Report 2019-108 Recommendation 6 Responses

Report 2019-108: Sacramento City Unified School District: Because It Has Failed to Proactively Address Its Financial Challenges, It May Soon Face Insolvency (Release Date: December 2019)

Recommendation #6 To: Sacramento City Unified School District

To address its current financial problems, Sacramento Unified should do the following:

By March 2020, adopt a detailed plan to resolve its fiscal crisis. The plan should estimate savings under multiple scenarios and include an analysis that quantifies the impact of reductions the district can make to ongoing expenditures. Specifically, Sacramento Unified should consider the impact of possible salary adjustments for employees in different bargaining units and include the impact those salary adjustments would have on postemployment benefits, such as pensions. It should also use the most recently available data to estimate net savings from modifying the health care benefits it provides to employees, as well as the impact those modifications would have on the total compensation of the employees. Finally, it should calculate the impact of possible changes to district and employee contributions to fund future retiree health benefits. The district should use the plan it develops as the basis for its discussions of potential solutions with its teachers union.

6-Month Agency Response

The FRP is an evolving plan and currently being reevaluated in light of the changed state budget.

Due to the drastic reductions in the state budget, the District's projected solution has increased substantially from the $27M previously required to achieve fiscal solvency. The District recently presented its 3rd interim presentation at the 5/21/20 Board meeting containing discussion of the impact from state revenue reductions on the evolving Fiscal Recovery Plan (FRP):

As recognized by the Audit, the majority of the FRP involves changes to District represented employees' health care contributions and overall compensation, with the largest portion of that from certificated employees. In addition to what is "already on the table", the FRP analysis included cost savings items for further consideration. The District continues to further evaluate existing and potential new proposals with our labor partners. After holding the first negotiation session with SCTA on March 3, 2020, negotiations again stalled. Initially, SCTA requested that the District provide a budget presentation at the next session to which the District agreed. Then, SCTA made multiple information requests and the parties had lengthy discussions regarding distance learning during the COVID-19 school closures. SCTA finally agreed to hold the next session which was just held on June 9. The District has filed an Amended Unfair Practice Charge against SCTA detailing the continued pattern of delay which is set for hearing in late August 2020.

The District's proposed adopted budget will be presented on June 18 and the budget will be adopted on June 25.

  • Estimated Completion Date: July 2020
  • Response Date: June 2020

California State Auditor's Assessment of 6-Month Status: Pending

The district states that it is developing a Fiscal Recovery Plan, which it notes is currently evolving and being evaluated. We are concerned that the district has yet to develop a detailed plan to address its declining financial condition. In addition, the economic impact of the COVID-19 pandemic certainly has added an additional financial strain for the district. It is therefore even more imperative that the district act quickly and judiciously to develop and implement a plan to resolve its fiscal crisis. Further, we expect to see action taken in its fiscal year 2020-21 budget.

Because of the impending risk of insolvency and lack of substantial progress on some of our recommendations, we believe more frequent updates from the district are necessary. Therefore, we requested that the district provide us another update in July and monthly thereafter.

60-Day Agency Response

The District presented the 2019-20 First Interim Financial Report's Fiscal Recovery Plan (FRP) at the February 6, 2020 Board meeting.

An updated FRP will be included in the 2019-20 Second Interim Financial Report in March 2020 which will include more detailed negotiable and non-negotiable items. As recognized by the Audit, the majority of the FRP involves changes to District represented employees' health care contributions, with the largest portion of that from certificated employees. The District electronically issued its proposal related to limiting healthcare costs and increasing employee OPEB contributions to SCTA on August 2, 2019.

The District filed for an impasse determination from the Public Employment Relations Board (PERB) on December 20, 2019, and again on January 13, 2020, thereby following the statutory process for attempting to move negotiations forward when there is a stalemate as recognized by the Audit. And, while those impasse applications were declined by PERB, we are pleased that there may be some positive developments for commencing negotiations with SCTA. While we would have preferred to begin this critical work this month, we look forward to beginning negotiations on March 3, 2020. See 3 Audit update letters.

The District has, and will continue to, base its FRP and its negotiation proposals on the latest relevant data related to projected ongoing expenditures and potential reductions, including changes to health care contributions.

  • Estimated Completion Date: March 2020
  • Response Date: February 2020

California State Auditor's Assessment of 60-Day Status: Pending

We look forward to reviewing the district's updated fiscal recovery plan. When considering efforts it needs to take to address its financial condition, we would remind the district to consider if the actions it takes will be sufficient so that in future years it does not fall back into a financial crisis as we show in Figure 9 on page 35 the audit report.

All Recommendations in 2019-108

Agency responses received are posted verbatim.