New Sac City financial update shows state takeover less likely, but new cuts loom
The news of Superintendent Lisa Allen leaving Sacramento City Unified School District comes as the financial outlook at the district finally seems to be improving in some ways.
On the bright side, the district looks like it will avoid state takeover in the 2025-26 school year, which looked like a very real possibility as recently as last week.
Fiscal insolvency happens when a school district runs out of cash to pay its bills. Previously the district was projecting to run out of cash by the end of the year, but according to materials released Wednesday night, the district will end the year with about $3 million in cash flow, while still running a significant deficit.
Having a positive cash flow while being in a deficit may sound paradoxical, but it is possible.
“We’re very confident we have a plan to avoid running out of money before June 30,” district communications officer Brian Heap said.
Another piece of good news: The district’s fiscal solvency plan is finally looking to produce some serious savings. Interim financial officer Lisa Grant-Dawson has identified $43.8 million in savings the district can realistically make this fiscal year.
Grant-Dawson will present an update to the board at a meeting Thursday night.
Tough times are still on the horizon for the district. While the district will have enough cash to keep it afloat into the next school year, the projected deficit for the 2025-26 school year has grown to $113 million — not including projected savings via the new fiscal solvency plan.
In essence, the district will have money in its checking account while it waits for a large credit card bill to arrive in the mail.
As the district works to stay afloat until the summer, efforts to shape the fiscal solvency plan for the following two years begin, which will bring more serious cuts. Some items on the plan for next year include reducing contributions to employee benefit offerings, cutting the parent participation preschool to one classroom and considering school consolidation and closures.
“In this moment, we are focusing on our current year spending with appropriate and implementable mid-year reductions while building our 2026-27 budget with less expenditures,” Grant-Dawson wrote in a presentation to the board.
The turnaround comes after several months of frustration that the solvency plan wasn’t moving quickly enough. In a letter to the school community, Board President Tara Jeane wrote that there was a lack of clarity on the scope of the deficit and that the plan had not been “implemented with urgency, consistency, or clarity these last three months.”
“These reasons are the fault of a broken system, not one person; ultimately all of us are responsible and all of us must be part of the solution,” she wrote.
This story was originally published February 5, 2026 at 4:19 PM.
