Santa Rosa City Schools staff warn of multimillion-dollar shortfall, outline rapid and longer-term fixes

Santa Rosa City Schools finance staff told the board’s finance subcommittee on Nov. 3 that the district faces a multimillion-dollar cash shortfall and outlined a mix of near‑term tactics and longer‑term revenue options to stabilize finances.

Staff said updated cash‑flow projections show the district could end June 2026 about $3 million in the red under current assumptions, and an alternative ‘‘do‑nothing’’ projection on an attachment showed a potential negative ending cash balance near $16.2 million. The presenter said the team will first show the problem and then present specific solutions to the board.

Why it matters: the district’s unrestricted ending fund balance has deteriorated since the adopted budget. Staff reported the adopted‑budget ending fund balance of about $11 million (before the district’s 3% reserve, roughly $7 million) has moved to a projected negative of about $15.2 million before reserves. That deterioration, officials said, makes near‑term cash management and clearer multi‑year planning urgent.

What staff proposed: staff described three broad “buckets” of solutions. First, maximize restricted resources by identifying roughly $15 million in prior‑year restricted fund balance and, where legally permitted, shift eligible expenditures into those restricted accounts or hold posting of budgets so managers cannot spend the dollars this year. Second, implement personnel measures including hiring freezes, reduced supplemental pay (stipends and overtime), tighter school‑site staffing and targeted restructuring of district‑office roles. Third, pursue multi‑year revenue actions such as a parcel tax, sale of surplus property and a standing committee to plan longer‑term measures.

Staff also said Fund 40 (special reserve for capital outlay) is a near‑term source that could provide about $5 million at June 2026 but cautioned that using that money is temporary and must be repaid. "If we pull from Fund 40, that's money that we have to put back again," the staff member said, warning of painful trade‑offs.

Program‑level pressure: special education was repeatedly cited as a major driver of increased spending. Staff announced a forthcoming information item (Nov. 12) that will summarize contracts with nonpublic agencies (NPA) and nonpublic schools (NPS) and said the district will post that summary monthly at board meetings to improve transparency.

Other specifics: staff said after‑school apportionments and grants (ELOP and ACES) and arts/music funds under Proposition 28 will be reviewed to see whether some unrestricted costs can be shifted to restricted dollars where rules permit. Staff estimated ELOP‑related expenditures around $6.3 million and ACES at about $1.4 million and said they will work with auditors and follow California Department of Education guidance on restrictions.

Oversight and next steps: staff described ongoing external support from School Services of California and FCMAT, which will conduct an on‑site fiscal health analysis in December with a report aimed for the January board meeting. Staff said the county office of education has oversight authority and is unlikely to treat borrowing as routine; county staff told district staff that solving the problem is the district’s responsibility and will document that position in writing.

The finance subcommittee did not take formal votes on these items; the presentation will inform decisions at upcoming board meetings and the first interim report. The committee recessed to closed session and reconvened with no reportable action before adjourning.