NEW ISSUE – BOOK-ENTRY ONLY RATING: Moody’s: “MIG 1” (See “MISCELLANEOUS – Rating” herein.) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the San Francisco Unified School District, based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. The amount treated as interest on the Notes and excluded from gross income may depend upon the taxpayer’s election under Internal Revenue Notice 94-84. In the further opinion of Bond Counsel, interest on the Notes is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Notes. See “TAX MATTERS.”

$100,000,000 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA) 2020-21 TAX AND REVENUE ANTICIPATION NOTES

Dated: Date of Delivery Due: December 31, 2021 This cover page is not a summary of this issue; it is only a reference to the information contained in this Official Statement. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

The San Francisco Unified School District 2020-21 Tax and Revenue Anticipation Notes (the “Notes”) are issued by the San Francisco Unified School District (the “District”), which is located in the City and County of San Francisco (the “City and County”). The Notes are by statute a general obligation of the District. The principal amount of the Notes, together with interest thereon, is payable from taxes, income, revenues, cash receipts and other moneys that are received by, that accrue to or are allocable to the District during fiscal year 2020-21 and that are lawfully available for the payment of current expenses and other obligations of the District. The District cannot be legally obligated to pay the Notes from revenue of a future year, and the District is not authorized to increase tax rates to repay the Notes in the event other available moneys are insufficient. As security for the payment of principal of and interest on the Notes, the District has pledged certain Pledged Revenues, as defined herein, to be deposited in a Repayment Fund (as defined herein), at the times and in the amounts described herein. See “THE NOTES – Security and Sources of Payment” herein.

Principal of and interest on the Notes are payable only at maturity. The Notes are not subject to redemption prior to maturity. See “THE NOTES – General Provisions of the Notes” herein.

Maturity Date Principal Amount Interest Rate Yield CUSIP No.* December 31, 2021 $100,000,000 2.000% 0.150% 79771TPH4

The Notes will be offered when, as and if issued by the District and received by the Underwriter, subject to approval of their legality by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District. Certain legal matters will be passed upon for the District by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California. It is anticipated that the Notes, in book-entry form, will be available for delivery through DTC in New York, New York, on or about March 9, 2021.

This Official Statement is dated February 23, 2021.

* CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2021 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. The CUSIP numbers are subject to change after the issuance of the Notes as a result of various subsequent actions. This Official Statement does not constitute an offering of any security other than the original offering of the Notes by the District. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the District.

The issuance and sale of the Notes have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption under Section 3(a)2 thereof. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy securities in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation.

The information set forth herein other than that furnished by the District, although obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Notes referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

“The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such information.”

The District maintains a website. However, the information presented on that website is not part of this Official Statement and should not be relied upon in making investment decisions with respect to the Notes.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE NOTES TO CERTAIN SECURITIES DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. SAN FRANCISCO UNIFIED SCHOOL DISTRICT

BOARD OF EDUCATION Name Title Term Expires Gabriela Lopez President January 2023 Alison M. Collins Vice President January 2023 Matt Alexander Commissioner January 2025 Kevine Boggess Commissioner January 2025 Jenny Lam Commissioner January 2025 Faauuga Moliga Commissioner January 2023 Mark Sanchez Commissioner January 2025

DISTRICT ADMINISTRATION Dr. Vincent Matthews, Superintendent Myong Leigh, Deputy Superintendent of Policy and Operations Enikia Ford-Morthel, Deputy Superintendent of Instruction Gentle Blythe, Deputy Superintendent of Strategic Partnerships and Communications Danielle Houck, Esq., General Counsel Meghan Wallace, Chief Financial Officer

PROFESSIONAL SERVICES Municipal Advisor Backstrom McCarley Berry & Co., LLC San Francisco, California

Bond and Disclosure Counsel Orrick, Herrington & Sutcliffe LLP San Francisco, California

Paying Agent Jose Cisneros Treasurer of the City and County of San Francisco San Francisco, California TABLE OF CONTENTS Page

INTRODUCTION ...... 1 General ...... 1 Changes from the Preliminary Official Statement ...... 1 The District ...... 1 Superintendent and Administrative Personnel ...... 2 THE NOTES ...... 3 Purpose of the Notes ...... 3 Authority for Issuance ...... 4 General Provisions of the Notes ...... 4 Redemption ...... 4 Security and Sources of Payment ...... 4 Bankruptcy Risks ...... 6 Investment of Note Proceeds and Repayment Fund ...... 6 ESTIMATED SOURCES AND USES OF FUNDS ...... 7 DISTRICT FINANCIAL AND OPERATING INFORMATION ...... 7 State Funding of Education; State Budget Process ...... 7 State Budget ...... 14 Local Sources of Education Funding ...... 23 Other District Revenues ...... 27 District Expenditures ...... 29 Charter Schools ...... 38 Summary of District Revenues and Expenditures ...... 39 District Cash Flows ...... 42 District Debt Structure ...... 47 Insurance, Risk Pooling and Joint Powers Arrangements ...... 49 SCHOOL DISTRICT BUDGET PROCEDURES AND REQUIREMENTS ...... 49 District Budget Process and City and County Review ...... 49 Accounting Practices ...... 51 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ...... 52 Limitations on Revenues ...... 52 Expenditures and Appropriations ...... 53 LOCAL PROPERTY TAXATION ...... 54 Property Taxation System ...... 54 Assessed Valuation of Property Within the District ...... 55 Tax Rate ...... 60 Tax Collections and Delinquencies ...... 61 RISK FACTORS ...... 65 State Budget ...... 65 Risk of Decline in Property Values ...... 65 Seismic Risks ...... 65 Drought ...... 66 Wildfire ...... 66 Risk of Sea Level Changes and Flooding ...... 66 Risks Related to COVID-19 ...... 66 TAX MATTERS ...... 68 OTHER LEGAL MATTERS ...... 70 Legal Opinion ...... 70 Legality for Investment in the State of California ...... 70 Continuing Disclosure ...... 70

-i- TABLE OF CONTENTS (continued) Page

Absence of Material Litigation ...... 71 MISCELLANEOUS ...... 72 Rating ...... 72 Professionals Involved in the Offering ...... 72 Underwriting ...... 72 Additional Information ...... 74

APPENDIX A PROPOSED FORM OF OPINION OF BOND COUNSEL ...... A-1 APPENDIX B FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 ...... B-1 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE ...... C-1 APPENDIX D CITY AND COUNTY OF SAN FRANCISCO INVESTMENT POLICY AND INVESTMENT REPORT ...... D-1 APPENDIX E BOOK-ENTRY ONLY SYSTEM ...... E-1 APPENDIX F ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE DISTRICT ...... F-1

-ii- [THIS PAGE INTENTIONALLY LEFT BLANK] $100,000,000 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA) 2020-21 TAX AND REVENUE ANTICIPATION NOTES

INTRODUCTION

General

This Official Statement, which includes the cover page and appendices hereto (the “Official Statement”), is provided to furnish information in connection with the sale of the San Francisco Unified School District 2020-21 Tax and Revenue Anticipation Notes (the “Notes”), as described more fully herein.

This Official Statement speaks only as of its date, and the information contained herein is subject to change. The San Francisco Unified School District (the “District”) has no obligation to update the information in this Official Statement, except as required by the Continuing Disclosure Certificate to be executed by the District. See “OTHER LEGAL MATTERS – Continuing Disclosure” and APPENDIX C herein.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the Underwriter or the owners of any of the Notes.

Quotations from and summaries and explanations of the Notes, the District Resolution (defined herein) providing for issuance of the Notes, and the Constitutional provisions, statutes and other documents described herein, do not purport to be complete, and reference is hereby made to said documents, Constitutional provisions and statutes for the complete provisions thereof. Copies of documents referred to herein and information concerning the Notes is available from the District through the Office of the Chief Financial Officer, 555 Franklin Street, San Francisco, California 94102. The District may impose a charge for copying, mailing and handling.

Changes from the Preliminary Official Statement

In addition to pricing information relating to the Notes, this final Official Statement reflects information regarding (i) the City and County of San Francisco’s recent assignment to the red tier under the Governor’s guidelines for reopening and (ii) the health and safety agreement reached between the District and its labor organizations with respect to reopening schools for in-person instruction. For information on such updates, see “DISTRICT FINANCIAL AND OPERATING INFORMATION – District Expenditures – Employment” and “RISK FACTORS – Risks Related to COVID-19.”

The District

The San Francisco Unified School District has boundaries that are coterminous with the City and County of San Francisco (the “City”). The District provides public education from transitional kindergarten through grade twelve. The District was established in 1851. The District also administers the County Office of Education. The administrative headquarters of the District are located at 555 Franklin Street, San Francisco, California.

The District operates eighteen (18) transitional kindergarten schools, sixty-four (64) elementary schools serving kindergarten through grade five, eight (8) alternative configured schools serving kindergarten through grade eight, thirteen (13) middle schools serving grades six through eight, fourteen (14) high schools serving grades nine through twelve, twelve (12) early education schools, three (3) continuation/alternative schools and five (5) County and Court schools. In addition, the District operates thirty-two (32) preschool sites. For fiscal year 2020-21, the District has projected enrollment of approximately 51,989 students, including special education and continuing education students. For fiscal year 2020-21, the District estimates that approximately 7,101 students will be enrolled at the 14 fiscally independent charter schools that operate within the District’s boundaries for which the District is the charter-approving agency. In its budget for fiscal year 2020-21, the District has projected 8,911 full-time equivalent employees including certificated (credentialed teaching staff), classified (non-teaching) and management personnel at the District and the San Francisco County Office of Education. The District has projected fiscal year 2020-21 general fund revenues of approximately $892.6 million and general fund expenditures of approximately $894.4 million. The total assessed valuation of taxable property in the District in fiscal year 2020-21 is approximately $301.4 billion.

The District is governed by a Board of Education (the “Board of Education”) consisting of seven voting members. The voting members are elected to four-year terms in staggered years so that, as nearly as practicable, one-half of the members shall begin their term in each odd-numbered year. The District’s day-to-day operations are managed by a board-appointed Superintendent of Schools (the “Superintendent”). The Board of Education appointed Dr. Vincent Matthews to serve as Superintendent in May 2017.

Superintendent and Administrative Personnel

The Superintendent is appointed by and reports to the Board of Education. The Superintendent is responsible for management of the District’s day-to-day operations and supervises the work of other key District administrators.

Following are brief professional biographical summaries of the Superintendent and certain key administrative personnel.

Dr. Vincent Matthews, Superintendent. Dr. Matthews has been with the District since May 2017. Prior to being named the Superintendent of the District, he served the California Department of Education as the state-appointed superintendent of Inglewood Unified School District. Dr. Matthews also previously served as Superintendent of the San Jose Unified School District. Prior to that, he served as a state-appointed superintendent for Oakland Unified School District and as an area superintendent for San Diego City Schools. Early in his career as an educator he taught at George Washington Carver Elementary School and served as principal at Alvarado Elementary School. Dr. Matthews holds Doctor of Education and Bachelor of Arts degrees from San Francisco State University.

Myong Leigh, Deputy Superintendent of Operations and Policy. Mr. Leigh has been a District staff member since August 2000, and has served as the Deputy Superintendent of Operations and Budget since May 2017. He served as Interim Superintendent of the District from September 2016 to May 2017. Prior to his appointment as Interim Superintendent, Mr. Leigh oversaw most non-instructional operations that support District schools. Immediately prior to working for the District, Mr. Leigh served as the Budget Director for the District of Columbia Public Schools. Prior to working in urban K-12 education, he was a municipal advisor to state and local governments on capital facilities financing and budgeting. His clients included the District of Columbia, the City of Philadelphia, the Virginia Public School Authority, the City of Norfolk and Montgomery County, Maryland. Mr. Leigh holds a Master in Public Policy degree from Harvard University’s John F. Kennedy School of Government and a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania.

2 Enikia Ford-Morthel, Deputy Superintendent of Instruction. Ms. Ford-Morthel has been the Assistant Superintendent for Cohort 3, leading efforts to close the achievement gap for the District’s African American students. Under her tenure, there has been a reduction of staff turnover in some of the District’s highest priority schools, positive trends toward increased academic outcomes, and established summer programming for students and staff professional development. Prior to joining the District, Ms. Ford-Morthel was the Chief of Schools for Education for Change Public Schools, supervising a network of schools in East Oakland, monitoring the academic program and resource alignment, developing family and community partnerships and coordinating support services for students. She has served as a site principal in both Oakland and Hayward, and served as an elementary classroom teacher. Ms. Ford-Morthel holds Bachelor of Arts degrees from the University of California, Berkeley in Interdisciplinary Studies and Education and holds a Masters degree from the University of California, Berkeley in Education.

Gentle Blythe, Deputy Superintendent of Strategic Partnerships and Communications. Ms. Blythe has held a variety of roles in public education and community development, serving as a teacher, school reform facilitator, community organizer, and administrator at schools and community-based organizations in the San Francisco Bay Area and Providence, Rhode Island. As the Deputy Superintendent of Strategic Partnerships and Communications, Ms. Blythe oversees the District’s fund development and communications efforts. She also serves as the President of the District’s non-profit partner Spark* SF Public Schools. Prior to her role as Deputy Superintendent, Ms. Blythe was the chief communications officer for the District, where she led strategic communications for over a decade. Ms. Blythe holds a Bachelor of Arts degree from Brown University and completed her multiple subject teaching credential at San Francisco State University. She has been honored with the Brown University Resource Scholar Fellowship, the Citizen’s Community Foundation Award, the Howard R. Swearer Community Excellence Award, and the Association of California School Administrators Administrator of the Year Award.

Danielle Houck, Esq., General Counsel. Ms. Houck began work as the General Counsel of the District on May 4, 2015. Prior to assuming the position of General Counsel, Ms. Houck was Of Counsel with the education law firm Fagen Friedman and Fulfrost LLP since September 2013 where she represented school districts throughout the State of California. Ms. Houck served as General Counsel for the Alameda Unified School District for approximately 4 years and as Deputy General Counsel and Interim General Counsel for the Oakland Unified School District for approximately 2 years. Ms. Houck earned a Bachelor of Arts degree in Political Science-Public Service and Women’s Studies, with honors, from the University of California, Davis. Ms. Houck also received her law degree from the University of California, Davis, and she has been a member of the State Bar of California since 1998.

Meghan Wallace, Chief Financial Officer. Ms. Wallace has been with the District since July 2019. Prior to being named the Chief Financial Officer she served as the Finance Director for the Port of San Francisco. Ms. Wallace also previously served as Finance & Procurement Manager and Budget Manager for the Port of San Francisco, and as a Senior Fiscal and Policy Analyst for the Mayor’s Office of Public Policy and Finance for the City and County of San Francisco. Prior to that, she served as a Program Examiner of the Environmental Branch of the Office of Budget and Management. Ms. Wallace holds a Master’s of Public Policy degree from the University of Maryland and Bachelor of Arts degrees in Policy Studies and Environmental Studies from Dickinson College.

THE NOTES

Purpose of the Notes

The Notes are issued in anticipation of future receipt of moneys in the General Fund of the District. Proceeds of the Notes will be used and expended by the District for any purpose for which the District is authorized to expend funds from the general fund of the District, including, but not limited to,

3 current expenses, capital expenditures, investment and reinvestment, and the discharge of other obligations or indebtedness of the District.

Authority for Issuance

The Notes are issued in conformity with the laws of the State, including Sections 53850 to 53858, both inclusive, of the California Government Code, being Article 7.6, Chapter 4, Part 1, Division 2, Title 5 thereof, and pursuant to a resolution adopted by the Board of Education of the District on February 9, 2021 (the “District Resolution”) authorizing the sale and issuance of the Notes.

A fiscally accountable district is authorized to issue its own tax and revenue anticipation notes without action by the board of supervisors of the county in which it is located. The District has attained “fiscal accountability status” under Section 42650 of the California Education Code. In addition to the authority to issue notes, this generally means that the District can order payment of its expenses directly from District funds held by the Treasurer of the City and County (the “Treasurer”, the “Paying Agent”, and the “Fiscal Agent”), instead of obtaining approval for each payment warrant from the State Superintendent of Public Instruction.

General Provisions of the Notes

Issuance and Maturity: The Notes will be dated the date of delivery thereof, and, assuming delivery on March 9, 2021, will mature on December 31, 2021.

Payment. The Notes will bear interest at the rate per annum set forth on the cover page hereof. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months, and will accrue commencing on the date of delivery of the Notes. Principal of and interest on the Notes are payable only at maturity, in lawful money of the United States of America, to the registered owners of the Notes, only upon surrender of such Notes at the principal trust office of the paying agent for the Notes (the “Paying Agent”), initially the Treasurer. No interest shall be payable on any Notes for any period after maturity of the Notes during which the registered owner thereof fails to properly present said Notes for payment.

Form and Registration. The Notes will be issued in fully registered book-entry form only, in denominations of $5,000 principal amount each or any integral multiple thereof. The Notes will initially be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Notes. Purchases of Notes under the DTC system must be made by or through a DTC participant, and ownership interests in Notes and any transfer thereof will be recorded as entries on the books of said participants. Except in the event that use of this book-entry system is discontinued for the Notes, beneficial owners will not receive physical certificates representing their ownership interests. See APPENDIX E – “BOOK-ENTRY ONLY SYSTEM.”

Redemption

The Notes are not subject to redemption prior to maturity.

Security and Sources of Payment

The Notes are by statute a general obligation of the District. The principal amount of the Notes, together with interest thereon, are payable from the “Unrestricted Revenues” of the District. Unrestricted Revenues consist of then uncollected taxes, income, revenue, cash receipts and other moneys of the District which will be available for the payment of the Notes and the interest thereon, received or accrued in or allocable to fiscal year 2020-21 for the General Fund of the District and lawfully available for the

4 payment of current expenses and other obligations of the District, regardless of whether such monies are received before or after June 30, 2021. Given current District cash flow projections, such monies are expected to comprise the fiscal year-end cash balance, deferred State apportionments, year-end cash receivables, and other legally available monies that are allocable to the District in fiscal year 2020-21 but not received prior to June 30, 2021. The District has pledged to deposit with the Treasurer in a special fund, designated as the Repayment Fund (defined herein), such amounts as shall be necessary to provide for payment of all such sums when due. In accordance with the District Resolution, the District has pledged (i) an amount equal to 50% of the principal amount of the Notes from the first Unrestricted Revenues allocable to fiscal year 2020-21 and to be received by the District prior to or during the month ending October 31, 2021; and (ii) an amount equal to 50% of the principal amount of the Notes and interest on the Notes from the first Unrestricted Revenues allocable to fiscal year 2020-21 and to be received by the District prior to or during the month ending November 30, 2021. The Pledged Revenues shall be deposited by the District into the Repayment Fund on October 31, 2021, and November 30, 2021, respectively (each such month, a “Repayment Month”). The amounts so pledged are known as the “Pledged Revenues.” Deferred State apportionments received by the District prior to the Repayment Months shall be held by the District in a segregated account or accounts of the District prior to deposit into the Repayment Fund in each Repayment Month; provided, however, that the District pledges to identify and hold in a segregated account or accounts all deferred State apportionments received as of June 30, 2021, and other Unrestricted Revenues necessary for deposit in the Repayment Fund, on June 30, 2021. The District expects to receive $96 million in deferred State apportionments between July and November 2021 that are allocable to fiscal year 2020-21. The principal of the Notes and the interest thereon will be a first lien and charge against the Pledged Revenues. Based on current projections, the District expects to have in excess of $145 million available for the repayment of the Notes. See “DISTRICT FINANCIAL AND OPERATING INFORMATION – District Cash Flows – Exhibit III – Fiscal Year 2020-21 Projected General Fund Cash Flows.”

To the extent not so paid from the Pledged Revenues, the Notes will be paid from any other moneys of the District lawfully available for the payment of the principal and interest thereon (the “Other Pledged Money”). In the event that there are insufficient Unrestricted Revenues received by the District by the third business day prior to the end of any month to permit the deposit into the Repayment Fund of the full amount of the Pledged Revenues required to be deposited from Unrestricted Revenues in such month, then the amount of any deficiency is required to be satisfied and made up from the Other Pledged Money when and as such moneys are received.

Although the Notes are a general obligation of the District, the statutory pledge only extends to revenues received or accrued during or allocable to fiscal year 2020-21, and the District cannot be legally obligated to pay the Notes from revenues of a future year. The District is entitled by statute to a share of the city and county-wide 1% ad valorem tax levy. The District has no authority, and cannot be compelled, to levy taxes to pay the principal of or interest on the Notes. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”

The District Resolution creates a special fund to be held by the Treasurer separate and distinct from all other City and County funds and accounts and District funds and accounts, designated the “San Francisco Unified School District, City and County of San Francisco, California, 2020-21 Tax and Revenue Anticipation Notes Repayment Fund” (the “Repayment Fund”). Any moneys placed in the Repayment Fund will be for the benefit of the holders of the Notes and, until the Notes and all interest thereon are paid or until provision has been made for payment of the Notes at maturity, will be applied solely for the purposes for which the Repayment Fund is created.

Not later than two days prior to the maturity date of the Notes, the moneys in the Repayment Fund shall be transferred by the Fiscal Agent to the Paying Agent to be used, to the extent necessary, to pay the principal of and interest on the Notes. After such date as the amount of Pledged Revenues

5 deposited in the Repayment Fund shall be sufficient to pay in full the principal of and interest on the Notes, when due, any money in excess of the amount remaining in the Repayment Fund that is unclaimed for two years shall be repaid to the District and all liability of the City and County with respect to such unclaimed moneys shall cease.

Bankruptcy Risks

The opinion of Bond Counsel, attached hereto as APPENDIX A, is qualified by reference to bankruptcy, insolvency, reorganization, receivership, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against school districts and counties in the State of California.

The Treasurer will be in possession of the taxes and other revenues that the District has agreed to set aside to pay the Notes, and may deposit and invest these funds in the City and County’s Investment Pool. Should the City and County go into bankruptcy, a court might hold that, unless the owners of the Notes could trace the funds, the owners do not have a valid lien on the funds set aside for payment of the Notes. In that case, the owners may be merely unsecured creditors of the bankrupt City and County. There can be no assurances that the owners could successfully so trace the pledged taxes and other revenues. If the City and County were to file for bankruptcy, the District may be unable to order payment of the Notes from moneys held by the City and County in the fund set aside for such payment.

If the District were to file for bankruptcy, the Treasurer may be enjoined from applying set-aside funds to payment of the Notes, or from setting aside any further moneys of the District for such payment. The opinion of Bond Counsel, attached hereto as APPENDIX A, is qualified by reference to bankruptcy, insolvency, reorganization, receivership, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against school districts and counties in the State of California.

There may be other adverse effects of a bankruptcy of the City and County or the District. Regardless of any specific adverse determinations by the court in a bankruptcy of the City and County or the District, the fact of a bankruptcy of the City and County or the District could have an adverse effect on the liquidity and value of the Notes.

Investment of Note Proceeds and Repayment Fund

Substantially all of the District’s operating funds are held by the Treasurer and invested pursuant to law and the City and County’s investment policy. Proceeds from the sale of the Notes will be deposited in the treasury of the City and County in a special fund designated as the Note Proceeds Fund within the general fund of the District. Moneys set aside for repayment of the Notes will be deposited in the Repayment Fund of the District held in the City and County treasury and invested by the Treasurer. All money held in the Note Proceeds Fund and in the Repayment Fund shall be invested, to the greatest extent possible, at the Treasurer’s discretion in the City and County’s Investment Pool and as otherwise permitted by the Government Code and the investment policy of the City and County, and the proceeds of such investments shall be deposited in each such respective Fund; provided, that no proceeds shall be invested for a term that exceeds the term of the Notes. See APPENDIX D – “CITY AND COUNTY OF SAN FRANCISCO INVESTMENT POLICY AND INVESTMENT REPORT” herein for a description of the City and County’s investment policy, current portfolio holdings and valuation procedures.

