Figure 1
The State Has Established a Negotiation Process for Public School Employers and Labor Unions
Figure 1 is has three sections. The first section describes initial negotiations between the employer and the labor union. In this phase, the parties present initial proposals. If the parties cannot reach an agreement, they are at impasse and move to the next phase. The second phase is mediation. In mediation, the Public Employment Relations Board appoints a mediator to assist the parties. If the mediator is unable to effect a settlement and declares that fact-finding is appropriate, either party may request fact-finding. The third phase is fact-finding where Employment Relations appoints a neutral fact-finder. The fact-finder considers multiple criteria and recommends the terms of a settlement. If the parties can still not reach an agreement after fact-finding, they reach a final impasse. After final impasse, the employer can impose an agreement and the labor union can strike.
Figure 2
Sacramento Unified Has Consistently Spent More Than It Received in Revenue Since Fiscal Year 2016–17
Figure 2 is a line chart showing the differences between expenditures and revenues for Sacramento Unified from fiscal year 2013-14 to fiscal year 2021-22. In fiscal years 2013-14 through 2015-16, revenue exceeded expenditures. Beginning in fiscal year 2016-17 through 2021-22, expenditures exceeded revenue with expenditures exceeding revenue by $9 million in fiscal year 2018-19 and by $25.9 million in fiscal year 2016-17. Fiscal years 2019-20 through 2021-22 are projections.
Figure 3
Most of Sacramento Unified’s Total Budgeted General Fund Expenditures for Fiscal Year 2019–20 Are for Salaries and Benefits
Figure 3 show the categories of spending and their percentage of budgeted total spending for Sacramento Unified in fiscal year 2019-20. 38 percent of expenditures are for certificated salaries. 31 percent are for employee benefits. 11 percent are for classified salaries. Combined, salaries and benefits total 80 percent of budgeted expenditures. The remaining expenditures are 13 percent for contracts, services, and other operating expenditures and 7 percent for other expenses, which includes books, supplies, and capital outlay).
Figure 4
Sacramento Unified Is Close to Insolvency
Figure 4 is a timeline of key events leading to Sacramento Unified’s financial condition. The first entry states that Sacramento Unified's ongoing spending exceeded its ongoing revenue and occurred since fiscal year 2016-17. The second entry states that on June 28, 2018, Sacramento Unified submitted a budget requiring it to make $62.5 million in unspecified reductions from 2019 through 2021 to meet its financial obligations. The third entry states that on August 22, 2018 The county office superintendent disapproved Sacramento Unified's budget because it projected it would not meet its financial obligations in the near term and appointed a fiscal adviser to the district. A fiscal adviser represents the county superintendent and acts on behalf of the county office. The fourth entry states that on October 4, 2018, Sacramento Unified submitted a revised budget projecting shortfalls in fiscal years 2019–20 and 2020–21. The fifth entry states that on October 11, 2018, The county office superintendent disapproved the district's revised budget because it projected it would not meet its financial obligations in the near term. The sixth entry states that on October 18, 2018, Sacramento Unified waived its right to form a budget review committee, and the county office superintendent gained stay-and-rescind authority. The county and state superintendents must agree to the waiver, after which the county superintendent gains the duties and responsibilities of the budget review committee. A budget review committee helps a district develop a balanced budget and reviews the district’s fiscal policies. Stay-and-rescind authority allows a county office superintendent to veto any action that would worsen a district’s financial position. The seventh entry states that on June 20, 2019, Sacramento Unified submitted a budget requiring $26 million in ongoing reductions from 2020 through 2022 to remain solvent. The eighth entry states that on September 11, 2019, The county office superintendent disapproved the district's budget because it projected it would not meet its financial obligations in the near term. The ninth entry states that on October 3, 2019, Sacramento Unified submitted a revised budget requiring $27 million in ongoing reductions, which the county office superintendent disapproved. The tenth entry states that Sacramento Unified projects to run out of funds in October 2021 and may request assistance from the State. If a district accepts a loan exceeding 200 percent of its required reserve amount, it loses administrative control.
Figure 5
Example of the Change to the Salary Schedule Under the 2017 Labor Agreement
Figure 5 shows that a teacher with a BA and 60 semester units of education would be paid $55,841 under the former salary schedule and would be paid $65,039 under the new salary schedule.
