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State concerned San Francisco schools may be insolvent by 2025-26

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(The Center Square) – The San Francisco Unified School District is projecting a deficit of $309.9 million over three years and has raised concerns with the California Department of Education that it may be insolvent by the 2025-26 fiscal year.

This comes after the district announced “historic” raises for its educators, while a financial crisis management team warned the district it may be insolvent if it doesn’t follow through with suggested layoffs.

The precarious financial condition of the district was laid out by financial documents included in the district’s Ad Hoc Committee on Fiscal and Operational Health earlier this month.

The San Francisco school district, which has 55,500 students, announced “historic” raises in December for its educators which would cost $88 million in 2024. In December, the district stated it would have to make $100 million in budget reductions in 2024 and an additional $55 million in cuts in 2026 and 2027.

A letter from the California Board of Education on May 3 stated that the district has not followed through on all of its proposed budget cuts in 2024-25 and the state said even if the district did make all of the proposed cuts in 2025-26, there would still be deficit spending.

The district is projecting a total $309.9 million in deficit spending. The report details deficits of $59.3 million for fiscal year 2023-24 and $121.7 million for the 2024-25 fiscal year, jumping to $128.9 million for the 2025-26 fiscal year.

The fiscal health analysis by the Fiscal Crisis & Management Assistance Team stated that the district had notified 110 administrators, 134 non-management certificated staff, and 102 non-management classified staff of layoffs, and if not finalized by May 15, the district is looking at even more financial issues.

“The district’s financial system is a significant barrier that prevents the district from conducting business in an accurate, effective, and efficient manner,” a April 26 report by the Fiscal Crisis & Management Assistance Team, an organization authorized by the state Legislature to help financially troubled school districts.

That report also found that among the staff, only one or two people in the district know how to generate reports that all budget and accounting areas should be able to operate.

The report further revealed that some mistakes in payroll are not always guaranteed or even accurate, stating staff said that in some cases payments were sent out for millions of dollars to individuals but were caught before being paid out to those employees.

The report also shows that the district’s 2021-22 audit was given with a “disclaimer opinion,” meaning the auditor wasn’t able to confirm the district’s financial condition, noting this finding serious compared to other findings and listing several areas where the district’s health is suspect and stating, “the district did not provide sufficient appropriate evidence to support that the financial statements are free from material misstatement.”

The district was given an extension to March 31, 2024, due to a lack of staff and a new auditor.

The district released a statement earlier this month saying it was taking correction actions to address the deficits.

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