SFUSD Faces State Deadline on Fiscal Stabilization Plan as $44M Deficit Looms

The San Francisco Unified School District board held a marathon budget study session Wednesday to confront the math behind its persistent structural deficit — and the state's demand that it adopt a fiscal stabilization plan at next week's second interim vote. Staff presented three tiers of cuts totaling more than $40 million, revealed that the district's chronically low attendance rate is costing more revenue than its declining enrollment, and fielded pointed questions about equity, transparency and whether SFUSD's budgeting practices have finally caught up with reality.

• State requires SFUSD to adopt a fiscal stabilization plan at next week's second interim; board must choose scope of cuts

• District's 91% attendance rate costs more revenue than its 500-student annual enrollment decline

• Three tiers of cuts presented: $32M already underway, an additional $8M, and a deeper $18.6M package that could restore positive certification by December 2026

• Board members push for explicit equity strategy in staffing model, rejecting appeals-based approach as insufficient

• First-ever position reconciliation completed, eliminating ghost positions; $6M in double-budgeted special ed contracts targeted for savings

• QTEA parcel tax carryforward will cover new healthcare agreement for 18 months; renewal with a higher rate needed by 2028

The Deficit Narrows, but the Hole Remains Deep

The basics: SFUSD's unrestricted general fund carries a structural deficit — meaning ongoing spending exceeds ongoing revenue — that staff projects will persist through at least 2028-29 even with tentative labor agreements factored in. The restricted fund will exhaust its balance by year four, shifting those costs onto the already strained unrestricted side.

Why it matters: The California Department of Education has notified SFUSD it cannot pass another budget period without adopting a fiscal stabilization plan. The scope of cuts the board endorses next week will determine whether the district can exit its "qualified" fiscal certification — a distress signal to the state — by December 2026 and how deeply services are reduced over the next two years.

Where things stand: Deputy Superintendent Chris Mount-Benites presented a draft second interim budget showing the unrestricted deficit has improved from $55 million to roughly $44 million through active savings. He then laid out three tiers of response:

• Tier 1 (already underway): $17 million in staffing-enrollment alignment and $15.26 million in central office reductions for fiscal year 2026-27.

• Tier 2 ("baby FSP"): An additional roughly $7.9 million in central office supply and contract cuts for fiscal year 2027-28.

• Tier 3 (full FSP): A further $18.6 million in deeper central office position cuts, special education contract consolidation and potential program and site consolidations for fiscal year 2027-28.

Only all three tiers combined would return the district to positive certification by December 2026.

"We received a letter from the state that we cannot go another budget period without passing one," said Deputy Superintendent Mount-Benites. He warned that central office operations are near a breaking point: "Response times are going to get longer across the board. There's not much more to cut, particularly in the operations side. We're pretty much going to the bone this year."

The other side: Commissioner Matt Alexander cautioned against adopting the largest package now, arguing it could send what he called a "doom loop signal" that accelerates enrollment flight rather than stemming it. "I do think there's a balance here of how do we move forward in a fiscally responsible manner, but also say we have a plan to invest and attract families to SFUSD so that then we can actually change it around," he said.

Vice President Jaime Huling offered a different lens, noting the full three-tier plan was a significant improvement over what was proposed in December. "Even though all three pages, the big FSP version, is much, much more student-centered and has cuts further away from school than the FSP that was presented to the board in December, which had a number of line items that were immediate cuts to staff and services provided to students at site," she said.

Huling also pressed on implications: "If we did just do the first two pages, then does that essentially leave us in qualified in perpetuity unless and until a larger cut FSP is adopted?" Mount-Benites confirmed that only the full three-tier plan would produce a path to exiting qualified status by December 2026.

What's next: The board appeared to lean toward the first two tiers while reserving the larger package for possible adoption in June. Commissioners were asked to provide direction before next Tuesday's formal second interim vote.

The Attendance Gap SFUSD Can't Afford to Ignore

Why it matters: California funds schools not by how many students enroll, but by average daily attendance — a three-year rolling average. That distinction is punishing SFUSD.