6 ESTIMATED SOURCES AND USES OF FUNDS

The proceeds of the Notes are expected to be applied as follows:

Sources of Funds Principal Amount of Notes $100,000,000.00 Original Issue Premium 1,498,000.00 Total Sources: $101,498,000.00

Uses of Funds Net Deposit to Note Proceeds Fund $101,298,000.00 Costs of Issuance(1) 125,000.00 Underwriter’s Discount(2) 75,000.00 Total Uses: $101,498,000.00

(1) Includes fees of the Municipal Advisor, Bond Counsel, Disclosure Counsel, rating agency, Paying Agent, printer and other miscellaneous expenses. (2) Retained by the Underwriter.

DISTRICT FINANCIAL AND OPERATING INFORMATION

State Funding of Education; State Budget Process

General. As is true for all school districts in California, the District’s operating income consists primarily of two components: a State portion funded from the State’s general fund in accordance with the Local Control Funding Formula (see “− Allocation of State Funding to School Districts; Local Control Funding Formula” herein) and a local portion derived from the District’s share of the 1% local ad valorem property tax authorized by the State Constitution (see “− Local Sources of Education Funding” herein). In addition, school districts may be eligible for other special categorical funding from State and federal government programs. The District projects to receive approximately 45.1% of its general fund revenues from State funds (not including the local portion derived from the District’s share of the local ad valorem tax), projected at approximately $402.9 million in fiscal year 2020-21. Such amount includes both the State funding provided under the LCFF (defined herein) as well as other State revenues (see “− Allocation of State Funding to School District; Local Control Funding Formula – Attendance” and “− Other District Revenues – Other State Revenues” below). As a result, decreases or deferrals in State revenues, or in State legislative appropriations made to fund education, may affect the District’s revenues and operations, though generally to a lesser extent than these may affect most school districts. In addition, the District estimates that approximately $39.8 million of LCFF revenues will be transferred to charter schools in lieu of property taxes in fiscal year 2020-21.

Under Proposition 98, a constitutional and statutory amendment adopted by the State’s voters in 1988 and amended by Proposition 111 in 1990 (now found at Article XVI, Sections 8 and 8.5 of the Constitution), a minimum level of funding is guaranteed to school districts, community college districts, and other State agencies that provide direct elementary and secondary instructional programs. Recent years have seen frequent disruptions in State personal income taxes, sales and use taxes, and corporate taxes, making it increasingly difficult for the State to meet its Proposition 98 funding mandate, which normally commands about half of all State general fund revenues, while providing for other fixed State costs and priority programs and services.

Because education funding constitutes such a large part of the State’s general fund expenditures, it is generally at the center of annual budget negotiations and adjustments.

The State budget for fiscal year 2013-14 contained a new formula for funding the school finance system (the “Local Control Funding Formula” or “LCFF”). The LCFF replaced the revenue limit funding

7 system and most categorical programs. For “basic aid districts” (now “community funded districts”), local property tax revenues would be used to offset the entire allocation of State funding under the new formula and such community funded districts would continue to receive certain categorical funds from the State. See “– Allocation of State Funding to School Districts; Local Control Funding Formula” herein for more information.

Adoption of Annual State Budget. According to the State Constitution, the Governor must propose a budget to the State Legislature no later than January 10 of each year, and a final budget must be adopted no later than June 15. Historically, the budget required a two-thirds vote of each house of the State Legislature for passage. However, on November 2, 2010, the State’s voters approved Proposition 25, which amended the State Constitution to lower the vote requirement necessary for each house of the State Legislature to pass a budget bill and send it to the Governor. Specifically, the vote requirement was lowered from two–thirds to a simple majority (50% plus one) of each house of the State Legislature. The lower vote requirement also applies to trailer bills that appropriate funds and are identified by the State Legislature “as related to the budget in the budget bill.” The budget becomes law upon the signature of the Governor, who may veto specific items of expenditure. Under Proposition 25, a two–thirds vote of the State Legislature is still required to override any veto by the Governor. School district budgets must generally be adopted by July 1, and revised by the school board within 45 days after the Governor signs the budget act to reflect any changes in budgeted revenues and expenditures made necessary by the adopted State budget. The Governor signed the fiscal year 2020-21 State budget on June 29, 2020.

When the State budget is not adopted on time, basic appropriations and the categorical funding portion of each school district’s State funding are affected differently. Under the rule of White v. Davis (also referred to as Jarvis v. Connell), a State Court of Appeal decision reached in 2002, there is no constitutional mandate for appropriations to school districts without an adopted budget or emergency appropriation, and funds for State programs cannot be disbursed by the State Controller until that time, unless the expenditure is (i) authorized by a continuing appropriation found in statute, (ii) mandated by the State Constitution (such as appropriations for salaries of elected State officers), or (iii) mandated by federal law (such as payments to State workers at no more than minimum wage). The State Controller has consistently stated that basic State funding for schools is continuously appropriated by statute, but that special and categorical funds may not be appropriated without an adopted budget. Should the State Legislature fail to pass a budget or emergency appropriation before the start of any fiscal year, the District might experience delays in receiving certain expected revenues. The District is authorized to borrow temporary funds to cover its annual cash flow deficits, and as a result of the White v. Davis decision, the District might find it necessary to increase the size or frequency of its cash flow borrowings, or to borrow earlier in the fiscal year. The District does not expect the White v. Davis decision to have any long-term effect on its operating budgets.

Aggregate State Education Funding. The Proposition 98 guaranteed amount for education is based on prior-year funding, as adjusted through various formulas and tests that take into account State proceeds of taxes, local property tax proceeds, school enrollment, per-capita personal income, and other factors. The State’s share of the guaranteed amount is based on State general fund tax proceeds and is not based on the general fund in total or on the State budget. The local share of the guaranteed amount is funded from local property taxes. The total guaranteed amount varies from year to year and throughout the stages of any given fiscal year’s budget, from the Governor’s initial budget proposal to actual expenditures to post-year-end revisions, as better information regarding the various factors becomes available. Over the long run, the guaranteed amount will increase as enrollment and per capita personal income grow.

If, at year-end, the guaranteed amount is calculated to be higher than the amount actually appropriated in that year, the difference becomes an additional education funding obligation, referred to as “settle-up.” If the amount appropriated is higher than the guaranteed amount in any year, that higher

8 funding level permanently increases the base guaranteed amount in future years. The Proposition 98 guaranteed amount is reduced in years when general fund revenue growth lags personal income growth, and may be suspended for one year at a time by enactment of an urgency statute. In either case, in subsequent years when State general fund revenues grow faster than personal income (or sooner, as the Legislature may determine), the funding level must be restored to the guaranteed amount, the obligation to do so being referred to as “maintenance factor.”

In recent years, the State’s response to fiscal difficulties has had a significant impact on Proposition 98 funding and settle-up treatment. The State has sought to avoid or delay paying settle-up amounts when funding has lagged the guaranteed amount. In response, teachers’ unions, the State Superintendent and others sued the State or Governor in 1995, 2005, 2009 and 2011 to force them to fund schools in the full amount required. The settlement of the 1995 and 2005 lawsuits has so far resulted in over $4 billion in accrued State settle-up obligations. However, legislation enacted to pay down the obligations through additional education funding over time, including the Quality Education Investment Act of 2006, have also become part of annual budget negotiations, resulting in repeated adjustments and deferrals of the settle-up amounts.

The State has also sought to preserve general fund cash while avoiding increases in the base guaranteed amount through various mechanisms: by treating any excess appropriations as advances against subsequent years’ Proposition 98 minimum funding levels rather than current year increases; by temporarily deferring apportionments of Proposition 98 funds from one fiscal year to the next; by permanently deferring apportionments of Proposition 98 funds from one fiscal year to the next; by suspending Proposition 98, as the State did in fiscal year 2004-05, fiscal year 2010-11, fiscal year 2011- 12 and fiscal year 2012-13; and by proposing to amend the State Constitution’s definition of the guaranteed amount and settle-up requirement under certain circumstances.

The District cannot predict how State income or State education funding will vary over the term to maturity of the Notes, and the District takes no responsibility for informing owners of the Notes as to actions the State Legislature or Governor may take affecting the current year’s budget after its adoption. Information about the State budget and State spending for education is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State of California official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on school districts in the State, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

Allocation of State Funding to School Districts; Local Control Funding Formula. Prior to the implementation of the Local Control Funding Formula in fiscal year 2013-14, under California Education Code Section 42238 et seq., each school district was determined to have a target funding level: a “base revenue limit” per student multiplied by the district’s student enrollment measured in units of average daily attendance. The base revenue limit was calculated from the district’s prior-year funding level, as adjusted for a number of factors, such as inflation, special or increased instructional needs and costs, employee retirement costs, especially low enrollment, increased pupil transportation costs, etc. Generally, the amount of State funding allocated to each school district was the amount needed to reach that district’s base revenue limit after taking into account certain other revenues, in particular, locally generated property taxes. This is referred to as State “equalization aid.” To the extent local tax revenues increased due to growth in local property assessed valuation, the additional revenue was offset by a decline in the State’s contribution; ultimately, a school district whose local property tax revenues

9 exceeded its base revenue limit was entitled to receive no State equalization aid, and received only its special categorical aid, which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the Constitution. Such districts were known as “basic aid districts,” which are now referred to as “community funded districts.” School districts that received some equalization aid were commonly referred to as “revenue limit districts,” which are now referred to as “LCFF districts.” The District is an LCFF district.

Beginning in fiscal year 2013-14, the LCFF replaced the revenue limit funding system and most categorical programs, and distributes combined resources to school districts through a base grant (“Base Grant”) per unit of average daily attendance (“A.D.A.”) with additional supplemental funding (the “Supplemental Grant”) allocated to local educational agencies based on their proportion of English language learners, students from low-income families and foster youth. The LCFF originally had an eight year implementation program to incrementally close the gap between actual funding and the target level of funding, as described below. In fiscal year 2018-19, the LCFF was fully funded ahead of the eight year implementation schedule. The LCFF includes the following components:

• A Base Grant for each local education agency. The Base Grants are based on four grade- span base rates. For fiscal year 2020-21, the LCFF provided to school districts and charter schools: (a) a Target Base Grant for each LEA equivalent to $8,503 per A.D.A. for kindergarten through grade 3; (b) a Target Base Grant for each LEA equivalent to $7,818 per A.D.A. for grades 4 through 6; (c) a Target Base Grant for each LEA equivalent to $8,050 per A.D.A. for grades 7 and 8; and (d) a Target Base Grant for each LEA equivalent to $9,572 per A.D.A. for grades 9 through 12. However, the amount of actual funding allocated to the Base Grant, Supplemental Grants and Concentration Grants will be subject to the discretion of the State.

• A 20% Supplemental Grant for the unduplicated number of English language learners, students from low-income families and foster youth to reflect increased costs associated with educating those students.

• An additional Concentration Grant of up to 50% of a local education agency’s Base Grant, based on the number of English language learners, students from low-income families and foster youth served by the local education agency that comprise more than 55% of enrollment.

• An Economic Recovery Target (the “ERT”) that is intended to ensure that almost every local education agency receives at least their pre-recession funding level (i.e., the fiscal year 2007-08 revenue limit per unit of A.D.A.), adjusted for inflation, at full implementation of the LCFF. Upon full implementation, local education agencies would receive the greater of the Base Grant or the ERT.

Under the new formula, for community funded districts, local property tax revenues would be used to offset up to the entire allocation under the new formula. However, community funded districts would continue to receive the same level of State aid as allocated in fiscal year 2012-13.

Local Control Accountability Plans. A feature of the LCFF is a system of support and intervention for local educational agencies. School districts, county offices of education and charter schools are required to develop, implement and annually update a three-year local control and accountability plan (“LCAP”). Each LCAP must be developed with input from teachers, parents and the community, and should describe local goals as they pertain to eight areas identified as state priorities, including student achievement, parent engagement and school climate, as well as detail a course of action to attain those goals. Moreover, the LCAPs must be designed to align with the district’s budget to ensure adequate funding is allocated for the planned actions.

10 Each school district must submit its LCAP annually on or before July 1 for approval by its county superintendent or with respect to the District, the State Superintendent of Public Instruction. The county superintendent or with respect to the District, the State Superintendent of Public Instruction, then has until August 15 to seek clarification regarding the contents of the LCAP, and the school district must respond in writing. The county superintendent can submit recommendations for amending the LCAP, and such recommendations must be considered, but are not mandatory. A school district’s LCAP must be approved by its county superintendent by October 8 of each year if such superintendent finds (i) the LCAP adheres to the State template, and (ii) the district’s budgeted expenditures are sufficient to implement the strategies outlined in the LCAP.

Performance evaluations are to be conducted to assess progress toward goals and guide future actions. County superintendents are expected to review and provide support to the school districts under their jurisdiction, while the State Superintendent of Public Instruction performs a corresponding role for county offices of education. The California Collaborative for Education Excellence (the “Collaborative”), a newly established body of educational specialists, was created to advise and assist local education agencies in achieving the goals identified in their LCAPs. For local education agencies that continue to struggle in meeting their goals, and when the Collaborative indicates that additional intervention is needed, the State Superintendent of Public Instruction would have authority to make changes to a local education agency’s LCAP.

Pursuant to the 2020-21 State Budget, the annual LCAP requirement has been replaced with a Learning Continuity and Attendance Plan for fiscal year 2020-21. See “– State Funding of Education; State Budget Process – 2020-21 State Budget.”

Rainy Day Fund. The 2014-15 State Budget proposed certain constitutional amendments to the Rainy Day Fund on the November 2014 ballot, which proposition was approved by the voters. Such constitutional amendments (i) require deposits into the Rainy Day Fund whenever capital gains revenues rise to more than 8% of general fund tax revenues; (ii) set the maximum size of the Rainy Day Fund at 10% of general fund revenues; (iii) for the next 15 years, require half of each year’s deposit to be used for supplemental payments to pay down the budgetary debts or other long-term liabilities and, thereafter, require at least half of each year’s deposit to be saved and the remainder used for supplemental debt payments or savings; (iv) allow the withdrawal of funds only for a disaster or if spending remains at or below the highest level of spending from the past three years; (v) require the State to provide a multiyear budget forecast; and (vi) create a Proposition 98 reserve (the Public School System Stabilization Account) to set aside funds in good years to minimize future cuts and smooth school spending. The State may deposit amounts into such account only after it has paid all amounts owing to school districts relating to the Proposition 98 maintenance factor for fiscal years prior to fiscal year 2014-15. The State, in addition, may not transfer funds to the Public School System Stabilization Account unless the State is in a Test 1 year under Proposition 98 or in any year in which a maintenance factor is created.

SB 858. As part of the 2014-15 State Budget, the Governor signed Senate Bill 858 (“SB 858”) which includes provisions which could limit the amount of reserves that may be maintained by a school district in certain circumstances. Such provisions became effective upon the State voters approval of the constitutional amendments relating to the Rainy Day Fund described above. Under SB 858, in any fiscal year immediately following a fiscal year in which the State has made a transfer into the Public School System Stabilization Account, any adopted or revised budget by a school district would need to contain a combined unassigned and assigned ending fund balance that (a) for school districts with an Average Daily Attendance (“A.D.A.”) of less than 400,000, is not more than two times the amount of the reserve for economic uncertainties mandated by the Education Code, or (b) for school districts with an A.D.A. that is more than 400,000, is not more than three times the amount of the reserve for economic uncertainties mandated by the Education Code. In certain cases, the county superintendent of schools or, with respect to the District, the State Superintendent of Public Instruction may grant a school district a waiver from

11 this limitation on reserves for up to two consecutive years within a three-year period if there are certain extraordinary fiscal circumstances.

SB 751. Senate Bill 751 (“SB 751”), enacted on October 11, 2017, alters the reserve requirements imposed by SB 858. Under SB 751, in a fiscal year immediately after a fiscal year in which the amount of moneys in the Public School System Stabilization Account is equal to or exceeds 3% of the combined total general fund revenues appropriated for school districts and allocated local proceeds of taxes for that fiscal year, a school district budget that is adopted or revised cannot have an assigned or unassigned ending fund balance that exceeds 10% of those funds. SB 751 excludes from the requirements of those provisions basic aid school districts (also known as community funded districts) and small school districts having fewer than 2,501 units of average daily attendance.

AB 1469. As part of the 2014-15 State Budget, the Governor signed Assembly Bill 1469 (“AB 1469”) which implemented a new funding strategy for the California State Teachers’ Retirement System (“CalSTRS”), increased the employer contribution rate in fiscal year 2014-15 from 8.25% to 8.88% of covered payroll and authorized additional increases to the employer contribution rate in subsequent fiscal years. See “– Retirement Benefits – CalSTRS” herein for more information about CalSTRS and AB 1469.

Prohibitions on Diverting Local Revenues for State Purposes. Beginning in 1992-93, the State satisfied a portion of its Proposition 98 obligations by shifting part of the property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and community college districts through a local Educational Revenue Augmentation Fund (“ERAF”) in each county. Local agencies, objecting to invasions of their local revenues by the State, sponsored a statewide ballot initiative intended to eliminate the practice. In response, the State Legislature proposed an amendment to the State Constitution, which the State’s voters approved as Proposition 1A at the November 2004 election. That measure was generally superseded by the passage of an initiative constitutional amendment at the November 2010 election, known as “Proposition 22.”

The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. This is intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. One effect of this amendment will be to deprive the State of fuel tax revenues to pay debt service on most State bonds for transportation projects, reducing the amount of State general fund resources available for other purposes, including education.

Prior to the passage of Proposition 22, the State invoked Proposition 1A to divert $1.935 billion in local property tax revenues in 2009-10 from cities, counties, and special districts to the State to offset State general fund spending for education and other programs, and included another diversion in the adopted 2009-10 State budget of $1.7 billion in local property tax revenues from local redevelopment agencies, which local redevelopment agencies have now been dissolved (see “− Dissolution of Redevelopment Agencies” below). Redevelopment agencies had sued the State over this latter diversion. However, the lawsuit was decided against the California Redevelopment Association on May 1, 2010. Because Proposition 22 reduces the State’s authority to use or shift certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget in some years—such as reducing State spending or increasing State taxes, and school and community college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s general fund.

12 Dissolution of Redevelopment Agencies. Under California law, a city or county could, and did, prior to California legislation dissolving redevelopment agencies as described below, create a redevelopment agency in territory within one or more school districts. Upon formation of a “project area” of a redevelopment agency, most property tax revenues attributable to the growth in assessed value of taxable property within the project area (known as “tax increment”) belong to the redevelopment agency, causing a loss of general fund tax revenues (relating to the 1% countywide general fund levy) to other local taxing agencies, including school districts, from that time forward. However, special ad valorem property taxes (in excess of the 1% general fund levy) collected for payment of debt service on school bonds are based on assessed valuation before reduction for redevelopment increment and such special ad valorem property taxes are not affected or diverted by the operation of a redevelopment agency project area.

As to operating revenues, any loss of local property taxes that contribute to the revenue limit target of a revenue limit district is made up by an increase in State equalization aid, until the base revenue limit is reached. “Pass-through” payments of local tax revenues required by law to be paid to the school district by a local redevelopment agency will count toward the revenue limit, except for any portion dedicated to capital facilities or deferred maintenance.

Commencing February 1, 2012, property taxes that would have been allocated to each redevelopment agency if the agencies had not been dissolved were instead deposited in a “redevelopment property tax trust fund” created for each former redevelopment agency by the related county auditor- controller and held and administered by the related county auditor-controller as provided in Part 1.85 (commencing with Section 34170) of Division 24 of the State Health and Safety Code (the “Health and Safety Code”). The Health and Safety Code generally requires each county auditor-controller, on May 16, 2012 and June 1, 2012 and each January 2 and June 1 thereafter, to apply amounts in a related redevelopment property tax trust fund, after deduction of the county auditor-controller’s administrative costs, in the following order of priority:

• To pay pass-through payments to affected taxing entities in the amounts that would have been owed had the former redevelopment agency not been dissolved; provided, however, that if a successor agency determines that insufficient funds will be available to make payments on the recognized obligation payment schedule and the county auditor-controller and State Controller verify such determination, pass-through payments that had previously been subordinated to debt service may be reduced;

• To the former redevelopment agency’s successor agency for payments listed on the successor agency’s recognized obligation payment schedule for the ensuing six-month period;

• To the former redevelopment agency’s successor agency for payment of administrative costs; and

• Any remaining balance to school entities and local taxing agencies.

The District estimates it received $13.4 million in pass-through payments in fiscal year 2019-20 and projects receipt of $13.5 million in pass-through payments in fiscal year 2020-21.

It is possible that there will be additional legislation proposed and/or enacted to “clean up” various inconsistencies contained in AB1X 26 and there may be additional legislation proposed and/or enacted in the future affecting the current scheme of dissolution and winding up of redevelopment agencies currently contemplated by AB1X 26. For example, AB 1484 was signed by the Governor on June 27, 2012, to clarify and amend certain aspects of AB1X 26. AB 1484, among other things, attempts to clarify the role and requirements of successor agencies, provides successor agencies with more control

13 over agency bond proceeds and properties previously owned by redevelopment agencies and adds other new and modified requirements and deadlines. AB 1484 also provides for a “tax claw back” provision, wherein the State is authorized to withhold sales and use tax revenue allocations to local successor agencies to offset payment of property taxes owed and not paid by such local successor agencies to other local taxing agencies. This “tax claw back” provision has been challenged in court by certain cities and successor agencies. The District cannot predict the outcome of such litigation and what effect, if any, it will have on the District. Additionally, no assurances can be given as to the effect of any such future proposed and/or enacted legislation on the District.

State Budget

2020-21 State Budget. The Governor signed the fiscal year 2020-21 State budget (the “2020-21 State Budget”) on June 29, 2020. According to the State, the economic impact of COVID-19 pandemic has resulted in a $54.3 billion budget deficit, which the State is addressing through the following measures:

 Reserves. The 2020-21 State Budget draws down $8.8 billion in reserves, including $7.8 billion from the Rainy Day Fund, $450 million from the Safety Net Reserve, and all of the funds in the Public School System Stabilization Account (the “PSSSA” or “Proposition 98 Rainy Day Fund”).

 Triggers. The 2020-21 State Budget includes $11.1 billion in reductions and deferrals that will be restored if at least $14 billion in federal funds are received by October 15, 2020. If the State receives a lesser amount between $2 billion and $14 billion, the reductions and deferrals will be partially restored. The trigger includes $6.6 billion in deferred spending on schools, approximately $970 million in funding for the University of California and the California State University, $2.8 billion for state employee compensation, $150 million for courts, and funding for child support administration, teacher training, moderate-income housing, and infrastructure to support infill housing. The trigger would also fund an additional $250 million for county programs to backfill revenue losses. (No such federal funds were received by October 15, 2020, and the District makes no representation as to how much, if any, federal funds will be received in the future or be received in time to initiate these triggers.)

 Federal Funds. The 2020-21 State Budget relies on $10.1 billion in federal funds that provide general fund relief, including $8.1 billion already received. This includes the enhanced Federal Medical Assistance Percentage (FMAP), a portion of the State’s Coronavirus Relief Fund allocation and funds provided for childcare programs.

 Revenues. The 2020-21 State Budget temporarily suspends the use of net operating losses for medium and large businesses and temporarily limits to $5 million the amount of business incentive credits a taxpayer can use in any given tax year. These short-term limitations will generate $4.4 billion in new revenues in fiscal year 2020-21.

 Borrowing/Transfers/Deferrals. The 2020-21 State Budget relies on $9.3 billion in special fund borrowing and transfers, as well as other deferrals for K-14 school districts. (Approximately $900 million in additional special fund borrowing is associated with the reductions to employee compensation and is contained in the trigger.)

 Cancelled Expansions, Updated Assumptions and Other Solutions. The 2020-21 State Budget includes $10.6 billion of other solutions for addressing the budget deficit, such as cancelling multiple program expansions and anticipating increased government efficiencies, higher ongoing revenues, and lower health and human services caseload costs that previously estimated.

