San Francisco Unified School District (SFUSD) logo. (Photo courtesy of the San Francisco Unified School District)

The California Department of Education downgraded its evaluation of the San Francisco Unified School District’s budget on concerns that the district won’t be able to pay its bills in the next two fiscal years, district officials said.

The district, which educates more than 50,000 students, said it received notice Friday that the state cut its certification of the most recent financial report from “qualified” to “negative.”

“This means that the CDE is concerned the district will not meet all of its financial obligations over the next two fiscal years,” the district said in a press release

The negative certification means that state fiscal experts, appointed in 2022 to support the district, “will move to fiscal advisor status and can directly engage in any district operation deemed counter to fiscal stability,” the district said.

The negative rating follows a report to the state in March. The district said it offered specific steps it is taking to remain fiscally solvent.

School districts are required to file two reports each fiscal year on their financial health. The state certifies the reports as positive, qualified, or negative.

“It is clear that opportunities for growth and improvement exist throughout the entire system,” district Superintendent Matt Wayne said in the statement. “We are committed to accelerating our efforts to address the remaining concerns.”

Under California law, school districts must report a variety of revenues and expenditures including fund and cash balances, reserves, deficit spending, salaries and benefits, and facilities maintenance.

Each of these criteria has a standard by which it is measured, and deviations must be explained, according to state regulations.

The San Francisco Board of Education will meet on Tuesday to discuss updates on the budget and the district’s stabilization plan.