Facts on SFUSD's Budget

SFUSD’s Reserves  Link to this section

SFUSD has two reserves:

1) A Board-Established Reserve (approximately 8% or $111 million) that was created by the Board of Education as a best-practice safeguard and to prevent against going back into negative certification. 

• Designed to protect classrooms from sudden cuts, respond to unforeseen emergencies, and ensure employee benefits and obligations are paid in a crisis.
• This reserve is a core component of responsible fiscal management, particularly as SFUSD works to exit state oversight.

2) We also have a State-Mandated Reserve (2% of the general fund or approximately $28 million) that is required by the State of California and can only be accessed for insolvency or bankruptcy where the District needs to pay outstanding bills. These funds are never available for salaries, programs, or ongoing operations. 

Some have said that the state does not require more than 2% reserves. That’s both true and completely misleading. The state does require 2% reserves for a catastrophic emergency so that payments can be made as the District winds down. The state ALSO recommends a 17% reserve as best practice to protect against unforeseen emergencies. SFUSD’s current Board-established reserve, while a step in the right direction, is still far below the State recommendations.

Bottom line:
SFUSD’s reserves are not a hidden surplus. Responsible stewardship means protecting classrooms today while avoiding decisions that would create deeper cuts and instability tomorrow.

Where the $429 Million “Reserve” Figure Comes From – and Why it’s Wrong Link to this section

There is a claim that SFUSD has a $429 million “reserve”: this is incorrect. This number does not represent money sitting untouched or available for new ongoing spending. Instead, it reflects a misunderstanding of something called fund balance.

What is Fund Balance?

Fund balance is what remains at the end of a fiscal year when a budgeted plan does not perfectly match actual spending. This is common across local governments because a budget is a projection for the year. The City and County of San Francisco, for example, has a fund balance every year for the same reason.

Fund balance is not revenue – it is one-time money, not an ongoing revenue source like property taxes or state education funding.

It exists at a specific moment in time and cannot be relied on year after year. Once it is spent, it is gone.

How SFUSD is Using These One-Time Dollars

SFUSD is using available one-time fund balance responsibly to:

• Plug the District’s structural deficit so we can not be in negative certification (i.e. remain under state oversight)
• Prevent deeper, immediate cuts to classrooms
• Avoid additional layoffs of educators and staff
• Stabilize the District as it works toward long-term fiscal sustainability

This is precisely what best fiscal practice calls for: using one-time dollars for one-time needs, including budget stabilization.

Why Not Use This for Wage Increases?

Wage increases are an ongoing cost. They exist year over year. You need a permanent plan to fund them, not a temporary one. This would be like buying a house because you have a down payment, but you have no idea how you are going to pay the mortgage next month. 

Using one-time fund balance for permanent raises creates a funding cliff. Once the one-time money runs out, the District would be forced to make even deeper cuts to classrooms and lay off more staff to cover the ongoing cost.

Also, half of this $429 million is actually restricted funds – it’s dedicated funds for very specific uses like Title X or PEEF funding. This means it cannot be used for across the board spending like wages anyway.  

Bottom Line

The $429 million figure reflects fund balance, not reserves. Those dollars are already being budgeted to prevent further damage to schools and students. 

Redirecting them to ongoing expenses like raises would destabilize the District and result in worse outcomes for both students and educators.

Why Not Account for the Expected Fund Balance in Budgeting Projections?

A common question is: If the District sometimes ends the year with fund balance, why not simply budget for more spending upfront and count on those dollars?

The answer is straightforward: that would be a major problem and highly irresponsible.

Budgets must be balanced. By law and by basic standards of good governance, SFUSD must adopt a balanced budget, meaning planned spending cannot exceed reliable, ongoing revenues.

Intentionally budgeting to spend money the District does not actually have would create an unbalanced budget, which is not allowed. 

Fund balance is not guaranteed. Some years, there is fund balance. Some years, there is not.

If the District plans to spend more than it takes in, it can very easily end the year in a deficit. That is exactly how districts end up in fiscal crisis.

What happens when you spend more than you have?

• Emergency mid-year cuts
• Layoffs of teachers and staff
• Program eliminations
• Instability for students and families

These are the outcomes SFUSD is actively trying to avoid.

Recent Budget Cuts and Progress Towards Fiscal Stabilization Link to this section

SFUSD continues to experience a structural deficit, meaning the district repeatedly plans to spend more money than it brings in. Currently the California Department of Education (CDE) can step in and overrule any financial decision that could put the district at risk, including salary increases that the district cannot afford.

Over the last year, SFUSD has made real progress toward stabilizing its finances. Last year, the district cut $114 million from the budget including the major reductions to its central office. For this fiscal year, the district faces another $102 million deficit that could force further cuts, including $51 million in unrestricted general funds, potentially including staffing reductions, reduced central office operations, professional development support for educators under consideration for this June.

The district’s goal is to reach a sustainable agreement that supports our educators and keeps a stable learning environment for students. Previously, SFUSD has given UESF historic raises. In 2023, UESF came to an agreement with SFUSD leadership to receive a significant raise during what was a very difficult budget. The raise was $9,000 for every educator, and then a 5% increase on top of that. These were on top of a 6% raise they received in 2022, just the year before.

Any raises above the current proposals from the District will force further cuts at school sites that will impact the District’s ability to serve all of its students long-term.