Copyright Santa Rosa Press Democrat
All eyes are on Santa Rosa City Schools as the district faces a multimillion-dollar deficit and the growing threat of a state takeover. Falling into state receivership depends on the district’s cash balance — the amount of money it has on hand to cover monthly expenses, most of which go toward payroll. A new financial report presented Monday projects that balance will dip $2.8 million below what’s needed to make payroll by June 2026. The report, shared at a district finance subcommittee meeting, offers the first concrete figure showing how close the district is to insolvency. District financial leaders also confirmed that last spring’s sweeping school closures saved only $7 million — $5 million below the $12.5 million goal district leaders had set. $2.8 million due this year — and more ahead The $2.8 million cash gap adds to a broader savings goal of $10 million to $15 million district leaders announced in September. Monday’s report raised that high-end estimate even further: by the start of the 2026-27 fiscal year, the district is expected to face a deficit just under $16.4 million. The key difference between those figures, Interim Superintendent Lisa August explained, is timing. About $2.8 million needs to be saved as soon as possible to offset the negative cash balance expected in June. So far, the district has saved about $384,000 through voluntary concessions from managers and administrators. Talks with the teachers union could bring another $340,000 if roughly 800 Santa Rosa teachers agree to an additional furlough day this school year. Those negotiations remain ongoing. The district has also sought concessions from its classified union — which represents aides, custodians and office staff — but both sides declined to share details. Union President Mary Lehman said talks were “cancelled” after their first meeting Oct. 30. August said the $2.8 million target could shift as spending fluctuates. “That’s the number right now,” she said. “The budget is what we expect to spend, but that changes based on what we actually spend.” Overspending and special education costs An early look at the district’s first interim budget report shows overspending of about $4 million projected for this year, driven largely by special education contract costs. “I wanted to be able to show the county, the public that we will end the year better than where we started,” said Luz Cazares, the district’s interim finance chief. “That’s feeling a little harder now because we’ve taken this swing in the wrong direction and I recognize we’re not done yet. We’re still interrogating what’s happening in special education.” If the district is unable to make up the $2.8 million shortfall, it may tap its capital outlay fund, which is typically reserved for minimal facility improvements and mid-size projects like buying and installing portable classrooms on school sites. But that money must later be repaid from the general fund, adding to the $16.4 million deficit. The district cannot use its multimillion-dollar voter-approved fund to cover shortfalls or routine maintenance that could be delayed if it taps the capital outlay fund to avoid a takeover. If necessary, the Sonoma County Office of Education has said it would provide a loan, which also would need to be repaid. Layoffs and rebuilding reserves The largest share of the district’s $16.4 million savings goal will come from what August has called “inevitable” rank-and-file layoffs later this year. She said the cuts will affect not only school sites but also the district office, which her department is already working to restructure. The district is also trying to rebuild its reserves — supposed to hold about 3% of its total budget, or roughly $7 million — a fund it has largely depleted. Leaders have until December to outline how they’ll close the deficit and restore reserves. The board is expected to approve that plan in February, ahead of the March 15 deadline for employee layoff notices. “We really need $23 million by the end of next year in budget solutions,” August said. “That’s not only reductions, that’s looking at revenues and everything else.” Possible funding reallocation If the district fails to meet its $16 million savings goal and rebuild its reserves, it could face another cash crunch next school year — potentially running out of cash-on-hand even earlier than next spring. To help avoid that outcome, Cazares identified a few areas where the district could reduce or reallocate funding. Special education remains the district’s largest expense, and Cazares said the district is working to negotiate lower rates with partner agencies and schools that serve students with disabilities the district cannot support on its campuses. Restricted funds can only be used for specific programs or purposes, while unrestricted dollars can be spent more freely — typically on payroll and other operating expenses — and that’s where the district’s deficit lies. The county Office of Education has repeatedly criticized the district for failing to prioritize restricted funds first, issuing a public statement of concern in July. After-school programs are one example of where costs might be rebalanced. Those programs, funded mostly through two grants, still rely heavily on unrestricted dollars to keep facilities open after hours. “We can’t speak to the impact of programs yet because that’s what we’re still evaluating,” August said. The board is scheduled to revisit the budget reports and potential cost-saving measures at its next meeting, Nov. 12.
