San Diego’s second-largest school district faces serious financial trouble

Sweetwater Union High officials project the school district’s financial reserves will run dry in about three years.

The county’s second-largest district is relying on reserves to balance its budget amid declining student enrollment and rising costs, mirroring several others here and across California. 

Sweetwater Union’s $824 million operating budget faces a roughly $200 million deficit, according to a recent financial report. Officials project sizable shortfalls in the following years, too.

Last month, board members unanimously approved the report, which projects covering the gaps by drawing down reserves to zero by the end of the 2028-29 school year if no other action is taken.

Roughly 34,000 students are enrolled at Sweetwater Union, down about 16% from a decade ago, state data shows. Enrollment is beginning to stabilize but is expected to fall below 30,000 by the 2028-29 year, said Jenny Salkeld, the district’s chief financial officer.

That would require Sweetwater Union to increase its reserves. Districts are required under state law to have a minimum reserve for economic uncertainty between 2% and 5% of their unrestricted expenses, depending on enrollment. 

“It’s an immediate impact to the district,” Salkeld said during a board meeting last month.

The district has increased its deficit spending since its first interim financial report, from $50 million to $67 million in the upcoming school year and $71 million the following year. That comes after the board approved salary raises for employees in January. 

California’s own budget shortfall is also impacting school budgets, with state officials withholding millions of dollars and suspending some money toward its rainy day fund as part of their deficit solutions, Salkeld said.

Gov. Gavin Newsom’s recent proposal also decreases the cost of living adjustment, meaning less revenue for school districts.

Saving for declining student enrollment has made a significant difference, Sweetwater Union board President Arturo Solis said during the meeting.

“We’re not as strapped as some of the other districts are … now hopefully things get better,” he said. 

The district has continued to file positive budget certifications. But if nothing changes, the district could have a qualified budget in the coming months, meaning it may not be able to meet financial obligations in the current or subsequent two years. 

That would trigger increased oversight from the county Office of Education and, if unresolved, state intervention — a process that puts the district’s superintendent and chief business officer out of a job and shifts decision-making power away from the school board until a financial overseer decides otherwise.

“That can be hard on a community,” said Michael Simonson, deputy superintendent and chief business officer for the region’s Office of Education, in an interview. 

This year, Bonsall Unified approved a qualified budget certification. The San Ysidro school district approved a negative budget certification. 

Pandemic-era funding masked the urgency for school districts to right size, but all K-12 public school boards in the county with a budget deficit have committed to making budget reductions, Simonson said. 

Declining reserves are one thing, but depleting them is problematic, Michael Fine, CEO of the Fiscal Crisis and Management Assistance Team, told inewsource. Sweetwater Union staff is being responsible by pointing out the potential 2028-29 conditions because it is just a few months away from being officially included in the multiyear forecast, he said. 

“The district has time to correct that trajectory,” Fine said. 

District leaders at Sweetwater Union will revisit the budget in June.