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FCMAT warns small districts and some receivership districts face deepening fiscal stress
Summary
The Fiscal Crisis & Management Assistance Team told the Senate subcommittee that while many districts remain fiscally stable, declining enrollment, rising utility and insurance costs, and the end of one‑time federal funds are increasing the number of districts with qualified or negative certifications; some may require emergency loans.
The Fiscal Crisis & Management Assistance Team (FCMAT) told the Senate Budget Subcommittee No. 1 on Education on March 13 that most California school districts retain signs of fiscal strength but that the number of districts with qualified and negative budget certifications is rising, and that the pace of deterioration is accelerating in some places.
FCMAT chief executive officer Mike Fine said the problems are concentrated among small and “tiny” districts that lack staffing and scale to absorb enrollment drops, but also appear in medium and large urban districts coping with special costs. Fine said the agency is monitoring districts in receivership or with long‑standing fiscal problems, and that one district—Plumas Unified—may require a state emergency loan.
“We have several on that list. I would alert you, Senator, that one of those we do not believe will be able to recover sufficiently without the need for state intervention, with an emergency loan,” Fine said, noting this would be the first emergency loan since 2013. He did not request a specific appropriation at the hearing but said FCMAT and the California Department of Education are actively working with county superintendents and district leadership.
Drivers: declining enrollment, lower real COLAs and rising fixed costs
FCMAT described the principal drivers of pressure: steady post‑pandemic declines in enrollment, the expiration of federal one‑time resources that masked revenue loss, cost‑of‑living adjustments (COLAs) that can be lower than local fixed‑cost increases, and dramatic increases in utilities and insurance costs—Fine cited 200% increases in utilities and over 700% increases in liability insurance in some districts. He said local fund balances and cash remain generally high statewide, “but in some cases, Plumas is an example, they are significantly weakened.”
Receivership districts and local examples
Fine provided an update on several monitored districts: Inglewood has been making progress after prior intervention; Oakland Unified remains at risk despite nearing payoff of a state loan; Vallejo has paid its final loan payment but has not yet exited receivership because it has not closed internal control audit deficits; and South Monterey County has made steady progress.
Small, rural districts are particularly exposed to a loss of a handful of students because the revenue impact is proportionally greater. Fine said this pattern “is what we’ve been forecasting” and that the agency expects more small districts to show early warning signs in the coming months.
What might follow
Fine said the state should be prepared to provide tailored support, including intensive fiscal planning assistance from FCMAT, county office oversight, and—if necessary—emergency loans to preserve basic operations and payroll where local liquidity has been exhausted. County offices and the state have tools for monitoring and intervention; Fine flagged that one district has already been through a budget disapproval process and related state oversight actions.
