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Mixed financial forecast paints uncertain future for SF school district

The interior of the San Francisco Unified School District Administrative Offices | Photo by Camille Cohen

In another budget-focused school board meeting on Tuesday, state financial experts forecast an uncertain future for the San Francisco Unified School District.

On the one hand, the San Francisco Unified School District is on a solid path to fiscal solvency, per its appointed fiscal expert Elliot Duchon. On the other, declining enrollment means further cuts will likely be needed as state funding is tied directly to the number of students. 

Without a steady infusion of cash the district could facing another budget shortfall—like the one that triggered state intervention last fall—by the 2025-2026 school year.

SFUSD might ward off such a budget deficit with the help of a large, one-time payment of federal pandemic support and by freeing up revenue from a legal challenge. But the road ahead isn’t easy.

“You’re clearly on the path that I see and [appointed fiscal expert] Ms. Luzon sees as a way to fiscal solvency,” Duchon told the board on Tuesday. “But it is not a quick path. You do have a decreasing deficit, but the deficit is still there.”  

California school districts are likely to see a boost in funding formulas and other educational revenue in May. But it simply won’t come in time to stop any predetermined layoffs this year due to a mismatched state budgeting process. Though staff said Tuesday it was unlikely that all would ultimately go through, there are 143 standing layoff notices for educators bringing uncertainty and worry about student impact.

Public comment was dominated by pleas from students, teachers and parents from Dr. William L. Cobb Elementary School to keep its teachers in place. Several called attention to the district’s aim to hire more Black teachers and teachers of color while the school’s Black educator faces layoff, which are determined by seniority.

Fiscal Health Check 

A report from the state’s Fiscal Crisis and Management Assistance Team made public this week found that SFUSD’s financial solvency is at high risk. Specifically, it cites its budget planning process, deficit spending based on one-time funds, and low reserves as leading to the designation. 

Other concerns from FCMAT include miscalculation of per-student funding, failure to account for cost-of-living adjustments and declining enrollment. 

SFUSD enrollment dropped to 49,204 this school year, compared to 52,778 students in the 2019-2020 school year, according to the state count released on Monday. Enrollment in California public schools lost another 110,000 students since the 2020-2021 school year. While 9,000 more students went to private schools, questions remain over where the remaining students are.

The report was compiled before the Board of Education approved a $125 million balancing plan that is being implemented. SFUSD also put $40 million from $150 million windfall funds freed from litigation back toward its rainy day fund.

The California Department of Education also confirmed the district’s interim report concluding it would meet its financial obligations. 

“Those are all wonderful steps,” said Chief Financial Officer Meaghan Wallace. “Our work is not yet complete by any means. We do recognize that this is a special opportunity to have this assessment done.”

The concern over budget planning came down to enrollment and funding projections not matching revenue, which Wallace acknowledged “was not all that accurate.” She said they are taking steps to hone those projections

Duchon recommended increasing staffing on the budget team in the short term and overhauling its system that manages the budget in the next three to five years. SFUSD also serves as the County Office of Education but may benefit from someone more focused on those duties.

Bad Budget Timing 

Gov. Gavin Newsom is expected to unveil an updated budget with even more funding for public schools than previously proposed. San Francisco and school district officials across the state are urging $1 billion in immediate funds for special education funding. It’s federally mandated but underfunded to the point where SFUSD covers two-thirds of its soaring costs by dipping into its general fund.

The prospect of more state funding brought hope that the layoffs of teachers could be prevented. Superintendent Vincent Matthews initially indicated school sites could make a wish list of what to use the extra money on.

Some board members expressed desire to stabilize schools, and families’ faith in them, if SFUSD received more funds to do so. But staff on Tuesday cautioned that it would put the budget balancing plan at risk, with a due date by end of June and before those funds hit SFUSD’s bank account. 

“We don’t believe it’s good practice,” Matthews said. “We would be undoing the process of our budget balancing plan.”

SFUSD would instead use the scenario planning to help identify uses for additional money over the fall. Wallace noted that cost of living increases are overdue and would be a strong contender.

The school board will undergo training on school finances and how SFUSD compares to other districts in California on Thursday at 5 p.m.. That meeting can be watched via Zoom.