Sacramento schools should consider cuts to teacher salaries, state audit suggests

The California state auditor painted a dire picture of Sacramento City Unified School District’s finances in a new report released Tuesday and suggested the district should consider trimming wages and benefits for teachers.

The report was requested by Assemblyman Kevin McCarty, D-Sacramento, in January. McCarty, who is married to Sacramento City Unified board member Leticia Garcia, is a longtime ally of teachers unions.

The audit stated the district “has failed to proactively address its financial problems” and is close to insolvency. The audit recommended the district adopt a new plan by March 2020 to resolve its fiscal crisis.

The audit found the district’s recommended expenditure reductions may not be sufficient to prevent a future state takeover.

In October, Sacramento City Unified said it needed to make $27 million in reductions to eliminate its deficit spending. That revised budget was rejected by the county Office of Education. But the audit states the only cost-saving proposal the district has put forward since then is to reduce teacher’s health benefits.

The audit found the district’s budget deficit increased nearly three-fold between 2016 and 2019 because officials did not take sufficient actions to control costs. The audit also found the district has a lack of adequate budget policies, has had turnover in its leadership ranks and has done little to control special education costs.

The audit report listed a range of possible options the district could implement to save millions of dollars, including cutting salaries by 2 percent, increasing teacher’s contributions to retiree health benefits and capping the district’s payment toward employee health care benefits at 90 percent; the district currently pays 100 percent of that cost.

The suggestions would account for more than $20 million in savings.

The audit, however, stated that before the district imposes changes on its teachers union or seeks a possible state takeover, the district should publicly disclose what the likely effects of these actions are.

“We agree with many of the Auditor’s findings and recommendations including that the real solution to our budget challenges lies in reducing our healthcare costs – which are among the highest of all school districts in the state,” said Jessie Ryan, President of the Sacramento City Unified Board of Education. ”We remain committed to establishing the types of budget practices that will support student learning and ensure our long-term fiscal stability – new leadership has already taken important steps to this end.”

Sacramento teacher raises

The district needed a plan to pay for a 2017 labor contract that increased teacher salaries by 15 percent, but the board “failed to uphold its fiduciary duty to ensure that the district is able to meet its financial obligations,” according to the audit. The district also failed to control the cost of generous employee benefits, which increased by 52 percent over a five-year period, according to the audit.

The district will have depleted its general fund by October 2021 and could require a state loan to continue operating, resulting in a state takeover. The audit stated that in to avoid state takeover, the district “should act quickly to develop and implement a plan to address its increasingly precarious financial situation.”

“This situation demands bold and long-term solutions that will require us all to act in good faith and make shared sacrifices for the benefit of students,” said Superintendent Jorge Aguilar. “We call on our labor partners to join us to work toward long-term solutions to our $27 million budget deficit.”

The Sacramento City Teachers Association said the audit confirms a number of things it already knew, including that the district had no plan for resolving its fiscal crisis.

“The report also confirms that Sac City is grossly mismanaged including certain budgeting practices that are ‘in violation of state law,’” read a statement from the union. The violations are in reference to the district’s failure to disclose its use of one-time funds to manage its budget.

“Wrong numbers equal bad decisions.”

Four entities have reviewed or audited the district’s finances — including the state’s Fiscal Crisis and Management Assistance Team (FCMAT), which presented its findings in December – and district officials have determined that they must reduce spending where it makes the most impact.

Mike Fine of FCMAT, in a March 7 string of emails to Aguilar and Ryan, expressed distress over the data the district was presenting in its second interim budget report. Fine said he had “no confidence” in the district’s business staff or their data as they cut jobs and programs.

The district says its will present a budget recovery plan to the state auditor and county Office of Education, and that it has begun negotiations with labor partners and sent several proposals to the teachers union to work on long-term solutions.

“We can no longer kick the can down the road – the time is now for us to make shared sacrifices for the financial stability of our District, so that we can invest in student learning. Our community expects and deserves nothing less,” Aguilar said.

This story was originally published December 10, 2019 at 1:00 PM.