Where things stand: Deputy Superintendent Mount-Benites revealed that SFUSD has maintained a roughly 91–92% attendance rate for years, far below the 95–97% achieved by comparable large urban districts statewide. "We have a longstanding roughly 91 to 92% attendance rate. Other districts of our size are between 95 and 97% — that means urban districts, large districts in the state of California. That is actually impacting us more than our 500 average per year declining enrollment," he said.

The numbers are stark: with enrollment at roughly 48,768, the district is funded on an ADA basis for approximately 44,790 students — a gap of nearly 4,000 funded seats annually.

Compounding the problem, the district's unduplicated pupil percentage — the share of low-income students, English learners and foster youth who trigger supplemental and concentration grant dollars — dropped 2% within the current year. SFUSD is approaching the 55% threshold below which concentration funding would be lost entirely, a cliff that could erase millions in annual revenue.

Commissioner Alexander noted that roughly 30% of K-12-age children in San Francisco attend private school and urged the district to develop an enrollment growth strategy rather than simply managing decline. He asked whether this year's 385-student enrollment drop was a blip or a trend, requesting demographer analysis.

CFO Niru Jayaraman explained that confusion between school building capacity and actual enrollment had contributed to inflated projections in prior budgets. The current model now uses 48,048 for fiscal year 2026-27, closely aligned with actual trends plus a 1% decline adjustment.

Revenue Projections: From "Optimistic Budgeting" to Hard Numbers

Why it matters: Trust in SFUSD's budget has eroded after years of projections that were off by tens of millions of dollars. Staff presented evidence that the problem was systemic, not incidental.

Where things stand: Mount-Benites revealed that prior-year budgets used projected enrollment figures higher than any actual enrollment since 2024-25. He did not mince words: "When you have an enrollment number that you're plugging into a budget which is higher than what you know your enrollment is going to be, I will kindly call that optimistic budgeting."

He explained that the district had not been using the state-standard FCMAT revenue calculator, instead relying on manual spreadsheets maintained on individual computers — a practice that left the district vulnerable when staff turned over during and after the pandemic. "I will happily tell you that we now use it in the district. In the past we were not using the approved calculator. We were using manual spreadsheets that folks were keeping online, either online or on their computers," he said.

Revenue discrepancies in some years reached as high as $77 million between adopted budgets and first interim actuals. Commissioner Alexander urged full public disclosure of projected-versus-actual revenue comparisons. "I just think that's the level of transparency that would be really helpful so that we don't get in this situation where all of a sudden we have $80 million more dollars and we don't know why. Because I think that's what creates the trust gap," he said.

Board President Phil Kim echoed the call for clarity, saying commissioners owe it to themselves and the public to understand how site allocations, labor agreements and enrollment true-ups all interact — and how they are communicated to families.

What's next: Staff committed to sharing projected-versus-actual revenue comparison data for the past four to five years, a disclosure that could help rebuild public confidence in SFUSD's fiscal management.

Equity in the Staffing Model: "An Appeals Process Is Not a Strategy"

Why it matters: SFUSD's stated mission centers on equity for its most vulnerable students — low-income families, English learners and foster youth. But commissioners questioned whether the district's funding formula actually delivers on that promise.

Where things stand: Commissioner Alexander drew a firm line, saying he would not support a budget that lacks an explicit equity strategy. "I'm gonna have real trouble supporting a budget that doesn't very explicitly have a strategy around improving student outcomes for all students," he said. He noted that SFUSD historically used multi-tiered systems of support and equity-weighted funding to direct more resources to focal students, but those mechanisms appeared largely absent from the current model.

He rejected the idea that the current appeals process — where individual schools petition for additional staff — constitutes an equity strategy: "I don't believe that an appeals process is a strategy. I'm glad we have it because I think it's really important if there were mistakes, but to suggest that our equity funding formula is an appeals process is not acceptable."

CFO Jayaraman pushed back, noting that equity factors do exist: 89 additional supplemental teachers are allocated based on unduplicated pupil percentage, along with equity-weighted assistant principals, counselors and dedicated course substitutes.

