The Natomas Unified School District will not need an emergency loan from the state to save it from bankruptcy after all.

Employee concessions and better-than-expected state aid helped pull it back into the black. But finding $9 million in the books didn't hurt either.

The unexpected windfall was discovered in September, when the district's new chief financial officer looked through the budget and found positions that were funded but not filled and other unsound budget practices, said interim Superintendent Walt Hanline.

Doug Crancer replaced John Christ as the district's chief financial officer on July 1.

"The budget did not reflect the reality of our spending," Hanline said. "It inflated the reality of our spending."

Last week, the Sacramento County Office of Education canceled the request for the state loan and removed the school district from "negative" budget status.

Because of the "negative" designation – which meant the district was in financial peril – Natomas Unified's finances have been under the control of the county Office of Education since September 2010.

During that 14-month period, the school district paid the county office about $125,000 to manage its money, Hanline said.

Natomas Unified officials reported the district was again financially fit in July after classified employees – primarily food service, clerical, maintenance, transportation and other support staff – agreed to take furlough days that amounted to a 4.8 percent pay cut over three years. That saved the district $550,000.

A few months later, Crancer reported that the district was actually $5 million ahead, instead of $4 million in arrears, as projected, Hanline said.

Does this mean the district won't be asking for more employee concessions?

No, said Hanline, who contends that the school district could face financial peril in the next two years if the unions aren't willing to offer deeper ongoing concessions.

A letter that county Superintendent of Schools David Gordon sent to Hanline last week says the district could be in the hole $6.4 million in 2012-13 and $6.8 million in 2013-14, even if teachers agree to increased concessions being proposed by the district.

The teachers' current concessions – worth $2.7 million a year – include seven furlough days and a 3.8 percent salary reduction. The concessions expire June 30.

Now the district is proposing that teachers agree to further salary cuts totaling 4.8 percent to save the district another $300,000. That amount could increase if the state makes future cuts, Hanline said.

Hanline said schools have taken a 20 percent cut from the state in the past four years. "We haven't come close to asking for that amount from our staff," he said. "We should all be thankful we have a job."

But the Natomas Teachers Association leadership is crying foul. The group says district leadership has been wasteful with its spending.

"One of the biggest objections we've had was that as soon as they got the cash flow into the positive the spending continued," said NTA President Kristen Rocha.

She said the district pays too much for consultants and lawyers, for example, when they could put that money into the classroom.

"We have given cuts for numerous years consistently," said Rocha. She didn't close the door on future concessions if the state makes future cuts and the money goes to the classroom.

Natomas Unified was one of 11 districts statewide – and the sole local district – to have a "negative" designation. Most local school districts are in "qualified" status, meaning they are in financial peril, but not so much that they need oversight.

The financial designation is important to school districts, which must qualify for loans to pay their bills while waiting for funds that have been deferred by the state.

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