The Sacramento City Unified School District sign outside of the Serna Center on Thursday, Feb. 5, 2026.
JOSÉ LUIS VILLEGAS
jvillegas@sacbee.com
Sacramento City Unified School District’s superintendent on Thursday called the county office-appointed fiscal adviser’s concerns about the district’s new budget plan “unfounded,” days after the adviser said she would only reinstate a teachers’ agreement if the district showed it could stay solvent.
The latest exchange puts two questions at the center of Sacramento City Unified’s fiscal crisis — whether its budget plan is realistic, and whether the rescinded teachers’ agreement can be reinstated as the district confronts a roughly $222 million structural deficit.
“Your ‘grave concerns’ are unfounded,” Cancy McArn, SCUSD’s superintendent, wrote in a letter sent Thursday to fiscal adviser Luz Cázares that was reviewed by The Sacramento Bee.
At its Sept. 17 meeting, the board approved a revised 2026-27 budget, and the district presented an updated multi-year projection that assumes about $31 million in student-support grant funding received this year will continue as ongoing revenue, along with about $23 million in Proposition 98 settle-up funds in each of the 2027-28 and 2028-29 school years.
In Thursday’s letter, McArn reiterated the district’s position that the grant assumption was supported by five years of funding trends, while the district’s projections counted only one-third of the anticipated Prop. 98 settle-up funding.
McArn disputed Cázares’ warning on Sept. 23 that the district’s cash flow and ability to make payroll could be significantly affected if its “highly questionable” funding assumptions did not come through, saying the 2027-28 funding projections would not affect its ability to make payroll in the current fiscal year.
The disagreement over the revenue assumptions comes as analysts from the California Legislative Analyst’s Office and the state-funded Fiscal Crisis and Management Assistance Team have questioned them, while SCUSD’s chief business officer has acknowledged the projection carries risks.
“Your observations, questions, and reminders appear to be a further effort to delay any actual reconsideration of your rescission of the MOU,” McArn said, adding that the fiscal adviser’s July decision to rescind the teachers’ agreement worsens the district’s financial position.
SCUSD views the agreement as a bridge to longer-term solutions, projecting it would provide $97.6 million in relief over three years and help meet its near-term cash needs.
McArn said Cázares set three conditions for reconsidering her decision to rescind the memorandum of understanding: adopting ongoing measures to address the structural deficit, using one-time measures to restore the ending fund balance and projecting positive cash flow through this year and next.
“We understand that you are closely examining the information that we have provided to you,” McArn continued. “When you do, we believe you will see that we have a viable plan that meets the three criteria you laid out on September 1, 2026.”
Xanthi Soriano, a spokesperson for the Sacramento County Office of Education, said the office had received the letter and was reviewing it.
District addresses adviser’s other fiscal concerns
McArn’s letter also addressed Cázares’ concerns about special education spending and her questions about a planned $9 million transfer omitted from the district’s unaudited year-end report.
Cázares had questioned the district’s slower projected growth in special-education spending, calling the 2.4% increase “significantly out of line with recent increases” compared with 11.1% increase last year and 13.7% the year before.
“We are confident that stronger internal oversight and newly implemented safeguards will enable us to keep special education expenditures more closely aligned with the approved budget than in prior years,” McArn wrote.
As for a planned $9 million transfer, McArn reiterated the chief business officer thought it had already been completed, then initiated it after learning it was still pending.
“The matter will be completed in October in accordance with the law,” the district superintendent added.
McArn rebutted the fiscal adviser’s description of the district’s $20.6 million reimbursement entry as an “egregious error” for showing the funds as received July 1, even though they arrived in August. The reimbursement was part of the rescinded MOU’s plan to use about $68 million from the district’s CalPERS-administered retiree health trust to cover retiree health costs over three years.
McArn explained SCUSD counted the money in its 2025-26 finances because it reimbursed retiree health costs from that year, noting that CalPERS also treated the payment as made by June 30.
“It is not an ‘egregious error.’ It is recorded in two previous months. It does not affect the calculation at all,” McArn said.
“As stated repeatedly, the District has a plan to make further and deeper cuts than we previously made,” McArn continued. “We are committed to and will continue to do the hard work to make these cuts and identify further cuts.”
Jasjit Singh, a SCUSD trustee, credited the Sacramento City Teachers Association and other labor groups with helping secure cash-flow relief amid the district’s fiscal crisis and laying the groundwork for long-term savings on health benefits.
“That is the kind of collaboration our district needs right now, and we have consistently extended that same opportunity to SCOE and the fiscal advisor,” Singh said.
“We will work with anyone ready to strengthen these solutions and keep our focus where it belongs — on students, staff and the long-term stability of our schools.”
In August, former SCOE Superintendent David Gordon sent state Superintendent Tony Thurmond a detailed account of the county office’s support for the district amid its fiscal distress, including regular meetings with district leaders, budget reviews, cash-flow monitoring and help developing fiscal recovery plans over the past year.
“The issue is not simply whether the district can get through the next few months, but whether it can remain financially viable in the years ahead,” Gordon wrote then.
The terms of collaboration
As tensions between the district and county office continue to mount, McArn declined SCOE’s invitation for the district’s CBO and other finance staff to join weekly meetings to work on budget solutions.
“Our staff should be focused on running our schools, and all of us should be focused on solutions that move Sacramento City Unified forward.”
This story was originally published October 1, 2026 at 11:53 AM.
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Chaewon Chung is an education reporter for The Sacramento Bee. She has previously covered climate and environmental issues, focusing on energy and water. Before joining The Bee, she worked as a climate and environment reporter at the Winston-Salem Journal in North Carolina.