State fiscal team flags SFUSD at high risk; board hears plan to align staffing with enrollment

A team from the state’s Fiscal Crisis & Management Assistance Team (FCMAT) told the San Francisco Board of Education that the district’s finances show signs of structural stress and material weaknesses that elevate its risk of insolvency unless more aggressive, sustained actions are taken.

John Von Flue, FCMAT chief analyst, described the review methodology and key findings: “We found a risk score of 38.4 percent for the district,” he said, and added that certain material weaknesses — including deficit spending, weak budget monitoring, and reliance on one-time funds — raised the effective risk level to high. FCMAT’s work was triggered by the California Department of Education’s earlier “no longer a going concern” determination.

Why it matters: FCMAT emphasized that enrollment decline drives revenue losses and that personnel costs are the dominant budget item. The report identified gaps in budget monitoring and recommended clearer multi‑year projections, improved cash and payroll controls, and alignment of staffing to projected enrollment.

District response and next steps: Chief Financial Officer Megan Wallace and other staff told the board they have adopted a budget‑balancing plan, committed one‑time investments to retiree health and to build a reserve, and are working with CDE advisers and FCMAT on implementation. State fiscal adviser Elliot Dushan urged urgency but said recent steps showed progress: “Think of this as going to the doctor and hearing that you’re on a good path to health, but there’s more work to do,” he said.

Board discussion focused on timelines for implementing staffing realignments, how to measure the impact of proposed changes (including special education encroachment and OPEB liability), and the limits of one‑time funds. Staff pledged to produce more detailed multiyear projections and to identify which county functions could be shifted to improve oversight.

Ending: The board received the analysis and directed staff to continue work on enrollment projection accuracy, budget monitoring improvements, and a short/medium/long-term action plan to present in upcoming committee meetings.