14 Because of such measures described above, the 2020-21 State Budget is a balanced budget for fiscal year 2020-21 that projects approximately $137.7 billion in revenues, and $88.8 billion in non- Proposition 98 expenditures and $45.1 billion in Proposition 98 expenditures. The 2020-21 State Budget sets aside $2.6 billion in the Special Fund for Economic Uncertainties (the “SFEU”), and it includes total funding of $98.8 billion ($48.1 billion general fund and $50.7 billion other funds) for all K-12 education programs. The 2020-21 State Budget estimates Proposition 98 funding levels of $78.5 billion in fiscal year 2018-19, $77.7 billion in fiscal year 2019-20, and $70.9 billion in fiscal year 2020-21. The reduction in Proposition 98 funding will result in per pupil spending of $10,654 in fiscal year 2020-21, a $1,339 reduction from fiscal year 2019-20.

The 2020-21 State Budget offsets such reduction in Proposition 98 funding in several ways, including the following:

 Local Control Funding Formula Deferrals. As a result of the COVID-19 pandemic, $1.9 billion in LCFF apportionments in fiscal year 2019-20 were deferred until fiscal year 2020-21, and the 2020-21 State Budget provides that apportionment deferrals in fiscal year 2020-21 will grow to $11 billion. Such deferrals allow LCFF funding to remain at fiscal year 2019-20 levels in both fiscal years. The 2020-21 State Budget suspends the statutory LCFF cost-of-living adjustment in fiscal year 2020-21. The 2020-21 State Budget provides that $5.8 billion of deferrals will be triggered off in fiscal year 2020-21 if sufficient federal funding is provided by October 15, 2020 that can be used for such purpose. No such federal funds were received by the deadline and the District makes no representation as to how much, if any, federal funds will be received in the future that may be used to pay down the deferrals.

 Learning Loss Mitigation. Additionally, the 2020-21 State Budget includes a one-time investment of $5.3 billion (comprised of $4.4 billion from the federal Coronavirus Relief Fund, $589.9 million in Proposition 98 general fund resources, and $355.2 from the federal Governor’s Emergency Education Relief Fund) to local education agencies to address learning loss resulting from school closures. To ensure that those local educational agencies serving students most affected by the COVID-19 pandemic receive additional funding, the 2020-21 State Budget will allocate $2.9 billion of such funds based on the LCFF supplemental and concentration grant allocation, $1.5 billion of such funds based on the number of students with exceptional needs, and $979.8 million of such funds based on the total LCFF allocation.

 Supplemental Appropriations. In fiscal years 2019-20 and 2020-21, the Proposition 98 funding level drops below the target funding level, by a total of approximately $12.4 billion. To accelerate the recovery from such funding reduction, the 2020-21 State Budget provides supplemental appropriations above the required Proposition 98 funding level, beginning in fiscal year 2021-22, and in each of the next several fiscal years, in an amount equal to 1.5% of general fund revenues, up to a total of $12.4 billion.

 Revised CalPERS and CalSTRS Contributions. To provide immediate and long-term relief to school districts facing rising pension costs, the 2020-21 State Budget redirects $2.3 billion appropriated in the 2019-20 State budget to California State Teachers’ Retirement System (“CalSTRS”) and the California Public Employees’ Retirement System (“CalPERS”) for long-term unfunded liabilities to instead reduce employer contribution rates in fiscal years 2020-21 and 2021-22. Such reallocation will reduce the CalSTRS employer contribution rate from 18.41% to approximately 16.15% in fiscal year 2020-21 and from 17.9% to 16.02% in fiscal year 2021-22. The CalPERS Schools Pool employer contribution rate will be reduced from 22.67% to 20.7% in fiscal year 2020-21 and from 24.6% to 22.84% in fiscal year 2021- 22.

15  Federal Funds. In addition to the Coronavirus Relief Fund and Governor’s Emergency Education Relief Fund allocations described above, the 2020-21 State Budget includes $1.6 billion in federal Secondary School Emergency Relief funds. Of this amount, $1.5 billion will be allocated to local educational agencies in proportion to the amount of Title I-A funding they receive, and may be used for costs relating to the COVID-19 pandemic. Of the remaining $164.7 million, $112.2 million will be used to provide up to $0.75 per meal for local educational agencies participating in certain school meal programs and serving meals between March 2020 and August 2020 due to school closures, $45 million will be used for grants to local educational agencies to increase access to health, mental health, and social service supports for high-need students, $6 million will be used to provide educator professional development for providing high quality distance learning, and $1.5 million will be used for State Department of Education costs associated with the COVID-19 pandemic.

 Temporary Revenue Increases. The 2020-21 State Budget includes a temporary three-year suspension of net operating losses, and a limitation on business incentive tax credits to offset no more than $5 million of tax liability per year. These temporary changes, along with other tax changes, will generate $4.3 billion in general fund revenues and approximately $1.6 billion in benefit to the Proposition 98 guarantee.

 Special Education. The 2020-21 State Budget provides for increased special education base rates of $625 per pupil pursuant to a new funding formula. The 2020-21 State Budget also includes $100 million to increase funding for students with low-incidence disabilities, $15 million in federal Individuals with Disabilities Education Act (“IDEA”) funds for the Golden State Teacher Scholarship Program to increase the special education teacher pipeline, $8.6 million in IDEA funds to assist local educational agencies to develop regional alternative dispute resolution services and statewide mediation services, and $1.1 million in IDEA funds to study the current special education governance and accountability structure.

 Average Daily Attendance and Distance Learning. The 2020-21 State Budget assumes that local educational agencies will provide in-classroom instruction during the 2020-21 school year, but recognizes that public health officials may require school closures. To ensure funding stability regardless of instructional model, the 2020-21 State Budget includes a hold- harmless for the purpose of calculating apportionments in fiscal year 2020-21, and it provides that average daily attendance will be based on the 2019-20 school year. The 2020-21 State Budget also includes requirements for distance learning services in the event of school closures, and provides $750,000 one-time Proposition 98 general fund resources for the Sacramento County Office of Education to develop distance learning curriculum and instructional guidance for adoption by the State Board of Education by May 31, 2021.

 Employee Protections. The 2020-21 State Budget suspends layoffs of non-management certificated staff during fiscal year 2020-21 and classified staff who hold positions in nutrition, transportation, or custodial services during fiscal year 2020-21. The 2020-21 State Budget includes $60 million Proposition 98 general fund resources to provide a match of State funds for participating classified employees to be paid during the summer recess period. The 2020- 21 State Budget also state that it is the intent of the State Legislature that school districts, community college districts, joint powers authorities, and county offices of education retain all classified employees in fiscal year 2020-21.

Other significant features of the 2020-21 State Budget affecting K-12 school districts include the following:

16  Child Care. Of the $350.3 million received by California through the CARES Act (defined herein) for COVID-19 related child care activities, the 2020-21 State Budget applies $144.3 million for State costs associated with SB 89 expenditures, family fee waivers, and provider payment protection; $125 million for voucher provider hold harmless and stipends; and $73 million to continue care for at-risk children and essential workers.

 Learning Continuity and Attendance Plan. The annual LCAP requirement is replaced with a Learning Continuity and Attendance Plan, with public stakeholder engagement, to outline local education agencies compliance with applicable provisions, including student participation and attendance reporting, device accessibility and instruction. The 2020-21 State Budget requires the State Superintendent to develop a template of this plan for use by LEAs which will include a description of how such agencies will provide continuity of learning during the COVID-19 pandemic, expenditures related to addressing the impacts of the pandemic, and how such agencies are increasing or improving services in proportion to concentration funding that is received under the LCFF.

The complete 2020-21 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

Proposed 2021-22 State Budget. The Governor released his proposed State budget for fiscal year 2021-22 (the “Proposed 2021-22 State Budget”) on January 8, 2021. The Proposed 2021-22 State Budget sets forth a balanced budget for fiscal year 2021-22 with an economic outlook and revenue forecast that is much improved from the 2020-21 State Budget. The Governor cautions that as the State enters fiscal year 2021-22, the risks to such positive forecast remain higher than usual as the State’s health and economy are threatened by the highest infection rate since the start of the COVID-19 pandemic. With increasing distribution of vaccines, however, the Governor notes that the State is poised to begin an equitable and broad- based recovery.

The Proposed 2021-22 State Budget estimates that total resources available in fiscal year 2020-21 will total approximately $168.10 billion (including a prior year balance of approximately $5.36 billion) and total expenditures in fiscal year 2020-21 will total approximately $155.90 billion. The Proposed 2021-22 State Budget anticipates the following fund balances for fiscal year 2020-21: $3.18 billion in the State’s Reserve for Liquidation of Encumbrances (the “Encumbrances Reserve”), $9.03 billion in the State’s SFEU, $747.00 million in the Proposition 98 Rainy Day Fund, $450.00 million in the State’s Safety Net Reserve, and $12.54 billion in the State’s Budget Stabilization Account/Rainy Day Fund (the “State Rainy Day Fund”).

The Proposed 2021-22 State Budget projects total resources available for fiscal year 2021-22 of approximately $170.57 billion, inclusive of revenues and transfers of approximately $158.37 billion and a prior year balance of approximately $12.20 billion. The Proposed 2021-22 State Budget projects total expenditures of approximately $164.52 billion, inclusive of non-Proposition 98 expenditures of approximately $103.68 billion and Proposition 98 expenditures of approximately $60.83 billion. The Proposed 2021-22 State Budget proposes to allocate approximately $3.18 billion of the general fund’s projected fund balance to the Encumbrances Reserve and approximately $2.88 billion of such fund balance to the SFEU. In addition, the Proposed 2021-22 State Budget includes deposits to the PSSSA and State Rainy Day Fund with estimated fund balances of approximately $2.99 billion in the PSSSA and approximately $15.57 billion in the State Rainy Day Fund in fiscal year 2021-22 while maintaining the State’s Safety Net Reserve fund balance of approximately $450 million. The Proposed 2021-22 State Budget notes that such fund balances will be critical to the State’s financial resiliency as the Proposed 2021-22 State Budget projects

17 that expenditures will grow faster than revenues, with a structural deficit of approximately $7.6 billion projected for fiscal year 2022-23 that is forecast to grow to over approximately $11 billion by fiscal year 2024-25.

The Proposed 2021-22 State Budget currently projects that the State’s appropriations limit (referred to as the “Gann Limit”) will be exceeded for just the second time since its passage in 1979. The Gann Limit is currently projected to be exceeded by approximately $102 million. As a result, any funds above the Gann Limit are constitutionally required to be allocated evenly between school districts and a tax refund.

In light the State’s improved economic outlook and revenue forecast for fiscal year 2021-22, the Proposed 2021-22 State Budget reflects the highest-ever State funding level for K-14 education, including the following notable proposals relating to education:

 Proposition 98. The Proposed 2021-22 State Budget includes $85.8 billion of Proposition 98 resources for K-12 schools and community colleges, which represents an increase of $14.9 billion above the level funded in the 2020-21 State Budget and the highest-ever level of funding for K-14 schools. The Proposition 98 funding levels for fiscal year 2019-20 and 2020-21 increased from the 2020-21 State Budget amounts by $1.9 billion and $11.9 billion, respectively, due almost exclusively to increased State general fund revenues in such fiscal years. Total K-12 per-pupil expenditures from all sources are projected to be $18,837 in fiscal year 2020-21 and $18,000 in fiscal year 2021-22 (the decrease between the level of per-pupil expenditures in fiscal year 2020-21 and fiscal year 2021-22 is reflective of the significant allocation of one-time federal funds in fiscal year 2020-21). The Proposed 2021-22 State Budget includes $12,648 of ongoing K-12 per-pupil expenditures of Proposition 98 resources, which represents an increase of $1,994 over the level provided in the 2020- 21 State Budget.

 Local Control Funding Formula. The 2020-21 State Budget suspended the cost-of-living adjustment for LCFF in fiscal year 2020-21. To remedy the prior fiscal year’s suspension, the Proposed 2021-22 State Budget funds LCFF in fiscal year 2021-22 with both the fiscal year 2020-21 cost-of-living adjustment of 2.31% and the fiscal year 2021-22 cost-of-living adjustment of 1.5%, for a total combined cost-of-living adjustment of 3.84% in fiscal year 2021-22. By combining such cost-of-living adjustments in fiscal year 2021-22, the Proposed 2021-22 State Budget increases Proposition 98 general fund resources for LCFF by $2 billion. Under the Proposed 2021-22 State Budget, total LCFF funding is approximately $64.5 billion, and all local education agencies are funded at their full LCFF target level.

 No A.D.A. Hold Harmless Provision. Unlike the 2020-21 State Budget, the Proposed 2021-22 State Budget does not include a new A.D.A. hold harmless provision for fiscal year 2021-22. However, because of the existing A.D.A. hold harmless provision in the 2020-21 State Budget, local education agencies that experience enrollment declines in fiscal year 2021-22 will retain the ability to receive their LCFF apportionment based on the higher of their 2019-20 or 2020-21 A.D.A. pursuant to existing law.

 Local Property Tax Adjustments. The Proposed 2021-22 State Budget includes an increase of $54.1 million of ongoing Proposition 98 general fund resources for school districts and county offices of education in fiscal year 2020-21 as a result of decreased offsetting property tax revenues. However, the Proposed 2021-22 State Budget reflects a decrease of $1.2 billion of ongoing Proposition 98 general fund resources for school districts and county offices of education in fiscal year 2021-22 as a result of increased offsetting property taxes.

18  In-Person Instruction Grants. The Proposed 2021-22 State Budget includes $2 billion of one-time Proposition 98 general fund resources, available beginning in February 2021, to augment resources for schools to offer in-person instruction safely. This funding will be available on a per-pupil basis for all county schools, school districts, and certain charter schools that are open for in-person instruction by specified dates. Funds may be used for any purpose that supports in-person instruction, as further outlined below, and school districts must complete a COVID-19 School Safety Plan and adopt and implement a COVID-19 surveillance testing plan for staff and students as a condition to receipt of such funds.

Qualifying school districts must be located in counties with a COVID-19 transmission rate below 28 per 100,000 residents and must submit their COVID-19 safety plan, which is approved by their school employee unions and meets the new Cal/OSHA regulations, to their county office of education. Participating school districts would be provided with a one-time grant of $450 per student, with an additional amount of up to $250 per student based on the number of low-income students, English learners and foster youth. Funds may be used on implementing safety and mitigation measures such as frequent testing for all school students and staff, the distribution and enforcement of personal protective equipment for all students and staff in school, improved contact tracing, and prioritized vaccinations for school staff.

 Expanded Learning Time and Academic Interventions Grants. To address learning loss due to the COVID-19 pandemic, the Proposed 2021-22 State Budget proposes to allocate $4.6 billion in one- time Proposition 98 general fund resources for early action by the State legislature. This funding will provide school districts with time to design targeted interventions that focus on students from low-income families, English language learners, youth in foster care, and homeless youth, including an extended school year or summer school.

 Federal COVID-19 Relief Funds. The Proposed 2021-22 State Budget assumes, based recent federal legislation (see “MISCELLANEOUS – Risks Related to COVID-19” for more information on HR 133), that the school districts within the State could receive more than $6 billion in total funding from the federal Elementary and Secondary Schools Emergency Relief Fund (of which 90% would go directly to Title I schools) and $400 million in total funding from the federal Governor’s Emergency Education Relief Fund to assist schools in reopening and remaining open for in-person instruction during the COVID-19 pandemic.

 Proposition 98 Rainy Day Fund (Public School System Stabilization Account). The Proposed 2021-22 State Budget projects that a $747 million deposit into the Proposition 98 Rainy Day Fund (PSSSA) will be required in fiscal year 2020-21, and a $2.2 billion deposit will be required in fiscal year 2021-22. The balance of approximately $3 billion in fiscal year 2021-22 triggers school district reserve caps beginning in fiscal year 2022-23.

 Deferrals. The 2020-21 State Budget included deferrals of LCFF apportionments in the amounts of $1.9 billion in fiscal year 2019-20, growing to more than $11 billion in fiscal year 2020-21. The Proposed 2021-22 State Budget pays off the full K-12 deferral of LCFF apportionments in fiscal year 2019-20 and pays off approximately $7.3 billion of the K-12 deferral of LCFF apportionments in fiscal year 2020-21, leaving an ongoing K-12 deferral balance of $3.7 billion in fiscal year 2021-22. The Proposed 2021-22 State Budget provides that the June 2022 apportionment will be delayed until July 2022, but that no other apportionments will be affected.

 Additional Funding for K-14 Education. The Proposed 2021-22 State Budget includes $3.4 billion of non-Proposition 98 general fund resources for K-14 education. Such funding is in

19 addition to the recent federal COVID-19 pandemic relief funding for school districts. See “MISCELLANEOUS – Risks Related to COVID-19” for more information on HR 133.

 Supplemental Payments. The Proposed 2021-22 State Budget projects a decline of $511 million of Proposition 98 funding in fiscal year 2019-20 and fiscal year 2020-21 – a vast improvement from the projected decline of $12.4 billion in the 2020-21 State Budget. As a result, the Proposed 2021-22 State Budget proposes to remove the supplemental payments included in the 2020-21 State Budget. However, in recognition of the extraordinary needs of students and the public school system as a result of the COVID-19 pandemic, the Proposed 2021-22 State Budget includes a one-time $2.3 billion supplementary payment to K-14 schools in fiscal year 2021-22.

 CalPERS/CalSTRS Contributions. The Proposed 2021-22 State Budget provides that CalSTRS will apply $820 million in fiscal year 2021-22 to reduce the employer rate from 18.1% to approximately 15.92%, and that CalPERS will apply $330 million in fiscal year 2021-22 to reduce the Schools Pool employer contribution rate from 24.9% to 23%.

 Investing in Educator Professional Development. The Proposed 2021-22 State Budget includes $315.3 million in Proposition 98 general fund resources for educator professional development. This funding includes $250 million of one-time Proposition 98 general fund resources for the Educator Effectiveness Block Grant to expedite professional development for teachers, administrators, and other in-person staff in high-need areas including accelerated learning, re- engaging students, restorative practices, and implicit bias training, and $50 million in one-time Proposition 98 general fund resources to create statewide resources and provide targeted professional development on social-emotional learning and trauma-informed practices.

 Investing in the Teacher Pipeline. The Proposed 2021-22 State Budget includes $225 million in one-time funding to improve the State’s teacher pipeline. This funding includes $100 million in one-time non-Proposition 98 general fund resources for continued investment in the Golden State Teacher Grant Program which provides grants to students enrolled in teacher preparation programs who commit to working in high-need fields and at schools with high rates of under- prepared teachers, $100 million in one-time Proposition 98 resources to expand the Teacher Residency Program which supports clinical teacher preparation programs dedicated to preparing and retaining teachers in high-need communities and subject areas, and $25 million in one-time Proposition 98 resources to expand the Classified School Employees Credentialing Program which provides grants to local educational agencies to recruit non-certificated school employees to become certificated classroom teachers.

 Special Education. The Proposed 2021-22 State Budget includes $300 million in ongoing Proposition 98 general fund resources for the Special Education Early Intervention Grant to increase the availability of evidence-based services for infants, toddlers, and preschoolers. The Proposed 2021-22 State Budget also includes $5 million in one-time Proposition 98 general fund resources to establish professional learning networks to increase local educational agency capacity to access federal Medi-Cal funds.

 Community Schools. The Proposed 2021-22 State Budget includes $264.9 million in one-time Proposition 98 general fund resources to enable local educational agencies to expand existing networks of community schools, establish new community schools, and coordinate a wide range of services to these schools with priority given to schools in high-poverty communities.

 Student Mental Health. The Proposed 2021-22 State Budget includes $400 million in one-time funding, consisting of a mix of one-time federal and State general fund resources available over

20 multiple years, for the Department of Health Care Services to implement an incentive program through Medi-Cal Managed Care Plans administered by county behavioral health departments and schools. Additionally, the Proposed 2021-22 State Budget also includes $25 million in one- time Mental Health Services Fund resources, available over multiple years, to expand the Mental Health Student Services Act Partnership Grant Program, which funds partnerships between county behavioral health departments and schools. Finally, the Proposed 2021-22 State Budget includes $25 million in ongoing Proposition 98 general fund resources to fund innovative partnerships with county behavioral health to support student mental health services.

 Early Learning. The Proposed 2021-22 State Budget includes $250 million in one-time Proposition 98 general fund resources, available over multiple years, to provide grants to local educational agencies that offer early access to transitional kindergarten (“TK”) to help them cover up-front costs associated with expanding their TK programs. Additionally, to increase the number of highly qualified teachers available to serve TK students, the Proposed 2021-22 State Budget includes an increase of $50 million of one-time Proposition 98 general fund resources to support the preparation of TK teachers and provide both TK and kindergarten teachers with training in providing instruction in inclusive classrooms, support for English language learners, social-emotional learning, trauma-informed practices, restorative practices, and mitigating implicit biases. The Proposed 2021-22 State Budget also includes $200 million in one-time general fund resources for school districts to construct and retrofit existing facilities to support TK and full-day kindergarten programs.

The complete Proposed 2021-22 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

LAO Overview of Proposed 2021-22 State Budget. The Legislative Analyst’s Office (“LAO”), a nonpartisan State office which provides fiscal and policy information and advice to the State Legislature, released its report on the Proposed 2021-22 State Budget entitled “The 2021-22 Budget: Overview of the Governor’s Budget” on January 10, 2021 (the “2021-22 Proposed Budget Overview”). In the 2021-22 Proposed Budget Overview, the LAO summarizes the condition of the Proposed 2021-22 State Budget and notes the State’s improved fiscal picture amidst the ongoing COVID-19 pandemic. The LAO also highlights key features of the Proposed 2021-22 State Budget, which include a wide array of one-time programmatic spending and efforts to alleviate the impacts of the COVID-19 pandemic.

The LAO notes that, under the Proposed 2021-22 State Budget, the State would end fiscal year 2021-22 with approximately $18.91 billion in total reserves, representing an increase of $7.50 billion from the budgeted reserve level of $11.4 billion in fiscal year 2020-21 set forth in the 2020-21 State Budget. The increase in total reserves is the result of an estimated $3 billion required deposit into the State Rainy Day Fund, a $4.20 billion true-up deposit into the State Rainy Day Fund for fiscal years 2019-20 and 2020-21, and an increase in the discretionary SFEU of $267 million. The LAO summarizes that at the end of fiscal year 2021-22, the State Rainy Day Fund would reach a balance of approximately $15.57 billion, the SFEU would reach a balance of approximately $2.88 billion, and the Safety Net Reserve would contain a balance of approximately $450 million. Despite the overall increase in reserves, the LAO anticipates that the State will face large multiyear operating deficits if the State legislature adopts the Proposed 2021-22 State Budget. In particular, the LAO warns that the State would experience an operating deficit of $7.60 billion in fiscal year 2022‑23 that would grow to $11.30 billion in fiscal year 2024‑25. The LAO recommends that the State legislature begin to consider the ways in which the State might address the multiyear structural deficit, including, for example, by considering the use of discretionary spending to make supplemental pension payments.

21 The LAO estimates that the Governor had a $15.50 billion surplus to allocate in the Proposed 2021-22 State Budget, and that the Governor allocated approximately $8.10 billion to one-time or temporary spending, approximately $2.90 billion to the SFEU, approximately $2.50 billion to revenue reductions, approximately $1.30 billion to ongoing spending (the costs of which the LAO estimates will grow slightly over time to $1.40 billion by fiscal year 2024‑25), and approximately $700 million to repay State debts and liabilities. The LAO comments that the Proposed 2021-22 State Budget provides a reasonable mix of one-time and ongoing spending. The LAO observes that most one-time spending is allocated to housing and homelessness, as well as natural resources and the environment, while most ongoing spending is allocated to health and behavioral health. The LAO notes that of the new spending specifically attributable to fiscal year 2021-22, the Proposed 2021-22 State Budget allocates $2.60 billion for ongoing commitments and $2.90 billion for one-time activities. Combined with a $2.40 billion one- time deposit into the PSSSA, this one-time spending creates a budget cushion of $5.30 billion that helps protect ongoing programs from volatility in the Proposition 98 minimum guarantee. The LAO remarks that having a large one-time cushion is especially important in fiscal year 2021-22 given the continued and significant economic uncertainty caused by the ongoing COVID-19 pandemic.

