SFUSD board adopts qualified first‑interim budget and creates $111M reserve after heated public comment

The San Francisco Board of Education voted on Tuesday night to adopt a qualified first‑interim budget certification for fiscal year 2025–26 and to establish Fund 17, a board‑controlled reserve set at 8 percent of general fund expenditures (about $111.5 million). The decisions followed more than an hour of public comment in which parents, teachers, principals and students urged the board not to cut school social workers, counselors and other student supports while moving large sums into a restricted reserve.

The board’s chief financial team told members the district’s unaudited beginning fund balance for 2025–26 is larger than earlier estimates but that the unrestricted general fund still faces a possible $51 million deficit this year if departments spend all amounts budgeted. Deputy Superintendent Chris Malbenites said the reserve proposal would convert prior‑year fund balance into Fund 17 “to provide transparency” about available savings and to leave a board‑level source of funds the board could authorize only for emergencies or to cover projected deficits.

The timing and amount drew repeated criticism from public commenters and several board members. “Moving $111,000,000 out of the general fund — the fund that supports teachers, counselors, paras and school site budgets — will impact students,” said Allen Tello, a senior who spoke during public comment. Parents, union leaders and school staff described recent tragedies and daily crisis work handled by wellness teams and social workers and asked how the district would maintain supports if those positions are cut.

Superintendent Dr. Hsu and finance staff said Fund 17 would be created from existing one‑time fund balance and would not automatically be spent; they emphasized that recommended staffing reductions to balance the unrestricted budget are a separate action in the district’s fiscal stabilization plan, which staff will bring back for board adoption. Staff recommended the board issue a qualified certification — meaning the district may or may not be able to meet all obligations for the current and next two years without additional actions — and to adopt the reserve policy and fund creation to show fiscal discipline to state authorities.

After extended debate, the board first adopted the First Interim report with a proposed qualified certification (recorded vote: 6 ayes, 0 nays in roll call). The board then voted on the Fund 17 resolution and fiscal reserve policy as a separate item; the motion passed 5–2. Supporters said the reserve creates a cleaner, more transparent place to track the district’s savings and to protect the district from cash‑flow shocks such as state apportionment deferrals; opponents said the magnitude and timing of the transfer demand more community engagement and clarity about trade‑offs for school staffing.

The board and staff stressed that the reserve does not itself identify programmatic cuts or restorations. Deputy Superintendent Malbenites said the reserve is intended as a safety net to cover deficits and emergencies, while the district’s fiscal stabilization plan — also required under state law and scheduled for board consideration on Dec. 16 — will outline proposed reductions and other balancing measures for the unrestricted fund.

The board’s action makes this interim certification a qualified one rather than negative, an improvement the district’s finance team highlighted in its presentation. Staff also noted that the multi‑year projection assumes revenue growth in later years but does not yet include any additional raises beyond those already ratified in one bargaining agreement the board approved earlier in the meeting.

What happens next: staff will post the mandatory SACS forms to the state by the reporting deadline and return on Dec. 16 with a draft fiscal stabilization plan that lays out the district’s chosen combination of cuts, one‑time savings and other actions to balance the unrestricted budget in coming years.