Sac City Unified faces fiscal insolvency, state receivership again. What happened?

The Sacramento City Unified School District is navigating poor financial waters for the second time in less than a decade.

The district was on the brink of insolvency in 2018 and facing the threat of state receivership. But Sac City Unified is again facing the possibility of running out of money as it works to close an estimated $43 million budget shortfall for the current fiscal year.

The district has implemented a fiscal solvency plan to cut costs, but the deficit projects show the gap increasing to more than $100 million by the 2027-28 school year.

Jennah Pendleton is an Education Reporter for The Sacramento Bee. She spoke with Insight Host Vicki Gonzalez about how the district found itself again risking a state takeover.

Sac City Unified was invited to join Insight, but the district declined.

This interview has been edited for length and clarity.

Interview highlights

Did these budget issues come out of nowhere? Were district officials surprised to be $43 million in the red?

In a way, it came as a surprise because there were these expenses that came in at the end of the 2024-2025 school year. These were unexpected payroll expenses, paying for third-party contracts that came in at an amount way more than was budgeted for.

There were talks at the beginning of 2025 about possible shortcomings due to economic uncertainties, and there was always the risk of what was going to happen with federal funds with Trump's administration coming in. But it really came to a head in the fall when the chief business officer revealed that not only were there these unexpected costs — that came in the amount of about $43 million — but there was also going to be a shortfall and that the district was not projected to be able to make its state-required reserves by the end of the school year. [This] which would mean state receivership, it would mean fiscal insolvency.

Remind us why state receivership is bad for a school district?

State receivership is really rare, only about 10 districts in California have ever had to do it. Basically the state bails the district out, but in exchange the district loses control of its finances and incurs extra expenses by paying off the loan. They are also subject to much more rigorous county and state oversight. It's not a good situation for anyone — most of the districts that have gone into receivership are still in receivership — and they have to meet more than 150 standards set by a state agency.

There's an element of… these children are paying for the mistakes of leaders past, possibly from decisions that were made before they were born. 

The district was in a similar situation back in 2018. How was Sac City Unified’s budget health over the last couple of years? Were they solvent?

My understanding is that most of the issues that were present in 2018 —  when the state agency looked at Sac City's budget and said, “there are a lot of problems here, and you're at high risk of insolvency” — those issues have actually not been resolved, but covered up because the district received state funds from COVID era grants, one-time funding that could cover up poor spending practices. 

What are some of the solutions that the district is coming up with to try and stay solvent? 

They've made a lot of cuts. One of the most impactful cuts so far is the elimination of about 70 administrative roles. This is something that the teachers association really pushed for. In essence they are going back to the number of administrators before COVID, however a lot of these roles may not be classroom roles but student support roles… arguably essential services within the district.

Also, we're going to see a 30% supply cut across the board, in every department except for custodial. It's one of those things where everybody is using the phrase, “keep the cuts as far away from the classroom as possible,” which is a lofty goal. But that doesn't mean that kids won't be affected. There will be a loss of programs, fewer supplies, fewer people. 

One of the points that the United Professional Educators — the union that represents administrators — [is] making is that with the loss of these administrative roles, that's going to push more on site administrators. They will have to pick up those responsibilities in addition to their daily [ones.]

After these current cuts that are being proposed, does that get the district to solvency? Or do they still have a gap to close?

There's still a large budget gap, a number of things have to happen to become solvent. Cutting spending in a lot of ways, not just on supplies, is going to be a big piece of it. The district has had an issue with spending money on contracts that are unauthorized by the board. A lot of these contracts are related to special education. 

The reason that they are unauthorized by the board is because they are for services that are written into kids’ special education plans that legally need to be provided. They're often expensive, and the district staff's reasoning for going ahead with these contracts is that it's more of a liability to not fulfill these services for students because it makes them subject to lawsuits. 

District leaders have been very careful to not put the blame on students with disabilities or their families. But, there is this sense of needing to get under control staffing of special education because the district largely relies on third-party contractors to fulfill duties that should go to staff… but those positions are vacant right now. 

The projections of this shortfall show it’s going to get worse. It could reach over $100 million dollars in the 2027-2028 school year. How is the district discussing long-term fiscal solvency? 

There's this deadline, so to speak, of June 2026. I think it's gone up to about $52 million dollars [that] they need to save to be fiscally solvent and to meet their state-required reserves. There's a big focus on the right now, the immediate moves to remain fiscally solvent. 

In the years to come, I think that's when we're going to have even more somber conversations because it may bring about something like school consolidations and closures. Sac City Unified has lost about 10,000 students in the last decade, but has the same number of schools. It may be the smart thing to do, but school closures can be devastating for communities and affect the kids who are enrolled in those schools.

These are far from easy decisions, and the school board meetings have been pretty heated with many different views on what happened and how to move forward. What stands out to you? 

There's definitely been increased tension. There was this seeming harmony between board members and with the superintendent, but now you're kind of seeing some of those cracks come through in a time of scarcity. The biggest thing I've noticed is that board members are really frustrated with district staff, and they don't think that their direction is reaching the people who are making these decisions.