Oversight hailed in rejection of Sacramento school budget

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The rejection of the Sacramento City Unified School District budget due to concerns about declining reserves is a sign of California’s strong education oversight, according to Moody’s Investors Service.

In a Thursday report, the rating agency called the decision a credit positive for the sector even though the district’s declining reserves are a credit negative.

The Sacramento County Office of Education, which has fiscal oversight of local school district, rejected the city school district budget for 2018 - 2019 on Sept. 6 because of projected deficit spending.

“The COE intervention serves as an example of California's strong fiscal oversight of K-12 public schools, a credit positive for the sector,” Moody’s analysts said.

The city school district board approved its $555.3 million budget in June, acknowledging that it was in dire financial straits with a $24.3 million deficit that it planned to cover with reserves.

“The district is forced to dip into its reserves to cover expenses,” school Superintendent Jorge Aguilar said in a June press release.

He commissioned an independent budget review, stating “it is clear to me that our district faces significant fiscal challenges.”

The district cited rising pension and health care costs as some of the significant cost increases it is grappling with. It has taken measures including cutting a summer learning program, implementing a hiring freeze and making cuts to its administrative offices.

The county Office of Education has assigned a fiscal advisor to assist the district in revising its budget and given it until Oct. 8 to submit it, according to the Moody’s report. Otherwise a budget review committee of outside experts could be called in to craft the budget.

The county office could also take the step of assigning the fiscal advisor day-to-day authority of the district’s finances.

The district plans to present its revised budget to the board Oct. 4.

The district in California's state capital serves 43,024 students on 77 campuses in a 70-square-mile area.

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