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‘No confidence’: State adviser slammed Sac City Unified officials in fiscal crisis, emails show

Here’s what a state takeover would mean at Sacramento City Unified

Michael Fine from the state's financial crisis team and David Gordon from the county office of education address the Sacramento City Unified School Board on cutting costs in their district on Thursday, Feb. 21, 2019 in Sacramento.
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Michael Fine from the state's financial crisis team and David Gordon from the county office of education address the Sacramento City Unified School Board on cutting costs in their district on Thursday, Feb. 21, 2019 in Sacramento.

An independent fiscal adviser blasted the Sacramento City Unified School District this spring while it was calculating huge cuts to jobs and programs, saying he had “no confidence” in its business staff or their data.

“It appears to me your staff has again demonstrated that they don’t have the capacity or willingness to produce accurate data,” Mike Fine of the state-created Fiscal Crisis and Management Assistance Team said March 7 in a string of emails to Superintendent Jorge Aguilar and board President Jessie Ryan, expressing distress over the data the district was presenting in its second interim budget report.

“That may seem like a strong statement, but I need you to hear me clearly so I’m being direct,” Fine continued. “It appears they load data in a system and then press the print button and add it to the board agenda without reviewing it, analyzing it, etc. They must take responsibility for that and you must hold them accountable for that.”

Fine copied Sacramento Mayor Darrell Steinberg and Sacramento County Superintendent of Schools Dave Gordon on the emails.

The records were received by the Sacramento City Teachers Association through a public records request and independently obtained from the district by The Sacramento Bee. The teachers union said it requested the emails “because of the lack of transparency at the district and because the district has been so badly mismanaged.”

Capacity, leadership questioned

Fine said in the emails that he had long raised issues about cash flow and budget oversight, but felt the district was not taking his advice. He expressed concern about the capacity and leadership of the business office.

He also said the second interim budget data was “not adequately reviewed and vetted by the county before they were published, publicly or privately,” and that the district seemed to be disengaged with the county Office of Education.

Ryan in an email response to Fine rebutted the notion that the district was not communicating with the Sacramento County Office of Education, citing weekly meetings with Gordon.

“I also am not aware of any feeling by Superintendent Gordon that our district has disconnected from him, his team, or otherwise rejected SCOE’s assistance in this process,” Ryan said in an email response to Fine.

“When districts fall into severe fiscal difficulty such as SCUSD is facing, the County Superintendent is empowered by state statutes to take various steps to tighten oversight and provide assistance to the district to help get them out of fiscal distress,” Gordon said in a statement to The Bee.

Aguilar defended the business staff in his email response to Fine. Noting that the financial recovery plan required negotiations with the district’s unions, he said Sacramento City Unified had “contracted with fiscal experts to conduct additional analyses and work with our team as needed through the negotiations process.”

But Fine rejected that defense. “Negotiations process? What about everyday activity?” he wrote. “... My point is that your business office doesn’t have the capacity to do the job expected each and every day. Bringing in an expert to analyze doesn’t change that.”

Fine’s role with the district came to an end after he presented the district’s fiscal health analysis to the school board in February.

On Wednesday, Fine explained to The Bee why he weighed in after his official role had ended. “It’s unusual for us to speak up like this,” he said. “But how they were going about producing an interim report with the cash flow wrong, that’s not acceptable.”

A year in financial crisis

The district has been in financial crisis for nearly a year. Warning bells went off last summer when, for the first time, the county Education Office rejected its budget due to a large projected deficit.

The Fiscal Crisis and Management Assistance Team, a state-created financial adviser for school districts, conducted an independent audit, and Fine warned in December that if the district failed to plug a then-$30 million budget hole, it could trigger a takeover by the state in six months. FCMAT’s report faulted the district for past mismanagement, communication failures and inexperienced staff.

Sacramento City Unified Chief Business Officer John Quinto presented the second interim report at the March 7 board meeting. Quinto, who had been with the district since August 2018, was Aguilar’s first major hire. He resigned in April, citing personal reasons.

The second interim report received a negative certification by the county on April 16. In May, the district approved layoffs affecting more than 170 certificated staff positions, and was considering deep cuts to student programs.

However, it announced in June it had temporarily dodged receivership by making cuts and using reserve funds to cover the remaining shortfall. Insolvency is now expected in October 2020, according to Gordon.

After Quinto’s departure, the district hired Jacquie Canfield, a contracted budget consultant, and in June she identified more than $5 million in savings after combing the budget, correcting errors and eliminating funds that had been going unspent.

The money identified by Canfield allowed the budget team to preserve funds for SAT testing, music classes, athletics and more. The school board approved the budget at its meeting in June. According to Gordon’s office, it is under review.

Canfield also corrected an error that the Sacramento City Teachers Association and Fine brought to the district’s attention months prior — before a teachers strike in April and and before teacher layoffs were approved — that more than 700 Sacramento City Unified students in five schools were not accounted for. Because school funding is based on student enrollment, the error had caused the district to underestimate its revenue by millions of dollars.

Fine said he doesn’t believe the district made any serious budget decisions, including layoffs, based on the enrollment errors, because they were corrected before the decisions were made.

Much of the email exchanges between Fine and Aguilar occurred the same day the school board voted to approve layoffs. Two months later, more than later 170 certificated employees, including teachers, were laid off. The district has since then rescinded layoffs after processing retirements and employee attrition, and about 50 teachers still remain unemployed. The district says it could rescind more layoffs up until the beginning of the school year.

Union criticizes ‘secrecy’

“Rather than pause to make sure that information was accurate (it wasn’t, the District forgot to count 730 students, an $8 million per year mistake), Mr. Aguilar and Ms. Ryan kept Mr. Fine’s communications secret, apparently even from other board members, and after 7 minutes of discussion voted to move forward with the layoffs,” the teachers union said in an email to The Bee. “The district’s secrecy has done significant damage.”

Fine said the district should be given credit for progress after making changes in the business office, but he is still concerned about the long-term forecast.

The teachers union agrees.

“The district is in better financial shape primarily because it grossly exaggerated its fiscal distress earlier in the year, rather than as a result of any major initiatives undertaken by the District,” the teachers union said in an email. “The bigger question is whether the elected school board will exercise its fiduciary duty to hold those responsible accountable. In addition, we believe the forensic audit currently underway by the State Auditor will likely reveal even more questionable actions and practices.”

Assemblyman Kevin McCarty, D-Sacramento, requested the California state auditor do a “deep dive” into the district’s finances and decision-making. The audit is not expected to be completed before the fall, according to McCarty’s office.

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Sawsan Morrar covers school accountability and culture for The Sacramento Bee. She grew up in Sacramento and is an alumna of UC Berkeley Graduate School of Journalism. She previously freelanced for various publications including The Washington Post, Vice, KQED and Capital Public Radio.
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