San Rafael's elementary schools ran roughly $4 million in the red during the 2025-26 school year, and county education officials have now warned that the shortfall could eventually put the district's finances under state control if the bleeding isn't stopped. The elementary arm of San Rafael City Schools brought in about $102.8 million in revenue but spent $106.9 million, a gap that has triggered a formal budget warning and set off a fresh round of cuts across the district.
A District Split Between Two Budgets
San Rafael City Schools is an unusual setup in Marin County: it runs two separately budgeted districts, the San Rafael Elementary School District and the San Rafael High School District, under a single school board and one district office administration, according to San Rafael City Schools. Together the two districts serve roughly 7,000 students. As reported by the Marin Independent Journal, San Rafael is the only Marin school district structured this way, and the split has produced two very different financial stories under the same roof.
The high school district, by contrast, finished 2025-26 with an excess of about $1.2 million, bringing in roughly $59.9 million against $58.7 million in expenses. Deputy Superintendent Bob Marcucci put it bluntly at the Sept. 8 board meeting: the high school district has sort of righted its ship, while the elementary district continues to struggle.
Enrollment Declines and Vanishing State Funds
Superintendent Carmen Diaz Ghysels attributed the elementary district's troubles to a familiar mix of pressures — declining student enrollment, rising operating costs, and the expiration of one-time state funding that had been propping up budgets in recent years. Those forces combined to make the deficit spending unsustainable, the outlet's report noted.
In response, trustees approved a two-year plan in January aimed at addressing the financial strain and shoring up long-term fiscal stability. That effort followed roughly $1.42 million in cuts already made to the 2025-26 budget — $830,000 from the elementary side and $590,000 from the high school side. The board has since approved another $2.8 million in elementary-district cuts and $1.3 million in high-school cuts for 2026-27 and 2027-28, part of a projected $5.5 million in total reductions over the three-year period.
Reserves Sliding Toward the State Minimum
Even with those cuts, the elementary district's projected reserves are still sliding — from 6.7% in 2026-27 down to 5.1% in 2027-28, and to just 3.1% by 2028-29, according to the district's own figures. California law requires public school districts to maintain ending fund balance reserves of at least 3% of their total budget, meaning San Rafael's elementary district is projected to approach that floor within a few years. The district is also facing a projected 73% decrease in its unrestricted ending fund balance.
Marin County Office of Education Assistant Superintendent Breean Brown issued the budget warning letter, saying the district's budgetary position continues to deteriorate and that further budget reductions must be implemented. Brown approved the current budget for now but said the elementary district needs continued critical budget monitoring and is required to provide a plan and timeline for further reductions.
What a Downgrade Would Mean
The stakes tied to that monitoring are significant. If the elementary district's structural deficit isn't corrected and reserves fall below 3%, its budget could be downgraded from positive to qualified status — meaning it becomes uncertain whether the district can pay its bills. Further reserve declines beyond that point would lead to negative status, under which a district is considered unable to pay its bills and risks state takeover, per the same account.
District officials say ongoing monitoring of budget assumptions, revenues, expenditures and reserve levels will continue, and the elementary district faces real financial risk if necessary reductions aren't made. A budget advisory committee will keep serving as a forum for community input on the district's financial outlook, with the elementary district's committee scheduled to meet at 4:15 p.m. on Jan. 13 at 310 Nova Albion Way in Terra Linda.
