The last week marked the most tumultuous period yet in the ongoing SFUSD budget turmoil. After embattled Superintendent Matt Wayne agreed to resign Thursday, the district quickly announced a halt to its controversial plan to close schools before next school year.
The shakeup has fueled speculation over dinner tables and in meetings and parents’ group chats about the future of the district, with one question transcending all others: Does the fresh chaos put SFUSD back at square one in making the budget cuts necessary to avoid a long-threatened state takeover?
On Monday morning, Mayor London Breed announced Wayne’s interim replacement, Dr. Maria Su, at a press conference in front of the district’s central office. (Su’s appointment was confirmed by a 6-1 school board vote Tuesday night.) But the Mayor’s first guest, state education superintendent Tony Thurmond, was perhaps even more important — and delivered some surprising news in his brief remarks.
“Let me be clear, there will not be a state takeover in San Francisco,” Thurmond, California’s top education official, told the crowd. “It is not the role of the state Department of Education to take over what happens here.”
Thurmond’s pronouncement is at odds with reality. For one thing, state advisors have already been given veto power over many of the district’s fiscal decisions. And for another, whatever the political messaging, the state absolutely does take over districts — nine of them, including Oakland’s, in the last 32 years. If San Francisco doesn’t succeed in cutting more than $100 million from its annual budget, and soon, it’s likely to become the recipient of state oversight.
How did we get here?
Last month, California’s Department of Education wrote a letter to SFUSD, noting that its projected spending for this school year will leave it with a deficit of $76.4 million. The district has been overspending for several years, making up the difference with pandemic funds and fiscal reserves. But left unchecked, according to the Dept. of Education, the district will burn through its required reserves by next year, leaving the system $53.4 million in the hole for the 2026 to 2027 school year.
The mismanagement that landed SFUSD in this precarious position — which predates Wayne — is “almost criminal,” said Michael Fine, the chief executive officer of the Financial Crisis & Management Assistance Team, a state agency that helps school districts monitor their fiscal health and avoid crises. In a district plagued by budgetary inaction, “time has marched on” and its financial condition has grown more dire, he told Gazetteer SF.
Fine’s team helps distressed districts avoid state takeover, a process similar to a bankruptcy, which is formally known as receivership. The state commissioned the crisis team to analyze San Francisco Unified’s finances last year. In its April report, the team concluded the district was at a high risk of insolvency, leading to significant spending cuts by the district in June — but not enough to balance its budget.
What does a state takeover look like?
Takeovers are triggered when school districts have insufficient cash on hand to make payroll, and no borrowing options left to make up the deficit. San Francisco Unified isn’t insolvent yet, but it is well on its way.
Before the district goes totally broke, the state’s financial crisis team would first arrange a state loan, to cover the most pressing expenses. The superintendent would be dismissed, and while the Board of Education would remain in position, a state-appointed official would assume full policy-making control, with a priority on getting the loan repaid.
Out of the nine California school districts to fall into receivership in the past, only one of those processes went well, according to Fine: Emery Unified. The state appointed administrator was “very focused,” Fine said, moving the district through recovery in three years and full release from state responsibility in ten years. The process is typically much longer; Oakland’s district went into receivership in 2003, and still hasn’t fully emerged.
Especially at the beginning of receivership, kids and families pay the price for budget cuts that have to not only get the district back within its budgetary limits, but also to ensure it has enough left over to pay back the loan.
“Right now, San Francisco still has choices,” Fine said. The city’s Board of Education “can choose to lead, and lead the district out of this — or not.” But getting there will “take some very difficult decisions. The board needs to be prepared to make those decisions, and make them soon.”
How can San Francisco avoid a takeover?
The next critical date for the district is December 16, when it must report its cost-cutting progress to the state. Aside from the spending cuts implemented in June, which included layoffs and a hiring freeze, it’s not clear how much of the district’s cost-cutting plan hinged on the paused plan to close schools — and what the district will cut in lieu of the closures to get on track. But any plan will likely mean more layoffs.
In an emailed response to questions from Gazetteer SF, San Francisco Unified said that it plans to “take the steps necessary to align the amount we spend with the amount we receive.”
The district said it plans to cut $113 million next school year, and another $13 million the year after. “We have begun to already reduce positions in the current year in the central office,” it added.
What's next for the district?
At Breed’s press conference on Monday, Thurmond, the state superintendent, said San Francisco Unified will be the “premiere district in the state,” but offered few specifics about how they plan to achieve that. While he insisted that the state won’t take over the school district, he did offer some word salad about the possibility of the state getting more involved.
“Yes, it is true that when districts reach a level of financial challenge that there can be a way to have oversight of decision making, including the ability to rescind a decision that has been made if there is not compliance with making good financial decisions,” Thurmond said.
Liz Sanders, a spokesperson for the state Department of Education, said Thurmond’s confidence that there won't be a takeover is based on the fact that the state has already hired two financial monitors to work closely with the district on its finances — and to have veto power over any spending propositions, including hiring teachers.
Asked about the specifics lacking from Thurmond’s remarks, Sanders said that a more detailed plan would be “very premature,” and “not in the spirit of the way that we are all moving forward in partnership.” She also said the state Department of Education has confidence in the new interim superintendent “to find a functional and even thriving path forward” for the district.
Jennie Herriot-Hatfield, a parent of two kids attending a San Francisco public elementary school, remains unconvinced. (A former teacher, Herriot-Hatfield said she was speaking for herself, and not in her role as a board member of the San Francisco Parent Coalition, which has circulated a “State Takeover FAQ” for parents.)
“I found [Thurmond’s] comments to be the opposite of reassuring,” she said, while the press conference “felt like obfuscation.”
After all, the state very much does have the power to enact a takeover if SFUSD doesn’t balance its own budget quickly. The district, meanwhile, has a poor track record with finances, and little evidence it has a workable plan — or the political will — to move itself into the black.
Editor's note: This story was updated at 10:00 a.m. on Oct. 24, 2024 to correct the misspelling of Jennie Herriot-Hatfield’s name.
