Deep in red, Sacramento City school district’s budget rejected by county. Cuts are coming.

For the first time, the county Office of Education has disapproved Sacramento City Unified School District’s budget for the current fiscal year due to projected deficits.

The district now has one month to file a revised budget for 2018-19 to replace the $555 million budget it had submitted, as announced during the district’s Thursday night board meeting.

In an Aug. 22 budget report letter addressed to district Superintendent Jorge Aguilar, county Superintendent David Gordon said the district will meet its 2018-19 minimum reserve requirements, but will fall short by $22.1 million the next year and by $40 million in 2020-21.

“The 2019-2020 shortfall leaves the district with a negative fund balance. Therefore, the district’s Adopted Budget is disapproved,” the letter reads.

Sacramento City Unified has until Oct. 8 to file a revised budget to the county, according to Gordon’s letter.

In further explanation of the disapproval, the letter says “unrestricted expenditures” for 2018-19 and 2019-20 have increased significantly, “even though the district has been asked to solve its structural deficit problem.”

“It’s not like we told them the day before yesterday that this was a problem,” Gordon said Friday in an interview. “We tried to warn them over and over and over.”

The expenditures increased by $23 million for 2018-19 and by $16 million for the following fiscal year, the letter says.

“This office recommends that the district begin making cuts immediately, as any delay in resolving the structural deficit could compromise the options available to the district to maintain fiscal solvency,” the letter concludes.

The county superintendent “will assign a fiscal advisor to assist the district” in reversing deficit spending, the letter says.

The adviser will be a highly experienced school business officer with experience balancing budgets, according to Gordon. The superintendent and the financial officers of the district and the county will be in continuous communication between now and October, Gordon said.

“The goal is not to punish them (Sacramento City Unified),” Gordon said Friday. “The goal is to help them get out of this predicament, which no other district in the county is in or even close to.”

The district launched a website dedicated to the budget review process. The website will invite parents and other stakeholders to recommend ways the district can save money, Sacramento City Unified School District spokesman Alex Barrios said in a statement Friday.

The district also released a video statement, telling families about the steps necessary to resolve budget issues.

“This is the first time that our adopted budget has been disapproved by the County Office of Education,” Board President Jessie Ryan says in the video.

Ryan says the district Board of Education is faced with the “grave task” of addressing a $24 million budget deficit.

“It breaks my heart to know that we’re now forced to make cuts, though our students desperately deserve every dollar,” says Ryan, a mother of two students at Sacramento City Unified schools.

Sacramento City Teachers Association President David Fisher was bewildered Friday, saying the union first learned about the disapproval at Thursday night’s meeting.

“We’d like some questions answered for sure,” Fisher said. “It comes as a big surprise, and we think somebody — the district or the county — has some explaining to do.”

In November, Sacramento City Unified reached a three-year deal on a new contract with SCTA, giving teachers up to an 11 percent raise, which averted a possible teachers strike that had loomed for more than a year. Mayor Darrell Steinberg helped facilitate that deal, announced at City Hall just two days before 2,800 union members planned to strike.

The county says it had previously aired concerns about Sac City Unified’s 2018-19 budget in three letters to Aguilar dated between Dec. 7 and April 26.

In December’s letter, the county district superintendent said that compensation increases provided in the three-year agreement with SCTA — $4.8 million in 2016-17, $6.2 million in 2017-18 and $14 million in 2018-19 — prompted concerns about the fiscal impact of the union deal down the road.

Fisher called the multiyear projections “wildly inaccurate,” but admitted multiyear budgets are not easy to project. He said he does not think the pay raises should have played much of a role in issues with the 2018-19 budget.

“Teachers as a percentage of the budget have been woefully underpaid,” Fisher said. “When we’re that low and we have a teacher shortage, something has to be done about it just to retain teachers in the classroom.”

In subsequent letters, the Sacramento County Office of Education took issue with the district using onetime funds to pay for expenses that would continue in future years, calling that a “poor business practice.” The county suggested instead using onetime funds to help reduce the district’s liability for retiree health care benefits.

In an editorial penned by Aguilar published by The Bee on Aug. 31, the superintendent says the district must collaborate with community stakeholders and the Board of Education.

“This budget deficit threatens our ability to achieve our shared vision. Now more than ever, the district needs all stakeholders to collaborate on a long-term plan to balance our budget and stabilize costs,” Aguilar wrote.

Aguilar says that while state funds are increasing, “our projected costs exceed these resources.” Aguilar wrote that “pensions and other obligations” by the district, including benefits, exceed state revenues by $3 million.

The superintendent notes that he and the school board reduced costs by $4.3 million so far, “even though we already operate one of the leanest offices in the region.” Aguilar also said he made the decision to cut a summer program, which served 3,000 mostly low-income students, in an effort to help them meet grade level standards.

“If this really is a crisis, the district hasn’t been acting like it,” Fisher said. “We need to make sure that whatever the true numbers end up being, resources need to go into the classroom.”

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