Commissioner Alida Fisher grounded the debate in a specific example, pointing to Visitacion Valley Middle School, which needed seven staff positions added back through the appeals process. "If we're finding so many add-backs are necessary, then is the baseline staff model actually sufficient for some of our schools?" she asked. "Does it really take equity into account the way that we want it to based on our mission and our values?"

Mount-Benites described a systemic pattern he called "everybody needs it creep" — where services originally targeted at Title I schools, such as social workers, gradually expanded to all schools, diluting their equity impact and creating supplement-versus-supplant compliance issues.

Vice President Huling and President Kim asked staff to produce a consolidated one-page document showing everything the district does extra for high-need schools — the first such summary commissioners said they had seen.

What's next: Staff committed to delivering that equity summary, which could reshape how the board evaluates the adequacy of its funding formula for the district's most vulnerable students.

Ghost Positions Gone: First-Ever Position Reconciliation and $6M in Special Ed Savings

Why it matters: Uncontrolled position creation and double-budgeted contracts have cost SFUSD millions in phantom expenditures. Fixing those systems is foundational to restoring credibility with the state.

Where things stand: Daniel Munoz, recruited from Los Angeles as Director of Position Control, described completing what he called the first position reconciliation in district history. "When I got here, it was very apparent to me that there were no controls in place for position management. And so that led to having unaccounted vacancies, ghost positions, schools and offices being allowed to just open positions without the proper approvals, without the proper fundings attached to these positions," he said.

Munoz now reconciles closing positions against new requests across all school sites to determine actual staffing needs and layoff exposure. A board policy on position control, accompanied by an administrative regulation and a position control manual, is coming to next week's meeting.

On special education, staff identified $6 million in potential savings from eliminating cases where both a contracted service and a full-time district employee are budgeted for the same IEP service. CFO Jayaraman explained the approach: "The intent here is to reduce $6 million in contracts and have those contractors fill district positions so that there's no interruption in service." The plan aligns with the recent UE tentative agreement's provision to reduce contractor reliance.

Staff also identified opportunities to maximize Child Development Fund reimbursements for early education students with disabilities — a strategy used in Los Angeles — and to better capture Medi-Cal revenues. Jayaraman noted the district is not fully taking advantage of existing state set-asides.

Commissioner Fisher expressed concern about the timeline, asking staff to ensure no interruption in services to students. Jayaraman said the work would begin immediately after the second interim, targeting fiscal year 2027-28.

Parcel Tax Funds Healthcare Deal — For Now

The basics: SFUSD relies on two parcel taxes — QTEA (for "educators," a locally defined term that includes paraeducators) and FWEA (salary augmentations for all staff) — to supplement state funding.

Why it matters: The new tentative agreement with UE to provide healthcare benefits will be funded through uncommitted QTEA carryforward balances and revenue, covering costs for approximately 18 months. But the parcel tax expires roughly six months after that coverage period ends.

Where things stand: Commissioner Supryia Ray asked how the parcel taxes interact with the healthcare agreement and whether existing salary augmentations would be reduced. Mount-Benites confirmed they would not. However, he explained that sustaining the healthcare benefit beyond 18 months requires QTEA to be renewed in 2028 at a higher per-parcel amount for another 20 years — a ballot measure that will need support from unions, the district and the city.

Commissioner Fisher later asked whether projected QTEA renewal revenue was factored into the multi-year projections. Mount-Benites indicated the projections did not yet extend far enough to capture it — a gap that could obscure a significant unfunded obligation.

Minor Items

• Brown Act challenge: Public commenter Bernice Casey alleged the special meeting was not properly noticed, citing missing calendar postings. Staff confirmed the meeting met all Brown Act requirements with 72-plus hours of posting.

• The Superintendent acknowledged the difficult budget choices ahead but noted investments moving forward, including Mission Bay Elementary and a new K-8 Mandarin school.

• Commissioner Lisa Weissman-Ward asked about the breakdown of local revenue sources, including whether real property leases could generate additional income.

• State funding mechanics: Mount-Benites offered a vivid description of California's ability to retroactively adjust school funding: "The state government's the only organization that has a time machine. They can go back three years and take your money back."