The LAO observes that the 2020-21 State Budget addressed a $54 billion budget shortfall, which arose as a result of significant declines in expected revenues. Although such revenue estimates were reasonable at the time, the LAO notes that revenues have nearly returned to pre-COVID-19 pandemic levels while State costs have not risen as dramatically as expected. The LAO also calls attention to the fact that some of the State’s actions in response to the COVID-19 pandemic (including making withdrawals from reserves and shifting costs) were larger than necessary and that the Proposed 2021-22 State Budget uses very little discretionary spending to restore budget resilience. While the LAO agrees that the State should remain focused on its response to the COVID-19 pandemic, it suggests that taking actions now to restore budget resilience is nonetheless important both to address the State’s multiyear budget problem and to help the State weather the next unexpected downturn.

The LAO remarks that the Proposed 2021-22 State Budget offers the State legislature an opportunity to consider how the State can best use its resources to help it respond to and recover from the COVID-19 pandemic. In December 2020, the federal government passed a fifth round of pandemic relief, providing additional funding to most taxpayers, people receiving unemployment insurance benefits, renters, businesses, and schools. The Proposed 2021-22 State Budget includes a number of significant proposals that address overlapping needs relating to the COVID-19 pandemic. The LAO observes that while this overlap is understandable given the timing of the release of the Proposed 2021-22 State Budget, the State legislature should examine the Proposed 2021-22 State Budget in light of the new federal relief. Specifically, the LAO recommends that the State legislature determine how to best target State funds to those not already benefiting from the federal assistance, and strive to complement, rather than duplicate, the federal stimulus.

The Proposed 2021-22 State Budget includes $5 billion in actions that the Governor proposes the State legislature adopt in January and February 2021 (“Immediate Action Proposals”). The Governor’s Immediate Action Proposals include $2 billion for in-person instruction grants to incentivize schools to offer in-person instruction for younger students and students with high needs, potentially as soon as February 16, 2021. The LAO is concerned this proposal sets unfeasible timelines and could discourage school district participation. Although it believes some additional State funding should be directed toward academic support and reopening schools, the LAO recommends allocating a larger share of one- time funds to paying down deferrals or mitigating future cost increases related to pensions. The Governor’s Immediate Action Proposals also include providing $2.40 billion in tax refunds to low- income taxpayers, which the LAO believes could be more narrowly tailored to assist taxpayers using an Individual Taxpayer Identification Number; providing $550 million in small business grants, which the LAO agrees is worth considering given that the recent federal business assistance does not target

22 businesses most heavily-impacted by the COVID-19 pandemic; and waiving fees for individuals and businesses directly affected by the State’s stay-at-home orders, which the LAO assesses as reasonable.

The Proposed 2021-22 State Budget also includes $7.80 billion in actions that the Governor proposes the State legislature adopt in Spring 2021 (“Early Action Proposals”). The Governor’s Early Action Proposals include additional academic support for disadvantaged students, emergency financial aid for community college students, and funding for various State housing and housing-related infrastructure programs. The LAO recommends that the State legislature evaluate each Early Action Proposal separately and offers a framework for legislators to conduct such evaluations. Ultimately, the LAO recognizes that making decisions with the benefit of knowing how COVID-19 vaccine distribution proceeds, how the State economy responds, how State revenues perform in the spring, and whether the federal government distributes additional funds to states will be very valuable for evaluating how to allocate the State’s limited resources.

The 2021-22 Proposed Budget Overview is available on the LAO website at www.lao.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

Changes in State Budget. The final fiscal year 2021-22 State budget, which requires approval by a majority vote of each house of the State Legislature, may differ substantially from the Proposed 2021- 22 State Budget. In May, the Governor will revise the Proposed 2021-22 State Budget based on updated information available at such time. Such revision in May 2021 may also differ substantially from the Proposed 2021-22 State Budget. The final fiscal year 2021-22 State budget may be affected by national and State economic conditions and other factors which the District cannot predict, including the continued and evolving effects of the COVID-19 pandemic on State revenues that may in turn impact the educational funding that the District receives from the State. Accordingly, the District cannot provide any assurances that there will not be any changes in the final fiscal year 2021-22 State budget from the Proposed 2021-22 State Budget. The District cannot predict the impact that the final fiscal year 2021-22 State budget, or subsequent budgets, will have on its finances and operations.

Future Budgets and Budgetary Actions. The District cannot predict what future actions will be taken by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors beyond the District’s ability to predict or control, including but not limited to the COVID-19 pandemic. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State’s ability to fund schools during fiscal years 2020-21 and 2021-22 and in future fiscal years. Certain factors, like an economic recession, could result in State budget shortfalls in any fiscal year and could have a material adverse financial impact on the District.

Local Sources of Education Funding

General. The principal component of local revenues is a school district’s property tax revenues, i.e., each district’s share of the local 1% property tax, received pursuant to Section 75 et seq. and Section 95 et seq. of the California Revenue and Taxation Code. California Education Code Section 42238(h) itemizes the local revenues that are counted towards the amount allocated under the LCFF (and formerly, the base revenue limit) before calculating how much the State must provide in State equalization aid. The more local property taxes a district receives, the less State aid it is entitled to receive. Prior to the implementation of the LCFF, a school district whose local property tax revenues exceeded its base revenue limit was entitled to receive no State aid, and received only its special categorical aid which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the

23 Constitution. Such districts were known as “basic aid districts.” School districts that received some State aid were commonly referred to as “revenue limit districts” and now “LCFF Districts.” The District is an LCFF District.

Under the LCFF, local property tax revenues are used to offset up to the entire State aid collection under the new formula; however, community funded districts would continue to receive, at a minimum, the same level of State aid as allotted in fiscal year 2012-13. The District is an LCFF district. See “− Allocation of State Funding to School Districts – Local Control Funding Formula” herein for more information.

Local property tax revenues account for approximately 47.7% of the District’s aggregate budgeted revenues reported under LCFF sources and are projected to be approximately $255.5 million, or 28.9% of total general fund revenues in fiscal year 2020-21.

For a discussion of legal limitations on the ability of the District to raise revenues through local property taxes, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below.

Attendance and Enrollment. The District’s A.D.A., including special education, for fiscal years 2011-12 through 2020-21 is set forth in the following table.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT Average Daily Attendance and Student Enrollment Fiscal 2011-12 through 2020-21

Average Daily Year Attendance(1) Enrollment 2011-12 51,576 53,470 2012-13 51,151 53,626 2013-14 51,116 53,787 2014-15 51,106 52,961 2015-16 50,734 53,561 2016-17 50,784 53,033 2017-18 50,802 52,592 2018-19 50,200 52,468 2019-20 50,517 52,778 2020-21(2) 49,895 51,989 ______(1) Includes elementary, middle and high school students in opportunity classes, home and hospital, special day class and continuation education. Excludes independent charter schools. These figures represent P-2 A.D.A. for both District and County Office programs combined. A.D.A. for each year, except for fiscal year 2020-21, is for the second period of attendance, typically in mid-April of each school year. (2) For the fiscal year 2020-21 budget, the District utilizes fiscal year 2019-20 A.D.A. to project funding under the LCFF. This estimate is typically based on A.D.A. as of the end of the seventh school month in the prior year, covering a portion of the school year referred to as Period 2 (“P-2”). However, due to school closures to protect students and staff from the COVID-19 pandemic, the P-2 data reflects attendance through February 29, 2020. See “– State Budget – 2020-21 State Budget.” Enrollment data is based upon the fiscal year 2020-21 Period 1 (“P-1”) report; declines in enrollment have been seen across the State and country as a result of COVID-19. Source: The District.

Attendance and LCFF. The following table sets forth the District’s actual and budgeted A.D.A., enrollment (including percentage of students who are English language learners, from low-income families and/or foster youth (collectively, “EL/LI Students”)), and targeted Base Grant per unit of A.D.A. for fiscal years 2013-14 through 2020-21, respectively. The A.D.A. and enrollment numbers reflected in the following table include special education but exclude adult education.

24 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Average Daily Attendance, Enrollment and Targeted Base Grant Fiscal Years 2013-14 through 2020-21

A.D.A./Base Grant Enrollment(11) Unduplicated Total Total Percent of Fiscal Year K-3 4-6 7-8 9-12 A.D.A. Enrollment EL/LI Students 2013-14 A.D.A.(2): 17,382 11,568 6,942 15,224 51,116 53,787 67.01% Targeted Base Grant(3): $7,675 $7,056 $7,266 $8,638 ------

2014-15 A.D.A.(2): 17,296 11,779 6,830 15,201 51,106 52,961 69.37 Targeted Base Grant(3)(4): $7,740 $7,116 $7,328 $8,712 ------

2015-16 A.D.A.(2): 17,073 11,904 6,878 14,880 50,734 53,561 67.48 Targeted Base Grant(3)(5): $7,820 $7,189 $7,403 $8,801 ------

2016-17 A.D.A.(2): 17,034 11,870 7,102 14,778 50,784 53,033 63.69 Targeted Base Grant(3)(6): $7,820 $7,189 $7,403 $8,801 ------

2017-18 A.D.A.(2): 17,036 11,866 7,109 14,791 50,802 52,592 62.19 Targeted Base Grant(3)(7): $7,941 $7,301 $7,518 $8,939 ------

2018-19 A.D.A.(2): 16,780 11,287 7,190 14,943 50,200 52,468 61.26 Targeted Base Grant(3)(8): $8,235 $7,571 $7,796 $9,269 ------

2019-20 A.D.A.(2): 16,839 11,275 6,993 15,409 50,517 52,778 59.99 Targeted Base Grant(3)(9): $8,503 $7,818 $8,050 $9,572 ------

2020-21(1) A.D.A.: 16,724 11,197 6,952 15,112 49,895 51,989 58.99 Targeted Base Grant(3)(10): $8,503 $7,818 $8,050 $9,572 ------

(1) Figures are projections. For the fiscal year 2020-21 budget, the District utilizes fiscal year 2019-20 A.D.A. to project funding under the LCFF. This estimate is typically based on A.D.A. as of the end of the seventh school month in the prior year, covering a portion of the school year referred to as Period 2 (“P-2”). However, due to school closures to protect students and staff from the COVID-19 pandemic, the P-2 data reflects attendance through February 29, 2020. (2) A.D.A. for the second period of attendance, typically in mid-April of each school year. Enrollment for the first period, typically in mid-October of each school year. (3) Such amounts represent the targeted amount of Base Grant per unit of A.D.A., and do not include any supplemental and concentration grants under the LCFF. Such amounts were not fully funded in any of the fiscal years listed above except for fiscal year 2018-19. (4) Targeted fiscal year 2014-15 Base Grant amounts reflect a 0.85% cost of living adjustment from targeted fiscal year 2013-14 Base Grant amounts. (5) Targeted fiscal year 2015-16 Base Grant amounts reflect a 1.02% cost of living adjustment from targeted fiscal year 2014-15 Base Grant amounts. (6) Targeted fiscal year 2016-17 Base Grant amounts reflect a 0.00% cost of living adjustment from targeted fiscal year 2015-16 Base Grant amounts. (7) Targeted fiscal year 2017-18 Base Grant amount reflects a 1.56% cost-of-living adjustment from targeted fiscal year 2016-17 Base Grant amounts. (8) Targeted fiscal year 2018-19 Base Grant amount reflects a 3.70% cost-of-living adjustment from targeted fiscal year 2017-18 Base Grant amounts. (9) Targeted fiscal year 2019-20 Base Grant amount reflects a 3.26% cost-of-living adjustment from targeted fiscal year 2018-19 Base Grant amounts. (10) Targeted fiscal year 2020-21 Base Grant amount reflects a 0.0% cost-of-living adjustment from targeted fiscal year 2019-20 Base Grant amounts. (11) Except for fiscal year 2020-21, reflects enrollment as of October report submitted to the CBEDS in each school year. For purposes of calculating Supplemental and Concentration Grants, a school district’s fiscal year 2013-14 percentage of unduplicated EL/LI Students was expressed solely as a percentage of its fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated EL/LI Students enrollment was based on the two-year average of EL/LI Students enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, the percentage of unduplicated EL/LI Students was and will be based on a rolling average of such school district’s EL/LI Students enrollment for the then-current fiscal year and the two immediately preceding fiscal years. Source: The District.

25 The District received $534.5 million in aggregate revenues allocated under the LCFF in fiscal year 2019-20, and projects receipt of approximately $535.1 million in aggregate revenues under the LCFF in fiscal year 2020-21 (or approximately 59.6% of its general fund revenues in fiscal year 2020-21). Such amount includes a projected $50.9 million in supplemental grants and $11.0 million in concentration grants in fiscal year 2020-21.

Effect of Changes in Enrollment. Changes in local property tax income and A.D.A. affect LCFF districts and community funded districts differently.

In an LCFF district, increasing enrollment increases the total amount distributed under the LCFF and thus generally increases a district’s entitlement to State equalization aid, while increases in property taxes do nothing to increase district revenues, but only offset the State funding requirement of equalization aid. Operating costs increase disproportionately slowly to enrollment growth; and only at the point where additional teachers and classroom facilities are needed. Declining enrollment has the reverse effect on LCFF districts, generally resulting in a loss of State equalization aid, while operating costs decrease slowly and only when, for example, the district decides to lay off teachers or close schools.

In community funded districts, the opposite is generally true: increasing enrollment increases the amount to which the district would be entitled were it an LCFF district, but since all LCFF income (and more) is already generated by local property taxes, there is no increase in State income, other than the $120 per student in basic aid, as described above. Meanwhile, as new students impose increased operating costs, property tax income is stretched further. Declining enrollment does not reduce property tax income, and has a negligible impact on State aid, but eventually reduces operating costs, and thus can be financially beneficial to a community funded district.

The District cannot make any predictions regarding how the current economic environment or changes thereto will affect the State’s ability to meet the revenue and spending assumptions in the State’s adopted budget, and the effect of these changes on school finance. The District’s adopted budget and budgeted A.D.A. are used for planning purposes only, and do not represent a prediction as to the actual financial performance, attendance, or the District’s actual funding level for the current fiscal year or beyond. Certain adjustments will have to be made throughout the year based on actual State funding and actual attendance.

Impact to District’s Fiscal Year 2020-21 Operations and Budget Due to COVID-19 Pandemic. The impact of COVID-19 on the District’s fiscal year 2020-21 operations and budget is likely to be significant due to the impact of the national recession on State and local revenues. The District’s budget assumptions included herein reflect the final 2020-21 State Budget. See “– State Budget – 2020-21 State Budget.”

The District faces significant levels of uncertainty in fiscal year 2020-21 and in future fiscal years. The District cannot predict the extent or duration of the COVID-19 pandemic, or what impact the outbreak and any resulting economic situation might have on the State’s financial condition and the District’s financial condition or operations. Due to its placement on the State’s COVID-19 watch list, the District started its school year with all students in distance learning on August 17, 2020. The District plans to phase into a hybrid model, with limited in-person school for small groups of priority students once science and data suggest it is safe to do so. In the meantime, the District has prepared and is implementing distance learning guidelines and a memorandum of understanding with the teachers’ union that aim to secure the highest quality of instruction possible.

On July 29, 2020, the City’s mayor, London Breed, announced $15 million in new funding support for the District as part of the City’s fiscal year 2020-21 and fiscal year 2021-22 budget. These

26 funds were included in the City’s adopted budget to help the District balance its fiscal year 2020-21 budget with a reserve to support new expenses related to COVID-19.

Emergency Relief. The District expects to receive $10.0 million in one-time funds from the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), Elementary and Secondary School Emergency Relief (ESSER) funds, signed into law on March 27, 2020. These funds are awarded to local educational agencies to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. To date the District has spent and been reimbursed $2.6 million. No assurances can be given that the District will ultimately receive all or a portion of the ESSER funding it currently expects to receive, or any additional future State or federal funds related to COVID-19, or the timing of receipt of such funds.

Additionally, the District expects to receive $43 million in funds from the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (“CRRSA”), deemed ESSER II funds, which act was signed into law on December 27, 2020. These funds have not yet been appropriated at the state level and are not yet available to the District. No assurances can be given that the District will ultimately receive all or a portion of the ESSER II funding it currently expects to receive, or any additional future State or federal funds related to COVID-19, or the timing of receipt of such funds.

For more information on expected impacts of the COVID-19 pandemic, see “RISK FACTORS – Risks Related to COVID-19.”

Learning Loss Mitigation. The District expects to receive $39.4 million in one-time Learning Loss Mitigation funding from the State to ensure it serves students most affected by the COVID-19 pandemic. These funds are comprised of $31.9 million CARES Act – Coronavirus Relief Funds (CRF), $4.6 million State Proposition 98 funds, and $2.9 million CARES Act – Governor’s Emergency Education Relief (GEER) funds. Funds are provided to the District on a reimbursement basis, as the District reports on eligible expenses. To date the District has spent and been reimbursed $37.3 million, however, no assurances can be given that the District will ultimately receive all or a portion of the Learning Loss Mitigation funding it currently expects to receive, or any additional future State or federal funds related to COVID-19, or the timing of receipt of such funds.

For more information on expected impacts of the COVID-19 pandemic, see “RISK FACTORS – Risks Related to COVID-19.”

Other District Revenues

Federal Revenues. The federal government provides funding for several District programs, including special education programs. Federal revenues, most of which are restricted, comprise approximately 8.1% (or approximately $72.3 million) of the District’s general fund projected revenues for fiscal year 2020-21.

Other State Revenues. In addition to State apportionments for Proposition 98 funding through the LCFF, the District receives other State revenues which comprise approximately 4.1% (or approximately $36.2 million) of the District’s general fund projected revenues for fiscal year 2020-21. A significant portion of such other State revenues are amounts the District expects to receive from State lottery funds, a portion of which may not be used for non-instructional purposes, such as the acquisition of real property, the construction of facilities, or the financing of research. School districts receive lottery funds proportional to their total A.D.A. The District’s State lottery revenue is projected at approximately $10.4 million for fiscal year 2020-21.

27 Other Local Revenues. In addition to ad valorem property taxes, the District receives additional local revenues from other local sources, such as interest earnings, which comprise approximately 28.3% (or approximately $252.3 million) of the District’s general fund projected revenues for fiscal year 2020- 21, which includes the parcel taxes, sales tax and the PEEF, described below. The impact of COVID-19 on the District’s fiscal year 2020-21 operations and budget is likely to be significant due to the impact of the national recession on State and local revenues. See “MISCELLANEOUS – Risks Related to COVID- 19.”

Parcel Tax – Living Wage for Educators Act. On June 5, 2018, voters within the District approved Proposition G (also known as the Living Wage Educators Act) by a majority vote, establishing an annual tax of $298 per parcel within the District for each year between July 1, 2018 and June 30, 2038.

Following the June 5, 2018 election, the City and County filed a validation action to obtain a ruling concerning the validity of Proposition G, which was subsequently answered by a taxpayer contending, among other arguments, that Proposition G imposed a special tax that required the approval of two-thirds of the voters under the California Constitution, and that having failed to achieve that supermajority, it was not validly enacted into law. On May 11, 2020, the trial court granted the City and County’s motion for summary judgment, determining, among other things, that a supermajority for taxes proposed by local governments do not apply to taxes proposed by voter initiative, such as Proposition G. The defendant has appealed that ruling, which is currently pending. Although the City and County is collecting parcel tax revenues, it cannot spend such revenues until the litigation is resolved. Until such time as the litigation is resolved, the District has committed to draw from its School Rainy Day Reserve (discussed below) established pursuant to the City and County’s Charter (the “District Reserve”) and work with partners at the City and County of San Francisco to identify additional funding to support the annual cost of salary increases and professional development opportunities. The District agreed with its labor organizations to provide salary increases that were contingent upon the successful passage of Proposition G. The District has provided such salary increases even in the absence of receipt of revenues from Proposition G; the District is under no obligation pursuant to existing contracts with its labor organizations to provide such salary increases.

On November 3, 2020, voters within the District approved Proposition J (also known as the Fair Wages for Educators Act), by at least two-thirds approval, replacing Proposition G and establishing an annual tax of $288 per parcel within the District for each year between July 1, 2021 and June 30, 2038. The parcel tax revenues are typically used for various District needs, including to fund educators’ salaries, staffing, professional development, technology, charter schools, and oversight of funding. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Limitations on Revenues” and “– Article XIIIC and Article XIIID of the State Constitution.”

Parcel Tax – Quality Teacher & Education Act. The District also receives funding from the Quality Teacher & Education Act (“QTEA”), a parcel tax measure approved by the voters of the City and County of San Francisco in June 2008 (also known as Proposition A). The QTEA provides funding to the District for twenty years beginning in fiscal year 2008–09, and such parcel tax revenues are collected by the City and County and disbursed to the District. These resources assist in recruiting and retaining effective teachers, supporting innovative instructional strategies, increasing accountability, and improving the District’s technology infrastructure. The QTEA is a qualified special tax, and established an annual tax of $198 per parcel commencing July 1, 2008, and adjusting for inflation each year thereafter by the San Francisco All Items Consumer Price Index for all Urban Consumers (CPI-I) as reported by the U.S. Department of Labor’s Bureau of Labor Statistics.

Parcel Tax – Proposition A. The District also receives funding from Proposition A, a parcel tax measure approved by the voters of the District in June 2010. Proposition A provides funding to the

28 District for twenty years beginning in fiscal year 2010–11, and funds raised from the parcel tax can only be used for capital improvements. Proposition A is a renewal of an annual special tax of not to exceed $32.20 per parcel for single-family residential and nonresidential parcels and $16.10 per dwelling unit for mixed use and multifamily residential parcels, adjusted for inflation, for parcels within Community Facilities District No. 90-1.

The District estimates it received $42.4 million of combined parcel tax revenues in fiscal year 2019-20 and projects receipt of $41.6 million of combined parcel tax revenues in fiscal year 2020-21.

Sales Tax – Proposition A. A special sales tax of 0.25% was approved by voters in 1993 and continues into perpetuity (also known as Proposition A). Portions of the sales tax revenues are allocated to the District and to San Francisco Community College District. The District estimates it received $35.3 million of Proposition A sales tax funds in fiscal year 2019-20, and projects receipt of $33.4 million in fiscal year 2020-21.

Public Education Enrichment Fund (PEEF). In March 2004, San Francisco voters approved Proposition H, establishing the Public Education Enrichment Fund (PEEF) within the San Francisco City Charter, Section 16.123.1-10. On November 4, 2014, San Francisco voters approved Proposition C, the “Children and Families First” initiative in order to guarantee funding for PEEF through fiscal year 2040-41. The City and County provides annual contributions from its general fund to PEEF, in order to fund the improvement of quality of education for the youth of San Francisco. PEEF funding is split into three equal portions, with one-third of funding dedicated to preschool support, one-third dedicated to sports, libraries, arts and music (“SLAM funding”) and one-third dedicated as discretionary funding for other general uses programs such as wellness centers, student support professional, translation and peer resources. The funds allocated to SLAM funding and other general uses are allocated to and managed by the District. The District’s PEEF allocation for fiscal year 2019-20 was approximately $77.4 million and is projected to decrease to approximately $76.7 million for fiscal year 2020-21. The District’s allocation in fiscal years 2010-11 through 2040-41 is required to equal the amount for the prior fiscal year adjusted by the percentage of increase or decrease in the City and County’s discretionary general fund revenues for that year. The District receives two–thirds of its annual PEEF allocation from the City and County with the remaining one–third going to the City and County’s Department of Early Care and Education for support to preschool.

Rainy Day Reserve. In addition, Proposition C further separated the City and County’s previously established Rainy Day Reserve into a City Rainy Day Reserve and a School Rainy Day Reserve. If the City and County collects revenue that exceeds the revenue of the previous year by 5% or more, the City and County is required to deposit half of the excess revenue above the 5% increase into the Rainy Day Reserve; 75% of which is deposited into the City and County Rainy Day Reserve and 25% of which is deposited into the School Rainy Day Reserve. Proposition C further establishes the conditions and procedures pursuant to which the District can access funds in the School Rainy Day Reserve.

