San Francisco Unified adopts third interim financial report after weeks of budget debate; trustees press for clearer markers to reach state standards

The San Francisco Board of Education on Tuesday adopted its third interim financial report, a staff presentation that updated the district’s multiyear budget outlook and outlined how administrators plan to implement more than $110 million in reductions to stabilize finances. The board voted to submit the report to the California Department of Education after an extended discussion about reserves, projected deficit spending and what the state will require for a positive fiscal certification.

District finance staff told the board the district’s forecast has improved compared with earlier reports but still projects ongoing deficit spending across the next several years unless additional steps are taken. “The reductions that are in the fiscal stabilization plan essentially cut deficit spending in half for next year,” Anne Marie Gordon, interim chief financial officer, said during the presentation. Staff said the district’s revised stabilization plan incorporates voluntary retirement incentives, position reductions and other non‑personnel savings and currently shows year‑end balances that are closer to meeting the state’s requirements than prior projections.

Why it matters: The third interim report is the district’s spring snapshot of revenues and expenses and is required by the state when a district has a qualified or negative certification. The report sets the financial baseline staff must use to prepare next year’s proposed budget and to show the state whether the district can meet its obligations in the current and two subsequent years.

Staff presented the fiscal picture in two parts: unrestricted general fund and restricted funding. In the unrestricted fund, local revenue adjustments and revised expenditure projections reduced the year‑end shortfall versus earlier forecasts; on the restricted side, staff said required changes to how routine maintenance and other time‑limited grants are budgeted explain much of the midyear swing. Mele Lau Smith, executive director of business services & strategy, and Gordon walked trustees through a revised multiyear projection that extends three years beyond the usual look‑ahead.

Board members and the district’s fiscal advisers pressed for more clarity about what the state will require for a positive fiscal certification beyond simply “balancing the numbers.” Elliot Duchan, the state fiscal adviser present at the meeting, said board members should consider a broader set of markers including stability of the finance team, a modernized fiscal system and elimination of outstanding audit exceptions. “There is more to it,” Duchan said, noting that the state looks at staffing stability, enterprise resource systems and audit findings as well as the budget itself.

Several trustees urged staff and the state advisers to put milestones in writing so the board, staff and the public know exactly what is expected before December. Vice President Healy asked for those markers to be documented and for the district to work with the state to identify specific, measurable criteria that will show progress toward solvency.

Next steps: Staff told the board they will incorporate updated information from the state budget “May revise” into the recommended 2025‑26 budget due for first reading in June. Staff also said they intend to continue dialogues with the fiscal advisers from the California Department of Education and to present a final proposed budget for trustee approval later in the summer. The board approved the third interim report by roll call vote.

The board’s vote does not by itself guarantee a positive state certification; Duchan and staff emphasized the district must continue executing on the stabilization plan and meet additional nonbudgetary criteria the state may review.