Murky Trust Navajo Elementary School Fire SUSD

A fire that badly damaged Navajo Elementary School brought a spotlight briefly to the little known state trust that acts as an insurer for Scottsdale Unified and many other Arizona school districts.

The fire at Navajo Elementary last year briefly put the spotlight on a little-known entity called the Arizona School Risk Retention Trust.

Though the trust manages hundreds of millions of dollars in public money, the public generally knows little or nothing about what essentially is an insurance provider for school districts in Arizona.

Scottsdale Unified currently has property casualty, workers compensation and medical insurance through the trust, said district interim CFO Jeff Gadd, and its role in SUSD emerged at a school board meeting last October.

At that meeting, even board members had to clarify exactly what references to “trust dollars” actually meant.

Gadd said they were funds that the Arizona School Risk Retention Trust, as the district’s insurer, would provide as part of the Navajo repair project.

The confusion is understandable considering the district has its own trust, called the Scottsdale Unified School District No. 48 Insurance Trust, that figures into the equation.

The SUSD trust is its own entity — with its own board  appointed by the district — whose purpose is to sign up for the statewide trust.

“And so, there’s two trusts; one is the district trust that has gotten money collected from its budget, etcetera, to cover the cost of insurance,” Gadd said. “Then (the district trust) actually purchases the insurance itself…through the Arizona Risk and Retention Trust, which is the one that is a statewide entity.”

The school board approved repairing Navajo’s fire-damaged areas with approximately $10 million in state trust money. It also allocated an additional $4 million to repairing and upgrading areas of the campus not affected by the fire.

While the state trust operates as the insurance provider for the district, it has some significant differences from your typical insurance carrier and has some procedural commonalities with public bodies — like school governing boards.

The Arizona School Risk Retention Trust was created in 1986. It is allowed under a state law, A.R.S. § 11-952.01(A), that enables two or more public agencies to enter into agreements for the joint purchase of insurance.

“It operates as a risk retention pool funded and governed by its members, and backed by the best reinsurance companies in the world,” the state trust website says.

Ryan Cole, director of operations for the trust, did not return a request for comment.

According to the state trust’s most recent financial statement, it has 250 members — 248 school districts and community colleges and two charter schools.

Its formation as a nonprofit in 1992 provided school districts an opportunity to save money on insurance.

“The trust formed quite a long time ago when liability premiums were really high,” said Chuck Essigs, director of Government Relations for the Arizona Association of School Business Officials (AASBO).

“It basically allowed districts to pool together to get better rates on the liability insurance to cover some of the risks that school districts would have by doing it on a cooperative basis rather than each district trying to come up with their own coverage,” he explained.

Gadd, also director of Educational Programs for AASBO, said the state trust provides other services tailored to the needs of school districts.

“The insurance is very structured towards schools and the uniqueness that schools have that you probably would not get in the private insurance market, and that is a big one for us,” Gadd said.

“They try to do very well with customer service with each and every one because of the interaction that districts have with one another,” Gadd said.

With 250 school districts on its rolls, the trust has been charged with managing a massive amount of public funds.

As of the fiscal year that ended June 2018, the state trust had nearly $205 million in assets versus $102.8 million in liabilities.

For that fiscal year, it had revenues exceeding $52.6 million and expenses of approximately $44.7 million.

Gross contributions from member school districts in 2018 totaled over $65 million. But that was adjusted down for the cost of reinsurance and a trust loyalty credit, which qualifies members can for up to seven percent of their previous year’s contribution as a credit.

According to the financial report, the trust had a 9.9 percent increase in net contributions over the previous year from a rate increase

Scottsdale Unified paid a $1,460,885 annual premium to the trust for liability insurance for the current fiscal year, according to information provided by the district – a 9.8 percent increase over the previous year.

How much value the district received for those premiums is difficult to discern without digging into the state trust's internal records.

Since joining it in 2000, SUSD has paid $21.7 million  into it and has filed claims totaling $17.1 million, records show.

The trust board meeting website includes districts and identification numbers for claims it is considering and whether or not the board approved them, but it does not include the total funds doled out for each claim.

The trust’s board includes superintendents and CFOs from districts throughout the state. Day-to-day management is handled by a contracted administrator, Ashton Tiffany, LLC, a Phoenix-based risk management firm.

Ashton Tiffany works with a number of other notprofit public entity pools, including Kairos Health — another group with ties to both Scottsdale Unified USD and the state Risk Retention Trust.

Kairos was established in 2017 and provides health insurance to Scottsdale Unified and 54 other public entities in Arizona.

Gadd is on the Kairos board and Ashton Tiffany CEO John Ashton is its executive director.

The Arizona Risk Retention Trust board approved a $3.5 million capital contribution to Kairos Health along with an additional $1.5 million for general funding support.

According to the state trust’s financial statement, “This decision was based on the conclusion that the capital contribution would: (a) benefit the Trust as an entity; and (b) benefit Trust members individually, whether or not they joined Kairos.”

The statement did not clarify how the investment would benefit non-Kairos Trust members beyond stating they could receive credit for a share of the contribution if they join Kairos within three years of its inception.

The state trust paid Ashton Tiffany about $2.9 million last fiscal year.

While the state trust’s board provides oversight, its minutes show it has unanimously approved every motion put before it since at least February 2018.

It is unclear how much oversight individual members, such as Scottsdale Unified, have in trust operations.

Gadd said that the district’s insurance policy lays out specifics about what is a payable claim and what is not and that the district can appeal to the state trust’s Board if a claim is denied.

The state trust also is required by the state to provide all members, like Scottsdale, a copy of its annual audit.

The Arizona Department of Insurance is also required to examine the state trust’s books at least every five years.

Beyond those mechanisms, the public has little oversight over the organization.

Unlike school board, city council and other public bodies that receive regular press coverage, the state trust has largely flown under the radar.

Its board holds public meetings at times that make public attendance difficult.

The first two meetings of 2019 were in the morning at trust offices at 333 E. Osborn Road, Suite 100, Phoenix.

As a result of complaints by Scottsdale resident John Washington, the Attorney General ruled the trust board violated the open meetings law.

Washington said that in the past, the trust board meeting listings on its website did not mention a location for the sessions. It now publishes that information at

In a letter to the state trust, Assistant Attorney General Katherine Jessen wrote that it did not provide proper public notice about four months last year as well as in February 2019.

The AG said it was satisfied with the trust’s response and that no further action would be taken at this time. However, it said the previous violations will be considered if any additional complaints are filed in the future.