The District has budgeted to make a draw of approximately $33.5 million on its share of the School Rainy Day Reserve in fiscal year 2020-21, which represents a draw of substantially all of the remaining funds held in such fund. See “DISTRICT FINANCIAL AND OPERATING INFORMATION – District Cash Flows – Exhibit III – Fiscal Year 2020-21 Projected General Fund Cash Flows.”

District Expenditures

Employment. The largest part of each school district’s general fund budget is used to pay salaries and benefits of certificated (credentialed teaching) and classified (non-instructional) employees. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels, negotiated salary increases, and the overall cost of employee benefits.

29 The District employs approximately 8,911.0 FTE employees, consisting of 5,197.0 FTE non- management certificated employees, 580.0 FTE management, supervisor and confidential employees, and 3,134.0 FTE classified non-management employees. For fiscal year 2019-20, the total certificated and classified payrolls were estimated to be approximately $402.6 million and $131.0 million, respectively. For fiscal year 2020-21, the total certificated and classified payrolls are projected to be approximately $403.9 million and $138.5 million, respectively.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Labor Organizations

Employees Contract Employee Group Labor Organization Represented(1) Expiration(2) Certificated United Educators of San Francisco 4,541 June 30, 2020 Paraprofessional United Educators of San Francisco 1,792 June 30, 2020 Classified Service Employees International Union, 1,147 June 30, 2020 Local 1021 Classified The International Federation Of Professional 80 June 30, 2020 and Technical Engineers, Local 21 ProTech and Non ProTech Units Classified International Brotherhood Of Electrical 9 June 30, 2020 Workers, Local 6 Classified International Union of Operating Engineers, 12 June 30, 2020 Stationary Engineers Local 39, AFL-CIO Classified Laborer’s International Union Of North 8 June 30, 2020 America AFL-CIO, Local 261 Classified Glaziers, Local 718 4 June 30, 2020 Classified Iron Workers, Local 377 2 June 30, 2020 Classified Roofers and Waterproofers, Local 40 2 June 30, 2020 Classified Carpenters and Locksmith, Local 22 12 June 30, 2020 Classified Auto, Marine and Specialty Painters, 5 June 30, 2020 Local 1176 Classified Sheet Metal Workers, Local 104 5 June 30, 2020 Classified Plumbers, Local 38 5 June 30, 2020 Classified Teamsters, Local 853 6 June 30, 2020 Classified Auto Mechanics, Local 1414 0 June 30, 2020 Supervisory/Other United Administrators of San Francisco 309 June 30, 2020 Total 7,939

(1) Includes full-time and part-time employees (not FTEs). (2) The District is in the process of negotiating successor contracts with all District labor organizations. This process has been significantly delayed due to COVID-19 and the need to negotiate new agreements specific to distance learning and socially distanced working conditions. On February 23, 2021, the Board ratified a memorandum of understanding between the District and its labor organizations regarding health and safety standards with respect to reopening schools for in-person instruction. Source: The District.

Compensated Absences (Vacation). The long-term portion of accumulated and unpaid employee vacation for the District as of June 30, 2019, was $14,948,673. The District expects the accumulated and unpaid employee vacation for the District as of June 30, 2020, to be $13,646,306.

Retirement Programs. The District participates in retirement plans with the State Teachers Retirement Plan administered by the California State Teachers Retirement System (“CalSTRS”) which covers certificated employees hired as of or after July 1, 1972. Classified employees and certain certificated employees hired prior to July 1, 1972 are eligible to participate in the single-employer San

30 Francisco Employees’ Retirement System (“SFERS”). The District also provides pension benefits to employees not eligible for CalSTRS or SFERS systems.

CalSTRS. The CalSTRS defined benefit pension plan provides retirement benefits (generally 2% of final compensation for each year of credited service) to participating employees based on hiring date, age, final compensation and years of credited service. The CalSTRS benefit pension plan is funded through a combination of investment earnings and statutorily set contributions from participating employees, employers (including the District) and the State. Prior to fiscal year 2014-15, the statutorily set rates did not vary annually to adjust for funding shortfalls or actuarial surpluses. As a result, the combined employee, employer and State contributions to CalSTRS were not sufficient to pay actuarially determined amounts. To address the shortfall and implement a new funding strategy, Governor Brown signed into law Assembly Bill 1469 on June 24, 2014, as part of the fiscal year 2014-15 State budget (the “2014-15 State Budget”). The 2014-15 State Budget introduced phased increases to employee, employer and State contributions to CalSTRS and sets forth a plan to eliminate CalSTRS’ unfunded liability by June 30, 2046.

The 2014-15 State Budget increased employee contributions, which were previously set at 8.00% of pay, to 10.25% of pay for members hired on or before December 31, 2012 and 9.205% of pay for members hired on or after January 1, 2013 effective July 1, 2016. On July 1, 2018, the rate increased to 10.250% of pay for employees hired on or after January 1, 2013. Employer contribution rates were also increased in fiscal year 2014-15 to 8.88% of payroll, with such rate increasing by 1.85% each year thereafter, plateauing at 19.10% of payroll in July 2020. However, due to supplemental payments of approximately $850 million pursuant to the 2019-20 State Budget, employer contribution rates are expected to decrease from 18.13% to 17.10% in fiscal year 2019-20 and 19.10% to 18.40% in fiscal year 2020-21 (see table below). The State’s total contribution was increased from approximately 3% in fiscal year 2013-14 to 6.828% of payroll in fiscal year 2017-18, and to 10.828% of payroll in fiscal year 2020- 21. The State’s contribution includes an annual payment of 2.5% of payroll pursuant to a supplemental inflation protection program.

Pursuant to the 2014-15 State Budget, employer contribution rates, including school districts’ contribution rates, will increase in accordance with the following schedule:

Effective Date School District (July 1) Contribution Rate 2014 8.88% 2015 10.73 2016 12.58 2017 14.43 2018 16.28 2019 17.10* 2020 16.15*†

* Pursuant to the 2019-20 State Budget. † The 2020-21 State Budget redirects funds paid to CalSTRS towards long-term unfunded liabilities to further reduce employer contribution rates in fiscal years 2020-21 and 2021-22. This reallocation reduced the CalSTRS employer contribution rate to approximately 16.15% in fiscal year 2020-21 and is projected to be 16.02% in fiscal year 2021-22. See “– State Budget – 2020-21 State Budget.” Source: Assembly Bill 1469.

31 The following table sets forth the District’s employer contributions to CalSTRS for fiscal years 2012-13 through 2018-19, the estimated contributed for fiscal year 2019-20 and the projected contribution for fiscal year 2020-21.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT AND COUNTY OFFICE OF EDUCATION (City and County of San Francisco, California) Annual CalSTRS Contributions Fiscal Years 2012-13 through 2020-21 Fiscal Year Amount 2012-13 $23,740,327 2013-14 24,777,345 2014-15 27,914,797 2015-16 35,778,381 2016-17 45,485,630 2017-18 53,763,701 2018-19 58,925,984 2019-20(1) 68,641,832 2020-21(2) 61,139,508 ______(1) Estimated. (2) Estimated based on fiscal year 2020-21 first interim budget. Source: The District.

The District’s total employer contributions to CalSTRS for fiscal years 2012-13 through 2019-20 were equal to 100% of the required contributions for each year. Pursuant to the 2014-15 State Budget, beginning in fiscal year 2021-22, the State Teachers Retirement Board is required to increase or decrease employer contribution rates to the rates designed to eliminate the CalSTRS unfunded liability by June 30, 2046. A decrease in investment earnings may result in increased employer contribution rates in order to timely eliminate the CalSTRS unfunded liability. As the world is currently experiencing a pandemic, the District cannot predict the impact of the outbreak of COVID-19 on investment earnings and employer contribution rates. See “MISCELLANEOUS – Risks Related to COVID-19.” However, under existing law, the State Teachers Retirement Board may not increase the employer contribution rate by more than 1% in any fiscal year up to a maximum contribution rate of 20.25%. The State Teachers Retirement Board may also adjust the State’s contribution rate by a maximum of 0.5% from year to year, based on the funding status of the CalSTRS actuarially determined unfunded liability.

CalSTRS has a substantial statewide unfunded liability. The amount of this unfunded liability will vary depending on actuarial assumptions, returns on investments, salary scales and participant contributions. The following table summarizes information regarding the actuarially-determined accrued liability for CalSTRS. Actuarial assessments are “forward-looking” information that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

32 FUNDED STATUS CalSTRS Defined Benefit Program Dollar Amounts in Millions(1) Fiscal Years 2010-11 through 2018-19

Value of Value of Trust Unfunded Trust Unfunded Fiscal Accrued Assets Liability Assets Liability Year Liability (MVA)(2) (MVA)(2) (AVA)(3) (AVA)(3) 2010-11 $208,405 $147,140 $68,365 $143,930 $64,475 2011-12 215,189 143,118 80,354 144,232 70,957 2012-13 222,281 157,176 74,374 148,614 73,667 2013-14 231,213 179,749 61,807 158,495 72,718 2014-15 241,753 180,633 72,626 165,553 76,200 2015-16 266,704 177,914 101,586 169,976 96,728 2016-17 286,950 197,718 103,468 179,689 107,261 2017-18 297,603 211,367 101,992 190,451 107,152 2018-19 310,719 225,466 102,636 205,016 105,703 ______(1) Totals may not add due to rounding. (2) Reflects market value of assets, including the assets allocated to the Supplemental Benefit Protection Account (“SBPA”) reserve. Since the benefits provided through the SBPA are not a part of the projected benefits included in the actuarial valuations summarized above, the SBPA reserve is subtracted from the CalSTRS defined benefit program assets to arrive at the value of assets available to support benefits included in the respective actuarial valuations. (3) Reflects actuarial value of assets. Source: The District.

As of June 30, 2019, the actuarial valuation (the “2019 CalSTRS Actuarial Valuation”) for the entire CalSTRS defined benefit program showed an estimated unfunded actuarial liability of $105.7 billion, a decrease of approximately $1.5 billion from the June 30, 2018 valuation. The funded ratios of the actuarial value of valuation assets over the actuarial accrued liabilities as of June 30, 2019 and June 30, 2018, based on the actuarial assumptions, were approximately 66.0% and 64.0%, respectively. According to the 2019 CalSTRS Actuarial Valuation, the funded ratio increased by 2.0% during the past year and has decreased by approximately 12% over the past 10 years. As described in the 2019 CalSTRS Actuarial Valuation, the additional State contribution and the return on the actuarial value of assets (7.7%) that exceeded the assumed return (7%) were the primary causes of the increase in the funded ratio from the prior year valuation. Future estimates of the actuarial unfunded liability may change due to market performance, legislative actions and other experience that may differ from the actuarial assumptions used for the CalSTRS valuation. The following are certain of the actuarial assumptions set forth in the 2019 CalSTRS Actuarial Valuation: measurement of accruing costs by the “Entry Age Normal Actuarial Cost Method,” an assumed 7.00% investment rate of return for measurements subsequent to June 30, 2016, 3.00% interest on member accounts, 3.50% projected wage growth, and 2.75% projected inflation and demographic assumptions relating to mortality rates, length of service, rates of disability, rates of withdrawal, probability of refund, and merit salary increases. The 2019 CalSTRS Actuarial Valuation also assumes that all members hired on or after January 1, 2013 are subject to the provisions of PEPRA (as defined herein). See “− California Public Employees’ Pension Reform Act of 2013” below for a discussion of the pension reform measure signed by the Governor in August 2012 expected to help reduce future pension obligations of public employers with respect to employees hired on or after January 1, 2013.

CalSTRS produces a comprehensive annual financial report and actuarial valuations which include financial statements and required supplementary information. Copies of the CalSTRS comprehensive annual financial report and actuarial valuations may be obtained from CalSTRS. The information presented in these reports is not incorporated by reference in this Official Statement.

33 SFERS. SFERS is charged with administering a defined benefit pension plan that covers substantially all City employees and certain other employees. At its January 2015 meeting, after review of the analysis and recommendation prepared by the consulting actuarial firm, the Retirement Board of SFERS (the “SFERS Retirement Board”) voted to change SFER’s long-term investment earnings assumption from 7.50% to 7.58%, long-term wage/inflation assumption from 3.83% to 3.75% and long- term consumer prices index assumption from 3.33% to 3.25%. These economic assumptions together with demographic assumptions based on periodic demographic studies are utilized to prepare the actuarial valuation of SFERS each year. Upon receipt of the consulting actuarial firm’s valuation report, SFERS staff provides a recommendation to the SFERS Retirement Board for their acceptance of the consulting actuary’s valuation report. In connection with such acceptance, the SFERS Retirement Board acts to set the annual employer contribution rates required by SFERS as determined by the consulting actuarial firm and approved by the SFERS Retirement Board.

In accordance with the Charter of the City and County, District participants contribute 7.5% to 13.5% of their salaries to SFERS. The funding policy of SFERS provides for actuarially determined periodic contributions by the District at rates such that sufficient assets will be available to SFERS to pay District participants’ benefits when due. The employer contribution rate for fiscal year 2018-19 was 7.5% to 12.0% of covered payroll and is estimated to be 21.69% and 23.40% for fiscal years 2019-20 and 2020- 21, respectively. As the world is currently experiencing a pandemic, the District cannot predict the impact of the outbreak of COVID-19 on investment earnings of the SFERS retirement system, which could materially increase the unfunded actuarial accrued liability of the SFERS retirement system, which, in turn, could result in material changes to the District’s required contribution rates in future fiscal years.

A history of the system-wide required contributions as well as the District’s and the County Office of Education’s combined contributions to SFERS are set forth below. The District’s portion of historical contributions have equaled 100% of the required contribution for each of the relevant fiscal years.

SAN FRANCISCO CITY AND COUNTY EMPLOYEES’ RETIREMENT SYSTEM Schedule of Employer Contributions Fiscal Years 2011-12 through 2016-17 ($ in thousands)

System-Wide District and Annual County Office of Education Year Ended Required Percentage Annual Required Percentage June 30 Contribution Contributed Contribution Contributed 2012 $410,797 100.0% $11,692 100.0% 2013 442,870 100.0 12,388 100.0 2014 532,882 100.0 15,858 100.0 2015 592,643 100.0 18,475 100.0 2016 526,805 100.0 15,732 100.0 2017 551,809 100.0 17,082 100.0 ______Source: The District.

34 SAN FRANCISCO CITY AND COUNTY EMPLOYEES’ RETIREMENT SYSTEM Schedule of Employer Contributions Fiscal Years 2017-18 through 2018-19 ($ in thousands)

System-Wide District and Actuarially County Office of Education Year Ended Required Percentage Actuarially Required Percentage June 30 Contribution Contributed Contribution Contributed 2018 $619,067 100.0% $19,530 100.0% 2019 645,056 100.0 20,496 100.0 ______Source: The District.

The following table sets forth the maximum employer contribution rates for fiscal years 2011-12 through 2020-21.

CITY AND COUNTY OF SAN FRANCISCO San Francisco Employment Retirement System Fiscal Years 2011-12 through 2020-21

Fiscal Year ended Maximum Employer June 30 Contribution Rates 2012 18.09% 2013 20.71 2014 24.82 2015 26.76 2016 22.80 2017 21.40 2018 23.46 2019 23.31 2020 25.19 2021 36.90 ______Source: SFERS’ Actuarial Valuation reports as of July 1, 2019, July 1, 2018, July 1, 2017, July 1, 2016, July 1, 2015, July 1, 2014, July 1, 2013, July 1, 2012 and July 1, 2011.

35 The following table sets forth SFERS’ schedule of funding progress for fiscal years 2009-10 through 2018-19.

CITY AND COUNTY OF SAN FRANCISCO San Francisco Employee Retirement System Fiscal Years 2009-10 through 2018-19 ($ in thousands)

Unfunded AL Actuarial Actuarial as a % of Valuation Date Value of Actuarial Funded Covered Covered (July 1) Assets Liability (AL) Unfunded AL Ratio Payroll Payroll 2010 $16,069,058 $17,643,394 $1,574,336 91% $2,398,823 66% 2011 16,313,120 18,598,728 2,285,608 88 2,360,413 97 2012 16,027,683 19,393,854 3,366,171 83 2,393,842 141 2013 16,303,397 20,224,776 3,921,379 81 2,535,963 155 2014 18,012,088 21,122,567 3,110,479 85 2,640,153 118 2015 19,653,338 22,907,892 3,254,554 86 2,820,968 115 2016 20,654,703 24,403,882 3,749,179 85 3,062,422 122 2017 22,185,244 25,706,090 3,520,846 86 3,242,468 109 2018 23,866,027 27,335,147 3,469,390 87 3,385,517 102 2019 25,247,549 28,798,581 3,551,032 88 3,549,936 100 ______Source: SFERS’ Actuarial Valuation report as of July 1, 2019.

Governor’s Pension Reform. On August 28, 2012, Governor Brown and the State Legislature reached agreement on a law that reforms pensions for State and local government employees. AB 340, which was signed into law on September 12, 2012, established the California Public Employees’ Pension Reform Act of 2012 (“PEPRA”) which governs pensions for public employers and public pension plans on and after January 1, 2013. For new employees, PEPRA, among other things, caps pensionable salaries at the Social Security contribution and wage base, which is $137,300 for 2020, or 120% of that amount for employees not covered by Social Security, increases the retirement age by two years or more for all new public employees while adjusting the retirement formulas, requires State employees to pay at least half of their pension costs, and also requires the calculation of benefits on regular, recurring pay to stop income spiking. For all employees, changes required by PEPRA include the prohibition of retroactive pension increases, pension holidays and purchases of service credit. PEPRA applies to all State and local public retirement systems, including county and district retirement systems. PEPRA only exempts the University of California system and charter cities and counties whose pension plans are not governed by State law.

The District is unable to predict what the amount of State pension liabilities will be in the future, or the amount of the contributions which the District may be required to make. CalSTRS and SFERS are more fully described in Note 13 to the District’s financial statements attached hereto as APPENDIX C – “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019.”

Other Post-Employment Benefits. The District provides medical insurance benefits to eligible retirees and their spouses. To be eligible for retiree health benefits, employees hired after January 9, 2009 must have at least five years of credited service with a City employer: City and County of San Francisco, San Francisco Unified School District, San Francisco Community College District, or San Francisco Superior Court. Different premium contribution rates apply for classified employees hired after January 9, 2009, based on years of credited service with the City and County employers.

36 • With at least 5 years, but less than 10 years of credited service, the retiree member must pay the full premium rate and does not receive any employer premium contribution.

• With at least 10 years but less, than 15 years of credited service, the retiree will receive 50% of the employer premium contribution for themselves and eligible dependents.

• With at least 15 years, but less than 20 years of credited service, the retiree will receive 75% of the employer premium contribution for themselves and eligible dependents.

• With 20 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

Certificated teachers hired after July 1, 2004, with 20 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

Paraprofessionals hired after July 1, 2004, with 10 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

Employees who separated service from a City employer before June 30, 2001 and retire after January 6, 2012 receive the employer health premium subsidies in effect at the time of their separation. The retiree member receives 100% of the employer premium contribution defined by the City and County Charter. The retiree pays the full premium for any other enrolled dependents.

In 2017, the District implemented GASB Statement Number 75 (“Statement Number 75”). Under Statement Number 75, net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees that is attributed to those employees’ past periods of service (“total OPEB liability”), less the amount of the OPEB plan’s fiduciary net position. The District’s total OPEB liability as of June 30, 2019 was $756.5 million. During the year ended June 30, 2019, the District contributed $25.4 million to an irrevocable trust that will be reflected in the net OPEB liability as of June 30, 2020. During the year ended June 30, 2019, the District recognized OPEB expense of $80.5 million. The District has established both an internal service fund and an irrevocable trust with respect to funding its accrued OPEB liability. See APPENDIX C – “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 11 for additional information regarding the OPEB obligation and the postemployment benefits plan.

37 The following table sets forth the District’s and the County Office of Education’s combined annual payments on post-employment benefits for fiscal years 2012-13 through 2019-20 and a projected amount for fiscal year 2020-21.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT AND COUNTY OFFICE OF EDUCATION Annual OPEB Payments Fiscal Years 2012-13 through 2020-21 ($ in Millions)

Fiscal Year Payment Amount(1) 2012-13 $33.9 2013-14 34.5 2014-15 35.2 2015-16 31.3 2016-17 31.1 2017-18 30.7 2018-19 30.6 2019-20 31.8 2020-21(2) 27.9 ______(1) Includes $2.0 million of funds that were deposited in each respective year through 2016-17 in a separate fund to offset a portion of the District’s OPEB liability. (2) Projected. Anticipated payments have decreased due to a recalculation of residents attending charter schools. Source: The District.

Charter Schools

Independent charter schools operate as autonomous public schools, under charter from a school district, county office of education, or the State Board of Education, with minimal supervision by the local school district. Independent charter schools receive revenues from the State and from the District for each student enrolled, and thus effectively reduce revenues available for students enrolled in District schools. The District is also required to accommodate charter school students originating in the District in facilities comparable to those provided to regular District students.

Fourteen independent charter schools for which the District is the charter-approving agency, inclusive of three (3) elementary schools, three (3) intermediate/middle schools, and eight (8) high schools, currently operate in the District’s boundaries. The District estimates that the combined attendance of the charter schools is approximately 7,101 students.

In the 2020-21 school year, there will also be two State Board of Education authorized charter schools operating in the District.

The District pays revenue in lieu of property taxes based on each charter school’s individual LCFF calculation. For fiscal year 2019-20, the District estimates a total transfer of in lieu payments to charter schools in the District of approximately $29.8 million. For fiscal year 2020-21, the District has budgeted a total transfer of in lieu payments to charter schools in the District of approximately $39.8 million.

38 Summary of District Revenues and Expenditures

The following table summarizes the District’s general fund revenues, expenditures and fund balances from fiscal years 2015-16 through 2018-19 (audited) and 2019-20 (unaudited actuals). See “SCHOOL DISTRICT BUDGET PROCEDURES AND REQUIREMENTS – District Budget Process and City and County Review” herein for a general description of the annual budget process for State school districts. The District’s audited financial statements for the year ending June 30, 2019 are reproduced in APPENDIX B. Audited financial statements for the year ending June 30, 2020, will be completed by March 15, 2021, under direction of the California Department of Education.

The District is required by State law and regulation to maintain various reserves. The District is generally required to maintain a reserve for economic uncertainties in the amount of 2.0% of its total general fund expenditures, based on total student attendance. For fiscal year 2020-21, the District has projected an unrestricted general fund reserve of 2.0%, or approximately $18.2 million. Additionally, as of the District’s First Interim Financial Report for fiscal year 2020-21, the District held $10.4 million in a COVID-19 reserve to address distance learning and reopening needs. Should the District need to reopen schools, such portion of the unrestricted general fund reserve earmarked for costs associated with COVID-19, could be promptly drawn down, in whole or in part. Substantially all funds of the District are required by law to be deposited with and invested by the Treasurer on behalf of the District, pursuant to law and the investment policy of the County. See APPENDIX D – “CITY AND COUNTY OF SAN FRANCISCO INVESTMENT POLICY AND INVESTMENT REPORT.”

