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SFUSD adopts qualified second-interim report and a fiscal-stabilization plan after staff lay out multi-year deficits
Summary
District staff presented a second-interim report showing improvement on the unrestricted side but growing restricted-side deficits projected to reach roughly $126 million by 2028–29; the board adopted a qualified certification and a two-page fiscal-stabilization plan including staff-alignment, central-office reductions and targeted special-ed contract conversions.
San Francisco Unified School District staff presented and the board approved the district’s second-interim fiscal report for 2025–26, certifying the district’s condition as "qualified" and laying out a fiscal stabilization plan (FSP) intended to bring multiyear budgets back into balance.
Deputy superintendent and finance staff told the board that the presentation’s key change since first interim was moving eligible expenses to restricted funds to relieve immediate pressure on the unrestricted general fund. Staff said that shift improved unrestricted projections but produced larger deficits on the restricted side: restricted deficits are projected at $44.5 million for the current year, rising to about $67 million in 2026–27, ~$96 million in 2027–28 and roughly $126 million in 2028–29 under current assumptions.
Staff noted the district’s OPEB (other postemployment benefits) liability remains unfunded and costs between $35–40 million per year. Staff also highlighted a decline in unduplicated pupil percentage (students qualifying as low-income, foster, homeless or English learners), which reduces revenue tied to those pupils. The presentation included updated multi-year projections accounting for the tentative agreements the board approved earlier in the meeting.
The district proposed a multi-part FSP: align staff with projected enrollment (position-control reconciliation and vacancy savings), central-office reductions (contract and staff reductions estimated to save roughly $15.26 million), and re-aligning special-education resources by onboarding contractors into vacant permanent positions to reduce reliance on high-cost contracts (preliminary 2027–28 savings target of about $6 million). Staff emphasized these are initial measures and more actions will be required at budget adoption.
Commissioners pressed staff on enrollment and average daily attendance trends, contract monitoring, the assumptions behind the savings estimates, and the degree to which the district is ‘‘over-budgeting’’ for contracts and supplies. Staff acknowledged ongoing work to reconcile contracting and procurement and said additional FSP measures will follow at budget adoption; they emphasized that unrestricted fund balances must remain nonnegative to avoid state receivership.
After discussion the board approved the second-interim report and FSP by roll call (7 yes). Staff said they will continue multi-year modeling and present more detailed proposals at third interim and at budget adoption.
The approval establishes a qualified certification and requires the district to implement FSP steps and to report back to the board as it finalizes the 2026–27 budget.
