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Sacramento schools again at risk of financial distress with enrollment declines, new contracts

Sacramento Bee 4/25/2022 Sawsan Morrar, The Sacramento Bee

Apr. 25—Sacramento City Unified School District is again facing financial distress just weeks after it approved labor agreements to end its eight-day teacher strike, Sacramento county education officials said last week.

The Sacramento Office of Education gave the district's budget a negative certification, stating the contracts and the strike itself would cost the district millions of dollars and could threaten insolvency.

The county assigns that designation "when a district will be unable to meet its financial obligations for the remainder of the current year or for the subsequent fiscal year," according to the state.

It's a step that eventually could lead to the state taking over the school district.

The district is on track to meet its requirement to maintain reserves equivalent to 2% of its budget for the current year and for the next two years, according to the county office.

But in a letter to the district, Sacramento County Superintendent Dave Gordon said the new labor contracts coupled with declining enrollment "significantly alter the projections" and increase the district's risk of running out of cash.

The agreements with the Sacramento City Teachers Association and classified employee union SEIU Local 1021 came after both unions went on strike for eight days, a period in which the district shut down campuses because it did not have staff to keep them open.

School districts face financial penalties when they close campuses, including for strikes.

It's unclear if the state will provide Sacramento City Unified with a waiver for the shutdown, but the district began working on proposals to make up time and avoid potential funding losses.

Gordon estimated that the agreements with SCTA and SEIU and the possible fiscal penalties for shuttering schools for more than a week would "result in a $16.1 million structural deficit" and sharply reduce the district's unrestricted general fund balance by the 2023-2024 financial year.

Video: Teachers Strike: District Meets With SEIU, No Meeting Set With SCTA (CBS Sacramento)

What's in the Sacramento contracts?

The contracts, which the school board voted to approve at a school board meeting on Thursday night, included ongoing 4% salary increases for teachers and classified staff as well as a mix of one-time bonuses. They also included a 25% rate increases for substitutes who filled in for absent teachers this year, and gave 14 more sick days for subs who test positive for or have symptoms of COVID-19.

The deal with the teachers union committed the district and the labor group to find an alternative to a costly health care plan that the administration considers too expensive.

In his letter, Gordon estimated the ongoing cost of the two agreements to be around $15 million, and a one-time cost of approximately $44 million.

"We encourage the SCTA and the district to come to an agreement to reduce the district's health benefit costs," read the letter. "However, given the district's growing structural deficit, this proposal may need to be renegotiated to allow the savings to be redirected to support current ongoing costs."

The Sacramento City Teachers Association said that Gordon's projections have been inaccurate in the past.

"Wrong numbers equal bad decisions, and SCOE has done very little to help SCUSD improve its fiscal management," said SCTA President David Fisher. "It's time for Dave Gordon to step aside."

Penalties from teacher strike

During the strike, students missed out on about 2,400 minutes of class time.

The county expects the district to save $8.4 million due to the strike, but the district faces $47 million in penalties for failing to offer a minimum number of 180 instructional days.

By way of comparison, a 2019 strike in Oakland cost about $1 million per day. The first day of a strike in Los Angeles in 2019 cost about $15 million — part of a dispute that wound up costing the district roughly $151 million in lost revenue.

Sacramento City Unified and unions are working together to identify ways to restore as many days and hours as possible to help to manage the penalty.

The options include extending the school year by six days, or extending Thursday school hours by an one hour for six weeks. Any decision must be negotiated with the unions.

(c)2022 The Sacramento Bee (Sacramento, Calif.) Distributed by Tribune Content Agency, LLC.

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