39 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) General Fund Revenues, Expenditures and Fund Balances Fiscal Years 2015-16 through 2019-20

2019-20 2015-16 2016-17 2017-18 2018-19 Unaudited Actual Actual Actual Actual Actuals(1) REVENUE/RECEIPTS LCFF Sources $475,932,385 $488,143,276 $501,472,812 $522,498,955 $534,482,712 Federal Sources 29,374,279 29,930,570 25,568,806 22,289,023 23,394,722 Other State Sources 75,654,380 60,363,936 51,171,759 48,876,324 81,235,754 Other Local Sources(2) 189,349,630 191,451,049 202,436,343 273,621,340 255,893,649 TOTAL $770,310,673 $769,888,831 $780,649,720 $867,285,642 $895,006,838

EXPENDITURES/ DISBURSEMENTS Certificated Salaries $277,893,868 $300,792,569 $347,050,985 $381,939,507 $402,586,963 Classified Salaries 80,068,179 88,601,739 114,046,586 125,392,412 130,964,574 Employee Benefits 152,218,679 159,861,869 177,319,449 192,647,778 241,358,856 Books and Supplies 27,789,158 26,130,848 24,911,809 24,745,850 25,088,458 Services/Other Operating 68,208,865 73,209,676 82,507,328 77,022,563 74,784,051 Expenditures Capital Outlay 773,014 2,742,719 5,604,464 7,496,499 3,389,681 Other Outgo(3) 94,289,238 101,132,437 37,990,004 38,408,279 51,106,155 Other Outgo -Transfers of Indirect Costs - - - - (2,620,621) Debt Service - Interest 3,143,303 1,278,838 - - - TOTAL $704,384,304 $753,750,695 $789,430,625 $847,652,888 $926,658,117

Excess (Deficiency) of Revenues $65,926,370 $16,138,136 $(8,780,905) $19,632,754 $(31,651,279) Over (Under) Expenditures

OTHER FINANCING SOURCES/(USES) Transfers In/Other Sources - - - - - Transfers Out/Other Uses(4) $(16,659,311) $(13,453,976) $(13,795,740) $(12,525,469) $(11,364,977) TOTAL $(16,659,311) $(13,453,976) $(13,795,740) $(12,525,469) $(11,364,977)

EXCESS OF REVENUE, OTHER $49,267,059 $2,684,160 $(22,576,645) $7,107,285 $(43,016,256) SOURCES OVER/ (UNDER) EXPENDITURES, OTHER USES

Fund Balance, beginning of year $69,316,503 $118,583,562 $121,267,722 $98,691,077 $105,798,362

Fund Balance, end of year $118,583,562 $121,267,722 $98,691,077 $105,798,362 $62,782,106

(1) Columns may not sum to totals due to rounding. (2) Increase in Other Local Sources in fiscal year 2018-19 were due to funding increases to PEEF as well as increases seen as a result of the implementation of the Quality Teacher and Education Act and the Living Wage Educators Act. (3) Decreases in Other Outgo for fiscal years 2017-18 through 2019-20 were due to reductions in general transfer levels, relating to the District’s expenditures on special education staff to meet requirements of the California Education Authority and California Department of Education. (4) Transfers out have been directed to the Cafeteria Fund, the Child Development Fund, and the Special Reserve Fund for capital. In fiscal years 2015-16 and 2017-18, transfers out were also made to the Deferred Maintenance Fund. Sources: District audited actuals for fiscal years 2015-16 through 2018-19; Adopted Budget for fiscal year 2020-21.

The following table sets forth the budgeted revenues, expenditures and changes in fund balances for the District’s general fund for the fiscal year 2020-21. Certain adjustments may be made throughout the year based on actual State funding and actual District revenues and tax collections. The District cannot make any predictions regarding the disposition of additional pending budget legislation or its

40 effect on the District. The Board will consider approval of the District’s Second Interim Financial Report for fiscal year 2020-21 at its meeting on March 9, 2021, at which time such report will be publicly available on the District’s website. The District’s budget is a planning tool, and does not represent a prediction as to the actual achievement of any budgeted revenues or fund balances.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Budgeted General Fund Summary for Fiscal Year 2020-21(1)

Adopted Recertified First Interim Budget(2) Budget(3) Budget(4) REVENUES LCFF Sources $535,116,608 $531,822,491 $531,822,491 Federal Revenue 25,369,506 25,369,506 72,285,493 Other State Revenue 76,395,870 70,639,352 36,188,579 Other Local Revenue(5) 244,625,304 259,625,304 252,283,552 TOTAL $881,507,288 $887,456,653 $892,580,115

EXPENDITURES Certificated Salaries $379,988,211 $397,988,211 $404,160,806 Classified Salaries 130,585,236 135,085,236 138,741,279 Employee Benefits 199,445,035 199,445,035 202,925,105 Books and Supplies 20,079,885 20,079,885 24,709,821 Services/Other Operating Expenditures 72,362,595 72,362,595 77,622,219 Other Outgo - Transfers of Indirect Costs 53,667,956 53,667,956 42,667,956 Other Outgo (excluding Transfers of Indirect Costs) (2,646,703) (2,646,703) (2,646,703)

Capital Outlay 391,662 391,662 6,252,630 TOTAL $853,873,878 $876,373,877 $894,433,113

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES $27,633,410 $11,082,776 $(1,852,998)

OTHER FINANCING SOURCES (USES) Transfers In - - - Transfers Out(6) $(14,705,642) $(14,705,642) $(19,705,642) TOTAL OTHER FINANCING SOURCES (USES) $(14,705,642) $(14,705,642) $(19,705,642)

NET CHANGE IN FUND BALANCE $12,927,768 $(3,622,866) $(21,558,640)

Fund Balance – Beginning(7) $82,245,295 $82,245,295 $62,782,106 Fund Balance – Ending $95,173,064 $78,622,429 $41,223,466 ______(1) Totals may not add due to rounding. (2) Adopted budget for fiscal year 2020-21, approved as of July 1, 2020. (3) The District recertified its budget on August 11, 2020, within 45 days of initial adoption. (4) First interim budget for fiscal year 2020-21, approved by the Board on December 8, 2020. (5) The recertified budget includes $15 million in new funding support for the District as part of the City and County’s fiscal year 2020-21 and fiscal year 2021-22 budget, which has yet to be finalized and approved by the City and County. See “– Impacts to District Operations and Budget Due to COVID-19 Pandemic – Fiscal Year 2020-21.” (6) Transfers out have been directed to the Cafeteria Fund, the Child Development Fund, and the Special Reserve Fund for capital. (7) Beginning balance for the adopted budget and recertified budget reflects the best estimate of such balance at the time of adoption. The beginning balance for the first interim reflects updates based on the data at the year-end close. The beginning balance for the first interim has been adjusted to correct for the true fiscal year 2019-20 ending fund balance. Source: The District.

41 District Cash Flows

General. The District’s general fund expenditures tend to be heaviest in the middle and end of the school year and lightest during the summer months. Receipts follow an uneven pattern, primarily because secured tax installment payment dates are in December and April. The District exercises virtually no control over the amount or timing of its own revenues. The level of receipts depends on assessed value of taxable property and State income. See “State Funding of Education; State Budget Process” above. The timing of receipt of State funds is dictated by statute. The timing of receipt of local property tax revenues depends on City and County policy. The timing and level of expenditures are largely predictable, depending primarily on scheduled employee payrolls and benefits payments as negotiated with employee labor organizations for the current year.

History of Tax and Revenue Anticipation Note Issuance. To address predictable annual cash flow deficits resulting from the different timing of revenues and expenditures, the District has issued tax and revenue anticipation notes in each recent year as shown in the following table. The District’s notes are a general obligation of the District, payable from the District’s general fund and any other lawfully available moneys.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Tax and Revenue Anticipation Notes

Issuance Date Principal Amount Interest Rate Yield Maturity Date 7/1/2011 $80,000,000 2.00% 0.290% 6/29/2012 8/27/2012 85,000,000 2.00 0.190 6/28/2013 8/15/2013 90,000,000 2.00 0.179 8/14/2014 9/25/2014 52,000,000 5.00 0.130 9/24/2015 9/17/2015 60,000,000 5.00 0.190 8/31/2016 9/30/2016 45,000,000 2.00 0.750 8/31/2017

Source: San Francisco Unified School District.

General Fund Cash Flows. Exhibits I, II, III and IV below show actual General Fund cash receipts and disbursements for fiscal year 2018-19, estimated General Fund cash receipts and disbursements from fiscal year 2019-20, projected cash receipts and disbursements for fiscal year 2020-21 and partial year projected cash receipts and disbursements for fiscal year 2021-22, respectively. The estimates and timing of receipts and disbursements in such projected cash flow analyses are based on certain assumptions and should not be construed as statements of fact. The cash flow projections represent the current best estimates of the District based on information available as of the date of the projections, including the most recent revisions to the State’s funding of school districts. However, due to the uncertainties inherent in the State’s distribution of education funding to school districts, these projections are subject to change and may vary considerably from actual cash flows experienced by the District during fiscal years 2020-21 and 2021-22. Moreover, payment of State assistance in the amounts anticipated depends on the State adhering to its then-current budget, including the appropriations therein provided for local assistance. See “– State Funding of Education; State Budget Process” above.

42 Exhibit I SAN FRANCISCO UNIFIED SCHOOL DISTRICT Fiscal Year 2018-19 Actual General Fund Cash Flows

July August September October November December January February March April May June 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 Totals BEGINNING CASH 167,605,794 121,293,506 65,372,545 6,699,893 22,235,978 560,459 69,978,790 27,576,223 6,984,953 71,791,956 163,531,492 159,218,460 167,605,794 RECEIPTS Revenue Limit Sources Principal Apportionment 5,061,578 5,061,578 11,649,386 9,110,840 9,110,840 11,649,385 9,110,840 40,375,158 53,481,882 40,375,158 40,375,158 32,401,910 267,763,713 Property Taxes - (3,249,633) (6,499,267) 6,828,174 (4,332,845) 81,421,996 (2,716,575) 46,845,744 (2,965,190) 108,840,915 623,681 29,938,242 254,735,242 Miscellaneous Funds ------Federal Revenue 32,160 68,023 28,273 3,341,545 2,196,770 1,599,679 7,824,472 210,117 6,502,969 944,929 (804,861) 517,948 22,462,024 Other State Revenue 175,595 175,000 708,852 6,181,152 480,517 4,463,492 7,815,924 4,369,689 7,020,726 818,766 557,065 69,067,188 101,833,966 Other Local Revenue 6,210,933 2,050,542 5,022,707 28,726,159 6,408,512 44,453,503 5,426,928 4,271,788 28,585,953 21,501,919 7,295,937 113,666,460 273,621,341 Interfund Transfers In ------Other Financing Sources ------Other Receipts/Non-Rev. ------TOTAL RECEIPTS 11,480,266 4,105,510 10,909,951 54,187,870 13,863,794 143,588,055 27,461,589 96,072,496 92,626,340 172,481,687 48,046,980 245,591,748 920,416,286 DISBURSEMENTS Certificated Salaries 5,275,662 29,807,784 31,793,300 31,380,249 31,432,158 31,595,574 30,335,995 31,200,336 31,637,850 31,157,903 32,734,077 63,588,619 381,939,507 Classified Salaries 5,326,001 6,808,619 10,589,011 14,874,053 10,314,028 10,277,936 9,507,020 10,324,380 10,526,209 15,737,403 10,675,473 10,432,279 125,392,412 Employee Benefits 3,867,840 12,051,971 19,346,959 18,386,274 16,324,668 16,308,971 16,215,200 15,799,187 16,220,584 19,216,902 17,063,531 74,976,335 245,778,422 Books, Supplies and Services 314,518 2,823,517 4,223,996 8,429,901 7,089,924 10,839,514 7,572,589 8,355,632 8,258,066 9,214,631 11,426,914 23,219,209 101,768,411 Capital Outlay 413 1,582,510 772,581 424,166 3,090 118,633 120,911 (125,648) 438,587 453,402 1,423,961 2,283,892 7,496,498 Other Outgo 5,275,662 29,807,784 31,793,300 31,380,249 31,432,158 31,595,574 30,335,995 31,200,336 31,637,850 31,157,903 32,734,077 63,588,619 381,939,507 Interfund Transfers Out 10,215,167 8,812,222 8,812,222 8,812,213 (22,154,200) 4,000,000 8,000,000 (4,597,055) 845,800 845,800 16,017,275 14,070,924 53,680,368 Other Financing Uses ------Other Disbursements/Non-Exp. (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (209,792) (438,909) (2,746,621) TOTAL DISBURSEMENTS 24,789,809 61,676,831 75,328,277 82,097,064 42,799,876 72,930,836 71,541,923 60,747,040 67,717,304 76,416,249 89,131,439 188,132,349 913,308,997 PRIOR YEAR TRANSACTIONS Accounts Receivable (10,477,930) (3,266,185) (6,546,179) (7,792,188) (2,818,863) 148,606,513 (1,235,032) (28,951,643) (39,846,038) (34,221,753) (35,249,325) (160,212,174) (182,010,797) Accounts Payable (43,480,675) (1,615,825) (800,505) 35,653,091 4,441,700 147,367,625 442,735 (84,868,369) 51,929 (38,547,655) 1,522,102 (277,770,873) (257,604,720) TOTAL PRIOR YEAR TRANSACTIONS NET INCREASE/DECREASE (46,312,288) (55,920,961) (58,672,652) 15,536,085 (21,675,519) 69,418,331 (42,402,567) (20,591,270) 64,807,003 91,739,536 (4,313,032) (60,099,300) (68,486,634) TRAN RECEIPTS TRAN DISBURSEMENTS ENDING CASH 121,293,506 65,372,545 6,699,893 22,235,978 560,459 69,978,790 27,576,223 6,984,953 71,791,956 163,531,492 159,218,460 99,119,160 99,119,160 ENDING CASH, PLUS ACCRUALS 121,293,506 65,372,545 6,699,893 22,235,978 560,459 69,978,790 27,576,223 6,984,953 71,791,956 163,531,492 159,218,460 99,119,160 99,119,160

43 Exhibit II SAN FRANCISCO UNIFIED SCHOOL DISTRICT Fiscal Year 2019-20 Actual Estimated General Fund Cash Flows

July August September October November December January February March April May June 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2020 Totals BEGINNING CASH 99,119,160 90,529,046 68,095,072 58,187,538 18,757,680 6,288,960 59,965,065 54,327,879 7,610,711 43,446,076 102,323,510 67,380,484 99,119,160 RECEIPTS Revenue Limit Sources Principal Apportionment 13,611,666 13,611,666 27,010,732 24,500,999 24,500,999 27,010,732 24,500,999 22,862,941 64,649,244 24,544,041 24,544,041 20,274,697 311,622,757 Property Taxes 2,976,504 5,256,056 (3,991,951) (2,621,760) 215,444 86,683,698 35,065,063 (2,676,342) (1,830,923) 83,133,484 9,200,835 11,449,848 222,859,956 Miscellaneous Funds ------Federal Revenue 172,304 19,286 63,596 673,159 1,462,869 789,911 3,132,702 346,463 7,309,698 1,574,564 992,628 6,857,542 23,394,722 Other State Revenue 191,650 4,066,962 650,083 376,935 340,425 5,024,302 10,761,639 331,611 3,144,723 4,190,648 317,475 51,839,301 81,235,754 Other Local Revenue 2,033,532 2,834,338 37,822,481 18,904,837 6,215,252 48,295,376 4,902,474 6,016,940 31,402,706 22,553,330 4,448,164 70,464,218 255,893,648 Interfund Transfers In ------Other Financing Sources ------Other Receipts/Non-Rev. ------TOTAL RECEIPTS 18,985,656 25,788,308 61,554,941 41,834,170 32,734,989 167,804,019 78,362,877 26,881,613 104,675,448 135,996,067 39,503,143 160,885,606 895,006,837 DISBURSEMENTS Certificated Salaries 5,320,622 31,615,181 33,562,557 32,730,579 33,281,943 33,302,313 34,639,386 32,991,709 32,938,235 33,091,804 33,848,116 65,264,518 402,586,963 Classified Salaries 5,942,873 7,243,070 10,624,523 15,869,026 10,911,221 10,425,017 9,907,576 10,654,262 15,781,556 10,350,858 10,755,766 12,498,826 130,964,574 Employee Benefits 3,977,962 13,353,565 21,001,843 20,010,933 17,676,481 17,629,005 18,240,058 18,021,026 20,585,710 17,985,064 18,224,353 54,652,856 241,358,856 Books, Supplies and Services 430,266 3,432,001 4,585,367 6,527,655 11,405,587 7,491,489 8,747,219 9,148,704 8,176,626 8,612,009 5,582,187 25,733,400 99,872,510 Capital Outlay (250) (31) 314,612 90,868 295,386 244,111 41,858 155,700 83,343 65,471 140,182 1,958,431 3,389,681 Other Outgo ------Interfund Transfers Out 5,231,143 3,786,109 3,786,109 7,786,109 12,895,418 4,982,963 6,426,484 7,046,954 (8,354,639) 6,645,361 6,728,570 5,510,550 62,471,131 Other Financing Uses ------Other Disbursements/Non-Exp. (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) (249,027) 118,676 (2,620,621) TOTAL DISBURSEMENTS 20,653,589 59,180,868 73,625,984 82,766,143 86,217,009 73,825,871 77,753,554 77,769,328 68,961,804 76,501,540 75,030,147 165,737,257 938,023,094 PRIOR YEAR TRANSACTIONS Accounts Receivable (4,709,603) (11,189,757) (3,100,715) (1,666,744) (839,731) (58,644) (451,424) (1,439,647) 12,772 (624,894) (816,156) 74,185,646 49,301,103 Accounts Payable (11,631,784) (231,171) (937,206) (164,629) 40,173,569 (40,360,688) (6,697,933) 2,730,900 134,493 (1,241,987) (232,178) 36,448,856 17,990,242 TOTAL PRIOR YEAR TRANSACTIONS NET INCREASE/DECREASE (8,590,114) (22,433,974) (9,907,534) (39,429,858) (12,468,720) 53,676,105 (5,637,186) (46,717,168) 35,835,365 58,877,434 (34,943,026) (42,588,441) (74,327,117) TRAN RECEIPTS TRAN DISBURSEMENTS ENDING CASH 90,529,046 68,095,072 58,187,538 18,757,680 6,288,960 59,965,065 54,327,879 7,610,711 43,446,076 102,323,510 67,380,484 24,792,043 24,792,043 ENDING CASH, PLUS ACCRUALS 90,529,046 68,095,072 58,187,538 18,757,680 6,288,960 59,965,065 54,327,879 7,610,711 43,446,076 102,323,510 67,380,484 24,792,043 24,792,043

44 Exhibit III

SAN FRANCISCO UNIFIED SCHOOL DISTRICT Fiscal Year 2020-21 Projected General Fund Cash Flows

July August September October November December January February March April May June 2020 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021 2021 Totals BEGINNING CASH 24,792,043 65,542,128 22,538,889 29,037,340 9,260,669 644,519 126,434,770 93,044,745 31,490,068 (1,367,300) 31,808,545 (38,919,179) 24,792,043 RECEIPTS Revenue Limit Sources Principal Apportionment(1) 13,457,073 13,457,073 35,921,180 24,222,732 24,222,732 35,921,181 24,222,732 24,222,732 35,921,180 24,222,732 24,222,732 35,921,180 315,935,259 Property Taxes 781,046 6,765,803 (3,577,289) (2,384,858) (58,282) 98,478,739 5,343,330 (2,384,858) (3,215,681) 82,913,244 (2,086,756) 35,312,794 215,887,232 Miscellaneous Funds ------Federal Revenue(2) 1,070,259 31,096 39,434,142 81,920 165,695 3,381,685 3,132,702 346,463 7,309,698 900,000 500,000 15,931,833 72,285,493 Other State Revenue 176,514 1,516,322 (33,776) 3,162,106 2,564,969 3,094,180 10,761,639 331,611 3,144,723 100,000 500,000 10,870,291 36,188,579 Other Local Revenue(3) 7,331,914 688,626 10,323,807 20,807,620 4,603,702 87,909,694 5,000,000 4,000,000 24,765,000 22,103,569 3,000,000 61,749,621 252,283,553 Interfund Transfers In ------Other Financing Sources ------Other Receipts/Non-Rev. ------TOTAL RECEIPTS 22,816,806 22,458,920 82,068,064 45,889,520 31,498,816 228,785,479 48,460,403 26,515,948 67,924,920 130,239,545 26,135,976 159,785,719 892,580,116 DISBURSEMENTS Certificated Salaries 4,682,514 32,253,835 33,063,934 33,981,895 32,131,560 32,440,329 33,500,000 33,500,000 33,500,000 33,500,000 33,500,000 68,106,739 404,160,806 Classified Salaries 4,757,120 6,968,019 15,504,850 10,985,819 10,754,415 10,321,508 11,000,000 11,000,000 16,000,000 11,000,000 11,000,000 19,449,548 138,741,279 Employee Benefits 3,689,934 15,905,152 19,780,609 17,298,179 17,210,700 17,161,962 17,300,000 17,300,000 17,300,000 17,300,000 17,300,000 25,378,569 202,925,105 Books, Supplies and Services 1,450,715 2,091,182 2,887,999 5,629,020 4,315,464 7,076,400 9,500,000 9,600,000 8,500,000 9,500,000 9,500,000 32,281,260 102,332,040 Capital Outlay 8,009 264,920 206,827 299,862 300,320 150,384 41,858 155,700 83,343 24,183 24,183 4,693,041 6,252,630 Other Outgo ------Interfund Transfers Out 6,327,638 4,839,253 9,855,743 1,855,743 2,480,743 7,480,743 4,929,128 3,480,743 4,480,743 4,480,743 3,980,743 8,181,635 62,373,598 Other Financing Uses ------Other Disbursements/Non-Exp. (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,558) (220,565) (2,646,703) TOTAL DISBURSEMENTS 20,695,372 62,101,803 81,079,404 69,829,960 66,972,644 74,410,768 76,050,428 74,815,885 79,643,528 75,584,368 75,084,368 157,870,227 914,138,755 PRIOR YEAR TRANSACTIONS Accounts Receivable(1) (55,735,181) (1,938,161) (7,820,835) (2,296,763) (1,334,118) (133,606) (500,000) 11,254,740 20,138,760 19,279,332 18,279,332 51,822,732 51,016,233 Accounts Payable (17,106,530) (5,298,517) (2,311,044) 1,867,006 25,523,560 (28,718,066) (6,300,000) (2,000,000) (1,000,000) (2,200,000) (3,500,000) 12,086,756 (28,956,835) TOTAL PRIOR YEAR TRANSACTIONS NET INCREASE/DECREASE 40,750,085 (43,003,239) 6,498,451 (19,776,671) (8,616,150) 125,790,251 (33,390,025) (61,554,677) (32,857,368) 33,175,845 (70,727,724) (37,820,484) (101,531,707) TRAN RECEIPTS 101,498,000 101,498,000 TRAN DISBURSEMENTS (200,000) (200,000) ENDING CASH 65,542,128 22,538,889 29,037,340 9,260,669 644,519 126,434,770 93,044,745 31,490,068 99,930,700 133,106,545 62,378,820 24,558,336 24,558,336 ENDING CASH, PLUS ACCRUALS 65,542,128 22,538,889 29,037,340 9,260,669 644,519 126,434,770 93,044,745 31,490,068 99,930,700 133,106,545 62,378,820 24,558,336 24,558,336 (1) Line items account for deferred State apportionments by showing positive revenue in the principal apportionment line item off-set by a negative entry in the accounts. (2) Line item does not include District’s anticipated receipt of ESSER II funds. (3) Line item includes the District’s draw of approximately $33.5 million in December 2020, consisting of the District’s share of the School Rainy Day Reserve held by the City and County, which represents a draw of substantially all of the remaining funds held in such fund.

