.
END_STATUTE

Sec.
3.

Consolidation of districts; petitions; election; delayed repeal

A. Notwithstanding
section 15-459, subsection A, Arizona Revised Statutes, on receipt of
petitions bearing the signatures of two percent or more of the number of
qualified electors who voted in whichever of the last two general elections
resulted in the higher number of ballots cast and who reside in each of two or
more school districts in the same county or in adjacent counties to consolidate
the school districts or parts of the districts, the county school
superintendent of each county affected, within ten days, shall call an election
to determine the question on consolidation if both:

1. The
combined student count of the school districts or parts of the districts is at
least eight thousand but less than eight thousand four hundred.

2. The
county school superintendent of each county affected received the petition on
or before December 31, 2028.

B. Except
as provided in subsection A of this section, an election called pursuant to
this section, and a consolidation allowed by this section, are subject to
section 15-459, Arizona Revised Statutes.

C. This section is repealed
from and after June 30, 2029.

Sec. 4.
Delayed repeal

Section 15-103.01, Arizona
Revised Statutes, as added by this act, is repealed from and after December 31,
2029.