Sacramento City Unified Financial Crisis Is No Surprise

Sacramento City Unified School District recently announced it could run out of money by the end of 2019. Its statement warned it “would not have enough cash to cover employee payroll, payments to vendors and others.”

I’m not surprised. It was one of the lowest-ranked among the 944 school districts I analyzed in my October 3, 2018 report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” The report found two-thirds of state school districts “bleed red ink.”

It examined each district’s Unrestricted Net Position, a key number showing fiscal soundness. The numbers are found in each district’s latest Comprehensive Annual Financial Report, called a CAFR.

Sacramento City Unified’s UNP ranked sixth worst, at ($540 million) – parentheses around a number indicate a negative. The worst of all was Los Angeles Unified ($10.9 billion), followed by San Diego Unified ($1.5 billion), Fresno Unified ($849 million), San Francisco Unified ($770 million) and Long Beach Unified ($564 million).

The financial problems of these districts have worsened despite leaps in spending. For example, according to Sacramento City Unified’s 2017 CAFR (the same one I used for my report), Total Government Funds revenues were $647 million, up 40 percent from the $461 million on the 2010 CAFR.

Another way to look at CAFR numbers is the per capita UNP, based on the number of residents in a school district, as provided by the California Department of Education.

That also rang an alarm bell for Sacramento City Unified, at ($1,588) per capita, 867^th worst among the 944 California public school districts.

From my overall state report, I broke out all 13 pubic school districts in Sacramento County and tallied their per capita UNPs. Note that only one district, Robla Elementary, is in positive territory. Three districts are even in worse shape than Sacramento City Unified:

The main culprit in negative CAFRs is unfunded pension liabilities.

New CAFRs soon will be coming out for all districts for the fiscal year that ended last June 30, 2018. The numbers should prove even more challenging as, for the first time, CAFRs will be required to also include retiree medical liabilities on their balance sheets. 

The warnings in my reports are intended to give officials, administrators, teachers, parents and students data to prevent financial disasters by searching now for solutions.