City schools face $75 million deficit in next fiscal year

Potential $124m windfall for SFUSD in limbo

San Francisco public schools, bracing for years of high deficits, stand to gain a much-needed $124 million collected from 2018’s Proposition G — but the funds remain stalled in litigation and it could take years for them to be released.

Until then, the San Francisco Unified School District must contend with overwhelming projected deficits of $75.4 million for the next fiscal year and $94.3 for the 2022-23 year. It’s also in the throes of finalizing plans to bring students back in person, which could ultimately cost up to $38 million, according to new figures released by district officials at a meeting on Wednesday.

SFUSD officials expect the state to issue a qualified certification of its budget, which occurs when districts may not be able to pay its bills for the current or immediately upcoming fiscal years.

“It’s clear that having two years of deficits of this degree does put us in a place of qualified outlook,” said Meghan Wallace, SFUSD’s chief financial officer. “If we prevail on that litigation, that could be a major windfall for our district. Revenues aren’t growing at a pace that’s fast enough.”

Funds collected under Prop. G, a 2018 parcel tax meant to pay for educator wage increases and retention in an expensive city, have sat unused due to a pending legal challenge that argued the measure needed a two-thirds majority to pass rather than a simple majority.

Judges have upheld other measures this year passed by simple majority, most notably the November 2018 Proposition C for homeless services. But the next hearing for Prop. G isn’t for at least a few months, and a decision likely won’t be issued until the end of 2021 — a decision that could still be appealed to the California Supreme Court, further restricting the funds.

San Francisco voters in November affirmed Prop. G by approving the similar Proposition J, which is expected to bring $50 million annually going forward and replace the 2018 measure. That measure did not release funds previously collected under Prop. G. but without its recent passage, SFUSD would have exhausted its rainy day reserve fund used to pay the raises within months.

“At the end of this current [fiscal] year, 2021, we will have fully drawn down the rainy day reserves,” said Myong Leigh, SFUSD deputy superintendent. “It was a very, very important thing that Prop. J passed.”

At the same time, SFUSD is expecting to spend anywhere from $5 million to $38 million to bring back first students in person starting Jan. 25, which largely depends on how many choose to return and when. The $38 million estimate accounts for returning all students to all sites, Leigh said.

The biggest expenses come from custodians and educators. The district has enough staff to maintain expected cleaning routines for all elementary schools but could need up to $20 million for middle and high school sites.

SFUSD may need to spend up to $13.1 million on educators to establish smaller classroom sizes and maintain safe physical distances. The remaining estimated costs come from health screenings, classroom materials and other social distancing needs.

The district has spent about $6.7 million on coronavirus costs while losing $5 million in early education tuition and saving $2.8 million in operating costs on buildings closed during the fall semester.

It also saved $11 million on transportation, but that savings led to school bus drivers being laid off in August.

While the added costs this year have been within budget thus far, it’s largely due to one-time emergency allocations from the federal stimulus, state and city. Declining local revenues, as well as enrollment projections and the current recession, factor into the high projected deficits.

District officials are hoping a new budget process, better revenue projections from the state, a new federal stimulus, and the release of Prop. G funds could turn the tide.

The Board of Education will discuss the budget further on Dec. 8, its final meeting of the year.

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