Figure 6
Sacramento Unified’s Available General Fund Balance Has Declined Since Fiscal Year 2016–17
Figure 6 shows that from fiscal year 2013-14 to 2015-16, Sacramento Unified’s general fund balance as a percentage of its total expenditures was increasing. Beginning in fiscal year 2016-17, the district’s general fund balance as a percentage of total expenditures has declined each year. As the balance declines, it approaches the required reserve amount, which is 2 percent of total expenditures. Based on Sacramento Unified’s projections, the chart shows that the district will reach insolvency during fiscal year 2021-22.
Figure 7
Sacramento Unified’s Retiree Health Benefit Liability Grew in Fiscal Year 2017–18 in Part, Because of Its Limited Contributions Toward Retiree Health Benefits
Figure 7 shows that in fiscal year 2017-18, the district contributed $33,078,830 towards retiree health benefit costs. However, the district’s total retiree benefit cost, which is the amount the district needs to contribute to fund benefits over time was $41,814,704, a gap of $8,735,874.
Figure 8
From Fiscal Years 2013–14 Through 2019–20, Sacramento Unified’s General Fund Spending for Special Education Is Projected to Almost Double
(in millions)
Figure 8 shows that the district’s general fund spending for special education has increased by $43.5 million from fiscal year 2013-14 to fiscal year 2019-20. In fiscal year 2013-14, the district received $39.1 million in funds for special education and used $46.1 million of its general fund for special education. In fiscal year 2014-15, the district received $39.4 million in funds for special education and used $51.5 million of its general fund for special education. In fiscal year 2015-16, the district received $38.5 million in funds for special education and used $63.6 million of its general fund for special education. In fiscal year 2017-18, the district received $38.7 million in funds for special education and used $71.9 million of its general fund for special education. In fiscal year 2018-19, the district received $37.1 million in funds for special education and used $84.4 million of its general fund for special education. In fiscal year 2019-20, the district projects to receive $39.7 million in funds for special education and use $89.6 million of its general fund for special education.
Figure 9
Sacramento Unified’s Recommended Expenditure Reductions May Not Be Sufficient to Prevent Insolvency in Future Years
Figure 9 shows a financial forecast for fiscal years 2018-19 through 2021-22 including the impact of district recommended expenditure reductions. In fiscal year 2018-19, revenue slightly exceeds expenditures. In fiscal year 2019-20, expenditures exceed revenue. In fiscal year 2020-21, the district recommends a $16 million reduction in expenditures but still projects expenditures to exceed revenues. In fiscal year 2021-22, the district recommends an $11 million reduction in expenditures, which results in revenue slightly exceeding expenditures. We projected fiscal year 2022-23 and show that despite the district’s reductions, it expenditures will likely exceed revenues by $5.62 million that year.
Figure 10
Sacramento Unified Has Options for Avoiding Insolvency
Figure 10 presents options to avoid insolvency in three categories. The information represents potential savings based on available district documentation. The first category is potential changes to salaries. We show that cutting all salaries by 2 percent would result in $6,854,000 in potential savings. Cutting only teacher salaries by 2 percent would result in $4,704,000 in potential savings. Cutting only classified salaries by 2 percent would result in $1,361,000 in potential savings. Cutting only administrator salaries by 2 percent would result in $789,000 in potential savings. The second main category is potential changes to retiree health benefits. Having teachers pay 3.5 percent of their salary toward retiree health benefits with the district making a corresponding reduction in its contribution would result in $7,064,000 in potential savings. Having all staff pay 3.5 percent of their salary toward retiree health benefits with the district making a corresponding reduction in its contribution would result in $9,997,000 in potential savings. The third main category is potential changes to health care benefits. If the district capped its payment to its teachers’ health care benefits at the lowest-cost plan for employee-only and family plans, the potential savings would be $7,867,000. If the district capped its payment to its teachers’ health care benefits at the lowest-cost plan for employee-only plans and 75 percent for family plans, the potential savings would be $15,682,000. If the district capped its payment to for all employees’ health care benefits at 90 percent of the lowest-cost plan for employee-only and family plans, the potential savings would be $14,078,000. If the district capped its payment to for all employees’ health care benefits at 80 percent of the lowest-cost plan for employee-only and family plans, the potential savings would be $20,419,000.