45 Exhibit IV

SAN FRANCISCO UNIFIED SCHOOL DISTRICT Fiscal Year 2021-22 Projected General Fund Cash Flows(1)

July August September October November December January February March April May June 2021 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 2022 Totals BEGINNING CASH 24,558,336 52,558,336 31,658,336 137,058,336 88,147,225 14,536,114 168,260,336 24,558,336 RECEIPTS Revenue Limit Sources Principal Apportionment(2) 13,500,000 13,500,000 35,900,000 24,200,000 24,200,000 35,900,000 147,200,000 Property Taxes 800,000 6,800,000 (3,600,000) (2,400,000) (100,000) 98,500,000 100,000,000 Miscellaneous Funds ------Federal Revenue(3) 1,100,000 - 100,000 100,000 200,000 3,400,000 4,900,000 Other State Revenue 200,000 1,500,000 - 3,200,000 2,600,000 3,100,000 10,600,000 Other Local Revenue 7,300,000 700,000 10,300,000 20,800,000 4,600,000 87,900,000 131,600,000 Interfund Transfers In ------Other Financing Sources ------Other Receipts/Non-Rev. ------TOTAL RECEIPTS 22,900,000 22,500,000 42,700,000 45,900,000 31,500,000 228,800,000 394,300,000 DISBURSEMENTS Projections for January through June 2022 Not Included Certificated Salaries 4,700,000 32,300,000 33,100,000 34,000,000 32,100,000 32,400,000 168,600,000 Classified Salaries 4,800,000 7,000,000 15,500,000 11,000,000 10,800,000 10,300,000 59,400,000 Employee Benefits 3,700,000 15,900,000 19,800,000 17,300,000 17,200,000 17,200,000 91,100,000 Books, Supplies and Services 1,500,000 2,100,000 2,900,000 5,600,000 4,300,000 7,100,000 23,500,000 Capital Outlay - 300,000 2,000,000 300,000 300,000 200,000 3,100,000 Other Outgo ------Interfund Transfers Out 6,300,000 4,800,000 9,900,000 1,900,000 2,500,000 7,500,000 32,900,000 Other Financing Uses ------Other Disbursements/Non-Exp. (200,000) (200,000) (200,000) (200,000) (200,000) (200,000) (1,200,000) TOTAL DISBURSEMENTS 20,800,000 62,200,000 83,000,000 69,900,000 67,000,000 74,500,000 377,400,000 PRIOR YEAR TRANSACTIONS(4) Accounts Receivable(5) (41,300,000) (23,800,000) (28,000,000) (24,000,000) (14,200,000) (100,000) (131,400,000) Accounts Payable (15,400,000) (5,000,000) (2,300,000) 1,900,000 (1,500,000) (1,000,000) (23,300,000) TOTAL PRIOR YEAR TRANSACTIONS NET INCREASE/DECREASE 28,000,000 (20,900,000) (14,600,000) 1,900,000 (22,800,000) 153,400,000 125,000,000 TRAN RECEIPTS(6) - - 120,000,000 - - 324,222 120,324,222 TRAN DISBURSEMENTS(7) - - - (50,811,111) (50,811,111) - (101,622,222) ENDING CASH 52,558,336 31,658,336 137,058,336 88,147,225 14,536,114 168,260,336 168,260,336 ENDING CASH, PLUS ACCRUALS 52,558,336 31,658,336 137,058,336 88,147,225 14,536,114 168,260,336 168,260,336 (1) Revenues of the District received in and allocable to fiscal year 2021-22 are not available for payment of the Notes. The fiscal year 2021-22 cash flow is projected assuming receipts and disbursements consistent with fiscal year 2020-21 levels except as noted. (2) Line item does not include any projected increases in the State apportionment funding for school districts for fiscal year 2021-22 included in the Governor’s Proposed 2021-22 Budget. See “– State Budget – Proposed 2021-22 State Budget” above. (3) Line item does not include District’s anticipated receipt of ESSER II funds. Receipts from federal revenues are adjusted to remove a one-time receipt in September 2020 that was atypical based on historical patterns. (4) Receipts and disbursements based on prior year revenues and expenditures are adjusted based on assumptions made in developing the projected fiscal year 2020-21 cash flow. (5) Line item includes the receipt of deferred State apportionments from fiscal year 2020-21. (6) Line item reflects the expected issuance of fiscal year 2021-22 Tax and Revenue Anticipation Notes in September 2021. At this point, the timing and amount of such Tax and Revenue Anticipation Note is unknown. (7) Line item reflects the pledged set asides for the Notes in October and November 2021. The Notes will mature on December 31, 2021.

46 District Debt Structure

As of February 1, 2021, the District had outstanding general obligation bonds in the aggregate principal amount of $1,055,950,000 (which amount excludes bonds issued by the City and County on behalf of the District) as described in the table set forth on the following page. For additional details on the District’s long-term liabilities, see Note 8 to the audited financial report in APPENDIX B hereto and “DIRECT AND OVERLAPPING DEBT.”

General Obligation Bonds. The District has issued $280,000,000 of general obligation bonds authorized at an election of the registered voters held on November 4, 2003 (the “2003 Authorization”), at which more than the minimum requisite 55% of the persons voting on the measure voted to authorize the issuance and sale of up to $295,000,000 principal amount of general obligation bonds of the District. The amount of authorized but unissued bonds pursuant to the 2003 Authorization is $15,000,000.

The District has issued $450,000,000 of general obligation bonds authorized at an election of the registered voters held on November 7, 2006 (the “2006 Authorization”), at which more than the minimum requisite 55% of the persons voting on the measure voted to authorize the issuance and sale of up to $450,000,000 principal amount of general obligation bonds of the District. The District has no remaining authorized and unissued bonds under the 2006 Authorization.

The District has issued $531,000,000 of general obligation bonds authorized at an election of the registered voters held on November 8, 2011 (the “2011 Authorization”), at which more than the minimum requisite 55% of the persons voting on the measure voted to authorize the issuance and sale of up to $531,000,000 principal amount of general obligation bonds of the District. The District has no remaining authorized and unissued bonds under the 2011 Authorization.

The District has issued $360,000,000 of general obligation bonds authorized at an election of the registered voters held on November 8, 2016 (the “2016 Authorization”), at which more than the minimum requisite 55% of the persons voting on the measure voted to authorize the issuance and sale of up to $744,250,000 principal amount of general obligation bonds of the District. The amount of authorized but unissued bonds pursuant to the 2016 Authorization is $284,250,000.

47 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Summary of Outstanding General Obligation Bond Issues(1) As of February 1, 2021

Original Principal Amount Series Name Issuance Date Principal Amount Outstanding (Proposition A, Election of 2006) General 5/27/10 $ 12,955,000 $ 12,955,000 Obligation Bonds Series C (2010) (Federally Taxable Direct Subsidy Qualified School Construction Bonds) (Proposition A, Election of 2006) General 5/27/10 72,370,000 72,370,000 Obligation Bonds Series D (2010) (Federally Taxable Build America Bonds) General Obligation Bonds (Proposition A, 1/23/14 205,000,000 152,740,000 Election of 2011), Series B (2014) General Obligation Bonds (Proposition A, 10/21/15 15,000,000 12,485,000 Election of 2006), Series F (2015) General Obligation Bonds (Proposition A, 10/21/15 211,000,000 175,530,000 Election of 2011), Series C (2015) 2015 General Obligation Refunding Bonds 10/21/15 63,655,000 36,270,000 General Obligation Bonds, Election of 2016, 4/6/17 180,000,000 140,945,000 Series A 2017 General Obligation Refunding Bonds 4/6/17 53,890,000 43,280,000 General Obligation Bonds, Election of 2016, 8/27/20 280,000,000 243,090,000 Series B 2020 General Obligation Refunding Bonds 8/27/20 166,285,000 166,285,000 Total $1,260,155,000 $1,055,950,000

(1) Excludes legally defeased bonds. Source: The District.

Capital Plan. The District has a 10-year Capital Plan that is updated periodically to take into account an annual review of changing capital needs and improved information regarding project requirements and projected costs. Because of the need for reconstruction and repair of existing facilities, including structural changes to comply with disability access standards, the District’s current 10-year Capital Plan anticipates a total capital facilities need of almost $900 million. In addition, pertinent District needs are reflected in the City and County’s annual Capital Plan.

As part of the District’s ongoing review of the 10-year Capital Plan, the District is analyzing the needs of District properties, in order to define the scope and projected costs of required new construction, replacement, modernization and deferred maintenance for such properties. The District anticipates funding its capital needs from a combination of proceeds from the sale of general obligation bonds, State- matching funds, developer fees, a facilities parcel tax, donations/capital funding campaigns, deferred maintenance allocations and other sources.

Bonding Capacity. As a unified school district, the District may issue bonds in an amount up to 2.5% of the assessed valuation of taxable property within its boundaries. The District’s gross bonding

48 capacity (also commonly referred to as the “bonding limit” or “debt limit”) is approximately $7.5 billion and its net bonding capacity is approximately $6.4 billion. Refunding bonds may be issued without regard to this limitation; however, once issued, the outstanding principal of any refunding bonds is included when calculating the District’s bonding capacity.

Insurance, Risk Pooling and Joint Powers Arrangements

The District has a risk management department that is responsible for all insurance and risk management activities. The current structure combines self-insurance with excess, or reinsurance, protection beyond retained levels. The risk management staff works with other departments within the District on prevention strategies to minimize the risk of loss to people and property. The current financial strategy for the risk management program includes an actuarial study each year for the workers’ compensation program. The property, liability and benefits programs are studied one time per year during marketing or prior to renewals.

The District participates in Schools Excess Liability Fund (“SELF”) joint powers authority. The District pays annual contributions to SELF for additional excess liability coverage. Additional commercial insurance is also purchased for excess workers’ compensation, property, general liability, crime, cyber liability, and student accidents. For workers’ compensation coverage, the District maintains a $500,000 self-insured retention with excess coverage purchased through Arch Insurance Company. The District maintains property coverage through Hartford Fire Insurance Company and Landmark American Ins. Co. primarily, with another four insurance carriers providing the upper tiers of coverage for a total of $300 million per occurrence, with a $100,000 deductible.

The District does not maintain insurance for earthquake risks, relying on its general reserves and the expectation that funds will be available from the Federal Emergency Management Agency (“FEMA”). There is no guarantee that sufficient reserves or FEMA assistance would be available in the event of a major seismic event in the San Francisco Bay Area. The District will carry earthquake insurance when it deems it cost-effective.

The District offers its employees dental insurance through a self-insured program, life and long- term disability insurance that is purchased through commercial carriers, and health insurance that is purchased through the City and County Health Service System. While the District considers its insurance coverage to be adequate, the District is unable to predict the availability or cost of such insurance in the future.

SCHOOL DISTRICT BUDGET PROCEDURES AND REQUIREMENTS

District Budget Process and City and County Review

State law requires school districts to adopt a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. Under current law, a school district governing board must adopt and file with the county superintendent of schools a tentative budget by July 1 in each fiscal year or, with respect to the District, the State Superintendent of Public Instruction (the “State Superintendent”). The District is under the jurisdiction of the State Superintendent.

The county superintendent must review and approve, conditionally approve or disapprove the budget no later than September 15. The county superintendent is required to examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance with the established standards. In the

49 event that the county superintendent conditionally approves or disapproves the school district’s budget, the county superintendent will submit to the governing board of the school district no later than September 15 of such year written recommendations regarding revisions of the budget and the reasons for the recommendations, including, but not limited to, the amounts of any budget adjustments needed before the county superintendent can approve that budget.

The governing board of the school district, together with the county superintendent, must review and respond to the recommendations of the county superintendent on or before October 8 at a regular meeting of the governing board of the school district. The county superintendent will examine and approve or disapprove of the revised budget by November 8 of such year. If the county superintendent disapproves a revised budget, the county superintendent will call for the formation of a budget review committee. By December 31 of each year, every school district must have an adopted budget, or the Superintendent of Public Instruction may impose a budget and will report such school district to the State Legislature and the Department of Finance.

Subsequent to approval, the county superintendent will monitor each school district under its jurisdiction throughout the fiscal year pursuant to its adopted budget to determine on an ongoing basis if the school district can meet its current or subsequent year financial obligations.

If, after taking various remedial actions, the county superintendent determines that a school district cannot meet its current or the subsequent year’s obligations, the county superintendent will notify the school district’s governing board, the Superintendent of Public Instruction and the president of the State board (or the president’s designee) of the determination and take at least one of the following actions, and all actions that are necessary to ensure that the school district meets its financial obligations: (a) develop and impose, after also consulting with the Superintendent of Public Instruction and the school district’s governing board, revisions to the budget that will enable the school district to meet its financial obligations in the current fiscal year, (b) stay or rescind any action inconsistent with the ability of the school district to meet its obligations for the current or subsequent fiscal year, (c) assist in developing, in consultation with the school district’s governing board, a financial plan that will enable the school district to meet its future obligations, (d) assist in developing, in consultation with the school district’s governing board, a budget for the subsequent fiscal year, and (e) as necessary, appoint a fiscal advisor to perform the aforementioned duties. The county superintendent will also make a report to the Superintendent of Public Instruction and the president of the State board or the president’s designee about the financial condition of the school district and the remedial actions proposed by the county superintendent. However, the county superintendent may not abrogate any provision of a collective bargaining agreement that was entered into prior to the date upon which the county superintendent assumed authority.

A State law adopted in 1991 (known as “A.B. 1200”) imposed additional financial reporting requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200 and the Education Code (Section 42100 et. seq.), each school district is required to file two interim certifications with the county superintendent (on December 15, for the period ended October 31, and by mid-March for the period ended January 31) as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county superintendent reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that, based on then current projections, will meet its financial obligations for the current fiscal year and the subsequent two fiscal years. A negative certification is assigned to any school district that, based on then current projections, will be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that, based on then current projections, may or may not meet its financial obligations for the current fiscal year or the two subsequent fiscal years. A certification may be revised to a negative or qualified certification by the

50 county superintendent, as appropriate. A school district that receives a qualified or negative certification for its second interim report must provide to the county superintendent, the State Controller and the Superintendent no later than June 1, financial statement projections of the school district’s fund and cash balances through June 30 for the period ending April 30.

Any school district that receives a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax and revenue anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the school district, unless the county superintendent determines that the school district’s repayment of indebtedness is probable. The District received a qualified certification on its most recent interim financial report.

For school districts under fiscal distress, the county superintendent is authorized to take a number of actions to ensure that the school district meets its financial obligations, including budget revisions. However, the county superintendent is not authorized to approve any diversion of revenue from ad valorem property taxes levied to pay debt service on district general obligation bonds. A school district that becomes insolvent may, upon the approval of a fiscal plan by the county superintendent, request an emergency appropriation from the State, in which case the county superintendent, the Superintendent of Public Instruction and the president of the State board or the president’s designee will appoint a trustee to serve the school district until it has adequate fiscal systems and controls in place. The acceptance by a school district of an emergency apportionment exceeding 200% of the reserve recommended for that school district constitutes an agreement that the county superintendent will assume control of the school district in order to ensure the school district’s return to fiscal solvency.

In the event the State elects to provide an emergency apportionment to a school district, such apportionment will constitute an advance payment of apportionments owed to the school district from the State School Fund and the Education Protection Account. The emergency apportionment may be accomplished in two ways. First, a school district may participate in a two-part financing in which the school district receives an interim loan from the State General Fund, with the agreement that the school district will subsequently enter into a lease financing with the California Infrastructure and Economic Development Bank for purposes of financing the emergency apportionment, including repaying such amounts advanced to the State General Fund. State law provides that so long as bonds from such lease financing are outstanding, the recipient school district (via its administrator) cannot file for bankruptcy. As an alternative, a school district may receive an emergency apportionment from the State General Fund that must be repaid in 20 years. Each year, the Superintendent of Public Instruction will withhold from the apportionments to be made to the school district from the State School Fund and the Education Protection Account an amount equal to the emergency apportionment repayment that becomes due that year. The determination as to whether the emergency apportionment will take the form of a lease financing or an emergency apportionment from the State General Fund will be based upon the availability of funds within the State General Fund.

Accounting Practices

The accounting policies of the District conform to generally accepted accounting principles in accordance with the definitions, instructions and procedures of the California School Accounting Manual, as required by the State Education Code. Revenues are recognized in the period in which they become both measurable and available to finance expenditures of the current fiscal period. Expenditures are generally recognized in the period in which the liability is incurred.

Eide Bailly LLP, served as independent auditor to the District and its report for fiscal year ended June 30, 2019 is attached to this Official Statement as APPENDIX B. The District considers its audited

51 financial statements to be public information, and accordingly no consent has been sought or obtained from the auditor in connection with the inclusion of such statements in this Official Statement. The auditor has made no representation in connection with inclusion of the audit herein that there has been no material change in the financial condition of the District since the audit was concluded. The District is required by law to adopt its audited financial statements following a public meeting.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Limitations on Revenues

Article XIIIA of the California Constitution. Article XIIIA of the State Constitution, adopted and known as Proposition 13, was approved by the voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to 1% of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. Section 1(b) of Article XIIIA provides that the 1% limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. The tax for payment of the District’s bonds approved at the 1996 election falls within the exception for bonds approved by two-thirds vote. The tax for payment of the District’s bonds approved at the 2001, 2004 and 2008 elections falls within the exception for bonds approved by 55% vote.

Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of real property as shown on the fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. The Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restored value of the damaged property. The State courts have upheld the constitutionality of this procedure. Legislation enacted by the State Legislature to implement Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 1% base tax levied by each county and taxes to pay debt service on indebtedness approved by the voters as described above.

Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the District.

Both the State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.

52 Article XIIIC and Article XIIID of the California Constitution. On November 5, 1996, the voters of the State approved Proposition 218, the so-called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes); prohibits special purpose government agencies such as school districts from levying general taxes; and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote. Article XIIIC also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the State Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4.

Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. The State Constitution and the laws of the State impose a duty on the Treasurer and tax collector to levy a property tax sufficient to pay debt service on school bonds coming due in each year. The initiative power cannot be used to reduce or repeal the authority and obligation to levy such taxes which are pledged as security for payment of general obligation bonds or to otherwise interfere with performance of the duty of the District and the City and County with respect to such taxes. Legislation adopted in 1997 provides that Article XIIIC shall not be construed to mean that any owner or Beneficial Owner of a municipal security assumes the risk of or consents to any initiative measure which would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution.

Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; however it is not clear whether the initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by the District. Developer fees imposed by the District are restricted as to use and are neither pledged nor available to pay general obligation bonds of the District.

The interpretation and application of Proposition 218 continues to be considered and determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination.

Expenditures and Appropriations

Article XIIIB of the California Constitution. In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and local governments are subject to an annual “appropriations limit” or “Gann Limit” imposed by Article XIIIB of the State Constitution, which effectively limits the amount of such revenues that government entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds.

53 Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in cases of emergency; however, the appropriations limit for the three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.

The State and each local government entity, each has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Each school district is required to establish an appropriations limit each year. In the event that a school district’s revenues exceed its spending limit, the district may increase its appropriations limit to equal its spending by taking appropriations limit from the State.

Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. If the State’s aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, 50% of the excess is transferred to fund the State’s contribution to school and college districts.

Future Initiatives. Articles XIIIA, XIIIB, XIIIC, and XIIID, and Propositions 98 and 111 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process.

LOCAL PROPERTY TAXATION

Property Taxation System

Property tax revenues result from the application of the appropriate tax rate to the total assessed value of taxable property in the District. School districts levy property taxes for payment of voter- approved bonds and receive property taxes for general operating purposes as well.

Local property taxation is the responsibility of various county officers. School districts whose boundaries extend into more than one county are treated for property tax purposes as separate jurisdictions in each county in which they are located. For each school district located in a county, the county assessor computes the value of locally assessed taxable property. Based on the assessed value of property and the scheduled debt service on outstanding bonds in each year, the county controller computes the rate of tax necessary to pay such debt service and presents the tax rolls (including rates of tax for all taxing jurisdictions in the county) to the county board of supervisors for approval. The Treasurer and Tax Collector prepares and mails tax bills to taxpayers and collects the taxes. In addition, the Treasurer and Tax Collector, as ex officio treasurer of each school district located in the county, holds and invests school district funds, including taxes collected for payment of school bonds, and is charged with payment of principal and interest on such bonds when due. The State Board of Equalization (the “Board of Equalization”) also assesses certain special classes of property, as described later in this section.

54 Assessed Valuation of Property Within the District

Under Proposition 13, an amendment to the California Constitution adopted in 1978, the county assessor’s valuation of real property is established as shown on the fiscal year 1975-76 tax bill, or, thereafter, as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased annually to reflect inflation at a rate not to exceed 2% per year, or reduced to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction or in the event of declining property value caused by substantial damage, destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than the market value of the property and of similar properties more recently sold. Likewise, changes in ownership of property and reassessment of such property to market value may lead to increases in aggregate assessed value greater than the actual rate of inflation or the 2% limit on inflation adjustments for properties that have not changed ownership. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Limitations on Revenues – Article XIIIA of the California Constitution” herein.

State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. State law also exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling provided that the owner files for such exemption. This exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of the exemptions.

Appeals of Assessed Valuation; Blanket Reductions of Assessed Values. There are two basic types of property tax assessment appeals provided for under State law. The first type of appeal, commonly referred to as a base year assessment appeal, involves a dispute on the valuation assigned by the assessor immediately subsequent to an instance of a change in ownership or completion of new construction. If the base year value assigned by the assessor is reduced, the valuation of the property cannot increase in subsequent years more than 2% annually unless and until another change in ownership and/or additional new construction activity occurs.

The second type of appeal, commonly referred to as a Proposition 8 appeal (which Proposition 8 was approved by the voters in 1978), can result if factors occur causing a decline in the market value of the property to a level below the property’s then current taxable value (escalated base year value). Pursuant to State law, a property owner may apply for a Proposition 8 reduction of the property tax assessment for such owner’s property by filing a written application, in the form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. A property owner desiring a Proposition 8 reduction of the assessed value of such owner’s property in any one year must submit an application to the county assessment appeals board (the “Appeals Board”). Following a review of the application by the county assessor’s office, the county assessor may offer to the property owner the opportunity to stipulate to a reduced assessment, or may confirm the assessment. If no stipulation is agreed to, and the applicant elects to pursue the appeal, the matter is brought before the Appeals Board (or, in some cases, a hearing examiner) for a hearing and decision. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level (escalated to the inflation rate of no more than 2%) following the year for which the reduction application is filed. However, the county assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year and any intervening years as well. In practice, such a reduced assessment may and often does remain in effect beyond the year in which it is granted.

55 Assembly Bill 102. On June 27, 2017, the Governor signed into law Assembly Bill 102 (“AB 102”). AB 102 restructures the functions of the State Board of Equalization and creates two new agencies: (a) the California Department of Tax and Fee Administration (the “Tax Administration Department”) and (b) the Office of Tax Appeals. Under AB 102, the Tax Administration Department will take over programs previously in the State Board of Equalization’s Property Tax Department, such as the Tax Area Services Section, which is responsible for maintaining all property tax-rate area maps and for maintaining special revenue district boundaries. Under AB 102, the State Board of Equalization will continue to perform the duties assigned by the State Constitution related to property taxes, however, beginning January 1, 2018, the State Board of Equalization only hears appeals related to the programs that it constitutionally administers and the Office of Tax Appeals hears appeals on all other taxes and fee matters, such as sales and use tax and other special taxes and fees. AB 102 obligates the Offices of Tax Appeals to adopt regulations as necessary to carry out its duties, powers and responsibilities. No assurances can be given as to the effect of such regulations on the appeals process or on the assessed valuation of property within the District.

In addition, Article XIIIA of the State Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. This measure is computed on a calendar year basis. No assurance can be given that property tax appeals and/or blanket reductions of assessed property values (as discussed below) will not significantly reduce the assessed valuation of property within the District in the future.

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56 The following table sets forth recent history of taxable property assessed valuation in the District.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Assessed Valuation of Secured and Unsecured Property Fiscal Years 2011-12 to 2020-21 Annual % Fiscal Year Local Secured Utility Unsecured Total Change 2011-12 $147,612,367,616 $ 41,527,475 $ 9,249,419,572 $156,903,314,663 0.47% 2012-13 153,348,031,902 46,515,990 9,764,668,943 163,159,216,835 3.99 2013-14 160,650,767,471 35,943,747 9,867,122,786 170,553,834,045 4.53 2014-15 169,001,854,462 32,843,747 10,734,859,006 179,769,557,215 5.40 2015-16 180,311,079,707 250,473,678 11,784,296,408 192,345,849,793 7.00 2016-17 195,319,718,011 242,464,205 13,750,364,838 209,312,547,054 8.82 2017-18 217,167,706,689 456,895,690 14,017,474,513 231,642,076,892 10.67 2018-19 241,800,535,728 453,925,863 14,410,415,905 256,664,877,496 10.80 2019-20 261,018,657,481 437,144,893 17,009,940,509 278,465,742,883 8.49 2020-21 280,818,331,421 433,728,865 17,524,316,683 298,776,376,969 7.29

Source: California Municipal Statistics, Inc.

State-Assessed Property. Under the State Constitution, the State Board of Equalization assesses property of State-regulated transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting or selling gas or electricity. The Board of Equalization also is required to assess pipelines, flumes, canals and aqueducts lying within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local jurisdictions in the county, including school districts, and taxed by the local county tax officials in the same manner as for locally assessed property. Taxes on privately owned railway cars, however, are levied and collected directly by the Board of Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricity-generating property to non- utility companies, as often occurred under electric power deregulation in California, affects how those assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property’s value will no longer be divided among all taxing jurisdictions in the City and County. The transfer of property located and taxed in the District to a State-assessed utility will have the opposite effect: generally reducing the assessed value in the District, as the value is shared among the other jurisdictions in the City and County. The District is unable to predict future transfers of State-assessed property in the District and the City and County, the impact of such transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the State’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing agencies, including the District.

Locally taxed property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All other property is “unsecured,” and is assessed on the “unsecured roll.” Secured property assessed by the State Board of Equalization is commonly identified for taxation purposes as “utility” property.

57 Assessed Valuation by Land Use. The following table sets forth a distribution of taxable property located in the District by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT Assessed Valuation and Parcels By Land Use Fiscal Year 2020-21

2020-21 % of % of Assessed Valuation(1) Total No. of Parcels Total Non-Residential: Commercial $ 25,488,780,519 9.08% 9,304 4.63% Office 55,339,365,059 19.71 1,769 0.88 Industrial 7,931,622,549 2.82 4,169 2.08 Hotel/Motel 11,064,327,560 3.94 759 0.38 Recreational 2,514,623,120 0.90 420 0.21 Government/Social/Institutional 599,266,081 0.21 1,574 0.78 Miscellaneous 945,519,576 0.34 833 0.41 Subtotal Non-Residential $103,883,504,464 36.99% 18,828 9.38%

Residential: Single Family Residence $ 77,475,572,379 27.59% 96,888 48.26% Condominium/Townhouse 44,600,694,604 15.88 48,555 24.19 2+ Residential Units/Apartments 51,304,043,825 18.27 25,973 12.94 Timeshare properties 145,468,176 0.05 5,415 2.70 Subtotal Residential $173,525,778,984 61.79% 176,831 88.08%

Vacant Parcels $3,409,047,973 1.21% 5,102 2.54%

Total $280,818,331,421 100.00% 200,761 100.00%

(1) Local secured assessed valuation, excluding tax-exempt property. Source: California Municipal Statistics, Inc.

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58 Assessed Valuation of Single-Family Residential Properties. The following table sets forth single-family residential properties only, which comprise approximately 27.6% of the fiscal year 2020-21 secured assessed value of taxable property in the District. The average fiscal year 2020-21 assessed value per single-family parcel is $799,641, and the median fiscal year 2020-21 assessed value per single-family parcel is $519,497.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT Assessed Valuation of Single Family Homes Fiscal Year 2020-21

2020-21 Average Median No. of Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 96,888 $77,475,572,379 $799,641 $519,497

2020-21 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $99,999 12,440 12.840% 12.840% $ 843,512,653 1.089% 1.089% $100,000 - $199,999 9,028 9.318 22.158 1,319,396,027 1.703 2.792 $200,000 - $299,999 8,279 8.545 30.702 2,090,138,919 2.698 5.490 $300,000 - $399,999 8,904 9.190 39.892 3,115,747,650 4.022 9.511 $400,000 - $499,999 8,421 8.691 48.584 3,773,786,228 4.871 14.382 $500,000 - $599,999 6,598 6.810 55.394 3,619,896,414 4.672 19.054 $600,000 - $699,999 5,441 5.616 61.010 3,528,592,753 4.554 23.609 $700,000 - $799,999 5,150 5.315 66.325 3,860,148,479 4.982 28.591 $800,000 - $899,999 4,982 5.142 71.467 4,232,697,934 5.463 34.054 $900,000 - $999,999 4,366 4.506 75.973 4,139,942,043 5.344 39.398 $1,000,000 - $1,099,999 3,346 3.453 79.427 3,506,055,479 4.525 43.923 $1,100,000 - $1,199,999 2,552 2.634 82.061 2,928,055,976 3.779 47.703 $1,200,000 - $1,299,999 2,097 2.164 84.225 2,614,656,672 3.375 51.078 $1,300,000 - $1,399,999 1,810 1.868 86.093 2,437,242,898 3.146 54.223 $1,400,000 - $1,499,999 1,708 1.763 87.856 2,470,340,166 3.189 57.412 $1,500,000 - $1,599,999 1,458 1.505 89.361 2,257,609,233 2.914 60.326 $1,600,000 - $1,699,999 1,216 1.255 90.616 2,005,362,811 2.588 62.914 $1,700,000 - $1,799,999 1,018 1.051 91.667 1,777,715,514 2.295 65.209 $1,800,000 - $1,899,999 901 0.930 92.597 1,665,459,035 2.150 67.358 $1,900,000 - $1,999,999 699 0.721 93.318 1,361,115,379 1.757 69.115 $2,000,000 and greater 6,474 6.682 100.000 23,928,100,116 30.885 100.000 Total 96,888 100.000% $77,475,572,379 100.000%

(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

Largest Taxpayers in District. The twenty taxpayers in the District with the greatest combined assessed valuation of taxable property on the fiscal year 2020-21 tax roll, and the assessed valuations thereof, are shown below.

The more property (by assessed value) owned by a single taxpayer, the more tax collections are exposed to weakness in the taxpayer’s financial situation and ability or willingness to pay property taxes. In fiscal year 2020-21, the largest single taxpayer owned approximately 0.64% of the total taxable property in the District. Each taxpayer listed is a unique name listed on the tax rolls. The District cannot determine from City and County assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the table.

59 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Twenty Largest Local Secured Taxpayers 2020-21

2020-21 % of Property Owner Primary Land Use Assessed Valuation Total(1) 1. Transbay Tower LLC Office Building $ 1,784,578,020 0.64% 2. GSW Arena LLC Sports Arena 1,513,172,881 0.54 3. HWA 555 Owners LLC Office Building 1,343,917,656 0.48 4. Elm Property Venture LLC Office Building 1,025,109,898 0.37 5. SHR St. Francis LLC Hotel 1,014,887,480 0.36 6. Ponte Gadea California LLC Office Building 938,897,279 0.33 7. Kilroy Realty LP / Kilroy Realty 303 LLC Office Building 874,365,039 0.31 8. PPF Paramount One Market Plaza Office Building 868,013,216 0.31 9. KR Mission Bay LLC Office Building 835,809,683 0.30 10. Parkmerced Owner LLC Apartments 808,669,680 0.29 11. SFDC 50 Fremont LLC Office Building 748,038,042 0.27 12. Market Center Owner LP Office Building 722,000,000 0.26 13. Emporium Mall LLC Shopping Center 643,689,476 0.23 14. JPPF 1155Battery LP Office Building 616,514,117 0.22 15. Park Tower Owner LLC Office Building 613,671,587 0.22 16. BCP-CG 650 Property LLC Office Building 604,544,612 0.22 17. 1169 Market Street LP Apartments 555,857,671 0.20 18. One Front Street Eat LLC Office Building 552,889,368 0.20 19. P55 Hotel Owner LLC Hotel 549,496,647 0.20 20. 222 Second Street Owner LP Office Building 530,206,404 0.19 $17,144,328,756 6.11% ______(1) 2020-21 local secured assessed valuation: $280,818,331,421. Source: California Municipal Statistics, Inc.

Tax Rate

The State Constitution permits the levy of an ad valorem tax on taxable property not to exceed 1% of the full cash value of the property, and State law requires the full 1% tax to be levied. The levy of special ad valorem property taxes in excess of the 1% levy is permitted as necessary to provide for debt service payments on school bonds and other voter-approved indebtedness.

The rate of tax necessary to pay fixed debt service on school bonds and other voter-approved indebtedness in a given year depends on the assessed value of taxable property in that year. The rate of tax imposed on unsecured property for repayment of such bonds and indebtedness is based on the prior year’s secured property tax rate. The rate of tax imposed may be affected by economic and other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc.

One factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the cumulative rate of tax. The following table sets forth ad valorem property tax rates for the fiscal years 2016-17 through 2020-21 in a typical Tax Rate Area of the District.

60 SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Summary of Ad Valorem Tax Rates (Dollars Per $100 of Assessed Valuation) 2016-17 through 2020-21

2016-17 2017-18 2018-19 2019-20 2020-21 General $1.00000000 $1.00000000 $1.00000000 $1.00000000 $1.00000000 City and County of San Francisco 0.11894004 0.10740904 0.10748997 0.11669015 .11972733 San Francisco Unified School District 0.03982180 0.04517555 0.03869354 0.04160439 .04510041 San Francisco Community College District 0.01245918 0.01135485 0.00982024 0.00979486 .01973594 Bay Area Rapid Transit District 0.00800000 0.00840000 0.00700000 0.01200000 .01390000 TOTAL $1.17922102 $1.17233944 $1.16300375 $1.18008940 $1.19846368

Source: California Municipal Statistics, Inc.

Tax Collections and Delinquencies

A school district’s share of the 1% countywide tax is based on the actual allocation of property tax revenues to each taxing jurisdiction in the county in fiscal year 1978-79, as adjusted according to a complicated statutory scheme enacted since that time. Revenues derived from special ad valorem taxes for voter-approved indebtedness are reserved to the taxing jurisdiction that approved and issued the debt, and may only be used to repay that debt.

Taxes are levied for each fiscal year on taxable real and personal property assessed as of the preceding January 1. When necessitated by changes in assessed value in the course of a year, a supplemental assessment is prepared, and taxes are pro-rated for the portion of the tax year remaining after the change.

Property taxes on the secured roll are due in two equal installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. If the taxes have not been paid by June 30, the tax is deemed to be in default. Secured roll property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If the taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale at a public auction by the county treasurer-tax collector.

Property taxes on the unsecured roll are due in one payment based on the lien date, January 1, and become delinquent after August 31. A 10% penalty attaches to delinquent taxes on assessments on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue on November 1. To collect unpaid taxes, the county treasurer-tax collector records a tax lien and may seize and/or sell personal property, improvements and possessory interests of the taxpayer. The county treasurer-tax collector may also bring a civil suit against the taxpayer for payment. The date on which taxes on supplemental assessments are due depends on when the supplemental tax bill is mailed.

Generally, once an installment of property tax becomes delinquent, penalties are assessed commencing on the applicable delinquency date until the delinquent installment(s) and all assessed penalties are paid. In the event of foreclosure and sale of property by a mortgage lender, all past due property taxes, penalties, and interest are required to be paid before such property is transferred to a purchaser or new owner. However, in response to the COVID-19 pandemic, Executive Order N-61-20 suspends the collection of interest, penalties, and costs on certain property specified in the Order, as further described below.

61 Property tax delinquencies may be impacted by economic and other factors beyond the District’s control, including the ability or willingness of property owners to pay property taxes during an economic recession or depression. An economic recession or depression could be caused by, among other factors, high interest rates, reduced consumer confidence, reduced real wages or reduced economic activity as a result of a pandemic or natural or manmade disaster, such as earthquake, drought, flood, fire, toxic dumping, or pandemic. It is not possible for the District to make any representation regarding the extent to which an economic recession or depression could impact the ability or willingness of property owners within the District to pay property taxes in the future. For more information on the impact of the COVID- 19 pandemic, see “MISCELLANEOUS – Risks Related to COVID-19.” If delinquencies increase substantially as a result of the unprecedented events of the COVID-19 pandemic or other events outside the control of the District, the City and County does have the authority to increase allowances for annual reserves in the tax levy to avoid fluctuating tax levies. Annual reserves can be used towards debt service where tax collections are insufficient to pay such debt service.

The District cannot predict the extent of delinquencies and delayed tax collections, or the resulting impact on the District’s financial condition or operations. However, the City and County has adopted the Teeter Plan (defined herein), according to which the City and County distributes to the District the amount levied on the secured and supplemental tax rolls, instead of the amount actually collected. See “– Teeter Plan.”

Pursuant to Section 4985.2 of the State Revenue and Taxation Code, the tax collector of each county may cancel any penalty, costs or other charges resulting from tax delinquency upon a finding that the late payment is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect, provided the property taxes are paid within four fiscal years of such taxes coming due.

On May 6, 2020, the Governor signed Executive Order N-61-20, suspending provisions of the State Revenue and Taxation Code requiring collection of interest, penalties, and costs through May 6, 2021, for certain property taxes that are not subject to impounds and were not delinquent prior to March 4, 2020, upon satisfaction of certain conditions set forth in such order. The District is unable to predict the effect such order will have on the actual collections of property taxes in fiscal year 2020-21.

62 The following table sets forth a recent history of tax payment delinquencies in the District.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT (City and County of San Francisco, California) Secured Tax Delinquencies(1) Fiscal Years 2011-12 through 2019-20

Amount Delinquent Percent Delinquent Fiscal Year Secured Tax Charge June 30 June 30 2011-12 $1,810,103,262 $25,476,315 1.41% 2012-13 1,878,868,414 20,668,235 1.10 2013-14 2,018,013,991 19,020,178 0.94 2014-15 1,996,955,408 15,959,828 0.80 2015-16 2,146,646,004 14,089,301 0.66 2016-17 2,310,696,197 12,020,054 0.52 2017-18 2,556,736,908 14,820,215 0.58 2018-19 2,824,518,111 17,721,353 0.63 2019-20 3,320,760,894 27,706,207 0.83

(1) All taxes collected by City and County. Source: California Municipal Statistics, Inc.

Teeter Plan. The City and County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code. Under the Teeter Plan, each participating local agency levying property taxes in the City and County, including school districts, receives the amount of uncollected taxes credited to its fund, in the same manner as if the amount due from taxpayers had been collected. In return, the City and County receives and retains delinquent payments, penalties and interest as collected that would have been due the local agency. The City and County applies the Teeter Plan to general taxes and taxes levied for repayment of school district general obligation bonds.

The Teeter Plan is to remain in effect unless the Board of Supervisors orders its discontinuance or unless, prior to the commencement of any fiscal year of the City and County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the City and County. The Board of Supervisors may also, after holding a public hearing on the matter, discontinue the Teeter Plan with respect to any tax levying agency or assessment levying agency in the City and County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll in that agency.

There can be no assurance that the County will always maintain the Teeter Plan or will have sufficient funds available to distribute the full amount of the District’s share of property tax collections to the District. The ability of the City and County to maintain the Teeter Plan may depend on its financial resources and may be affected by future property tax delinquencies. Property tax delinquencies may be impacted by economic and other factors beyond the District’s or the County’s control, including the ability or willingness of property owners to pay property taxes during an economic recession or depression. See also “MISCELLANEOUS – Risks Related to COVID-19.”

Direct and Overlapping Debt. Set forth below is a schedule of direct and overlapping debt prepared by California Municipal Statistics Inc. for debt issued as of February 1, 2021. The table is included for general information purposes only. The District has not reviewed this table for completeness or accuracy and makes no representations in connection therewith. The first column in the table names each public agency which has outstanding debt as of the date of the schedule, and whose territory

63 overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

The table generally includes long-term obligations sold in the public capital markets by the public agencies listed. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT DIRECT AND OVERLAPPING BONDED DEBT

2020-21 Assessed Valuation: $302,011,940,399 (includes unitary utility valuation)

GENERAL OBLIGATION BONDED DEBT: Debt 2/1/21 San Francisco City and County General and School Purposes $2,502,746,741 San Francisco Unified School District Bonds 1,055,950,000(1) San Francisco Community College District 492,235,000 TOTAL GENERAL OBLIGATION BONDED DEBT $4,050,931,741

LEASE OBLIGATION BONDS: San Francisco City and County $1,509,305,296 TOTAL LEASE OBLIGATION BONDED DEBT $1,509,305,296

TOTAL COMBINED DIRECT DEBT $5,560,237,037

OVERLAPPING TAX AND ASSESSMENT DEBT: Bay Area Rapid Transit District General Obligation Bonds (34.606%) $ 652,971,389 San Francisco Community Facilities District No. 4 10,600,000 San Francisco Community Facilities District No. 6 119,807,107 San Francisco Community Facilities District No. 7 35,270,000 San Francisco Community Facilities District No. 2009-1, Improvement Areas 1 and 2 2,587,770 San Francisco Community Facilities District No. 2014-1 Transbay Transit Center 472,840,000 San Francisco Community Facilities District No. 2016-1 Treasure Island 17,135,000 City of San Francisco Assessment District No. 95-1 420,000 ABAG Community Facilities District No. 2004-1 Seismic Safety Improvements 9,195,000 ABAG Community Facilities District No. 2006-1 San Francisco Rincon Hill 4,970,000 ABAG Community Facilities District No. 2006-2 San Francisco Mint Plaza 2,840,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $1,328,636,266

OVERLAPPING TAX INCREMENT DEBT (Successor Agency): Successor Agency to the San Francisco Redevelopment Agency $ 738,895,372 Transbay Joint Powers Authority 264,585,000 TOTAL OVERLAPPING INCREMENT DEBT $1,003,480,372

TOTAL DIRECT AND OVERLAPPING BONDED DEBT $7,892,353,675(2) Ratios to 2020-21 Assessed Valuation ($302,011,940,399): Direct General Obligation Bonded Debt ($4,050,931,741)...... 1.34% Combined Direct Debt ($5,560,237,037) ...... 1.84% Total Direct and Overlapping Bonded Debt ...... 2.61%

Ratio to 2020-21 Redevelopment Incremental Valuation ($37,591,667,028): Total Overlapping Tax Increment Debt ...... 2.67%

(1) Excludes the Notes to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

64 RISK FACTORS

The purchase and ownership of the Notes involves certain investment risks that are discussed throughout this Official Statement. Accordingly, each prospective purchaser of the Notes (or a beneficial interest therein) should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. Some of the risks that could affect the Notes and the financial condition of the District are described below.

State Budget

The District receives a significant portion of its General Fund Revenues from funds apportioned or controlled by the State. As a result, decreases in or deferrals of State revenues, or in State legislative appropriations made to fund education, may significantly affect District operations. See THE NOTES – Security and Sources of Payment” and “DISTRICT FINANCIAL AND OPERATING INFORMATION – State Budget.”

Risk of Decline in Property Values

Property values could be reduced by factors beyond the District’s control, including earthquake and a depressed real estate market due to general economic conditions in the City and County, the region and the State. Other possible causes for a reduction in assessed values include the complete or partial destruction of taxable property caused by other natural or manmade disasters, such as drought, flood, fire, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes). Lower assessed values could necessitate a corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance of additional bonds in the future might also cause the tax rate to increase.

Seismic Risks

The assessed valuation of the City and County could be substantially reduced as a result of a major earthquake proximate to the City and County. The City and County are located in a seismically active region. Active earthquake faults underlie both the City and County and the surrounding Bay Area. Three major earthquake faults that comprise the San Andreas Fault System extend through the Bay Area. They include the San Andreas Fault, the Hayward Fault and the Calaveras Fault. On August 24, 2014, an earthquake occurred in Napa, California. The tremor’s epicenter was located approximately 3.7 miles northwest of American Canyon near the West Napa Fault and registered 6.0 on the Richter scale of earthquake intensity. The Napa earthquake caused fires, damaged buildings and roads, and injured approximately 200 people. The Napa earthquake was the largest earthquake in the Bay Area since the 1989 Loma Prieta earthquake on the San Andreas Fault, which was centered about 60 miles south of San Francisco and registered 6.9 on the Richter scale of earthquake intensity. The Loma Prieta earthquake caused fires and collapses of and structural damage to buildings, highways and bridges in the Bay Area.

In August 2016, the 2014 Working Group on California Earthquake Probabilities (a collaborative effort of the United States Geological Survey, the California Geological Society and the Southern California Earthquake Center) issued a revised report that states there is a 72% chance that one or more earthquakes of magnitude 6.7 or larger will occur in the Bay Area before the year 2043. Such earthquakes may be very destructive. Property within the City and County could sustain extensive damage in a major earthquake, and a major earthquake could adversely affect the area’s economic activity.

65 Drought

In recent years California has experienced severe drought conditions. In January 2014, the Governor declared a state-wide Drought State of Emergency due to the State facing serious water shortfalls due to the driest year in recorded history in the State and the resultant record low levels measured in State rivers and reservoirs. The California State Water Resources Control Board (the “State Water Board”) subsequently issued a Statewide notice of water shortages and potential future curtailment of water right diversions. In April 2017, the Governor of the State lifted the drought emergency declaration, while retaining a prohibition on wasteful practices and advancing conservation measures. It is not possible for the District to make any representation regarding the extent to which drought conditions could cause reduced economic activity within the boundaries of the District or the extent to which the drought has had or may have in the future on the value of taxable property within the District.

Wildfire

In recent years, portions of California have experienced wildfires that have burned millions of acres and destroyed thousands of homes and structures. Property damage due to wildfire could result in a significant decrease in the assessed value of property in the District. It is not possible for the District to make any representation regarding the extent to which wildfires could cause reduced economic activity within the boundaries of the District or the extent to which wildfires may impact the value of taxable property within the District.

Risk of Sea Level Changes and Flooding

In May 2009, the California Climate Change Center released a final paper, for informational purposes only, which was funded by the California Energy Commission, the California Environmental Protection Agency, the Metropolitan Transportation Commission, the California Department of Transportation and the California Ocean Protection Council. The title of the paper is “The Impacts of Sea-Level Rise on the California Coast.” The paper posits that increases in sea level will be a significant consequence of climate change over the next century. The paper evaluated the population, infrastructure, and property at risk from projected sea-level rise if no actions are taken to protect the coast. The paper concluded that significant property in the State is at risk of flooding as a result of a 1.4 meter sea level rise. The paper further estimates that the replacement value of this property totals nearly $100 billion (in 2000 dollars). The District may be particularly vulnerable to impacts associated with sea-level rise due to extensive development on its coastline. A wide range of critical infrastructure, such as roads, airports, hospitals, schools, emergency facilities, wastewater treatment plants, power plants, and wetlands is also vulnerable. Continued development in vulnerable areas will put additional assets at risk and raise protection costs.

The District is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the financial condition of the District and the local economy.

Risks Related to COVID-19

The recent outbreak of the novel strain of coronavirus called COVID-19, which has been designated a global pandemic by the World Health Organization, is impacting local and global economies, as governments, businesses, and citizens react to, plan for, and try to prevent or slow further transmission of the virus. Financial markets, including the stock market in the United States and globally, have seen significant recent volatility and decline that have been attributed to coronavirus concerns. The United States Centers for Disease Control and Prevention and the California Department of Public Health

66 have been providing regular updates and guidelines to the public and to State and local governments. On March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 13, then President Donald Trump declared a national emergency, freeing up funding for federal assistance to state and local governments. Many school districts across the State have temporarily closed some or all school campuses in response to local and state directives or guidance.

On March 27, 2020, the U.S. House of Representatives approved and then President Trump signed into law the CARES Act. The CARES Act appropriates $30 billion to education, of which $3 billion is allocated to state governors to be used at their discretion to address the emergency, $13.5 billion is allocated for K-12 education, and $14.25 billion is allocated for postsecondary institutions. The District is authorized to receive $44.9 million in funds under the CARES Act, which are being used to support online instruction, professional development for educators, personal protective equipment, and hazard pay for essential workers.

On December 28, 2020, the United States Congress approved and then President Trump signed into law the Consolidated Appropriations Act, 2021 (“HR 133”), which includes a $900 billion COVID- 19 relief package. HR 133 provides $81.9 billion to education, specifically $4.1 billion allocated to state governors to be used at their discretion to address the emergency, of which $2.75 billion is reserved for private K-12 education, $54.3 billion for K-12 education, $22.7 billion for postsecondary institutions, and $819 million for outlying areas and Bureau of Indian Affairs schools. School districts will be able to use their share of the $54.3 billion K-12 education allocation under HR 133, which will be based on the proportion of Title I funding received for the most recent fiscal year, for purposes authorized by federal law and other specified uses. The District anticipates it will receive approximately $43.0 million pursuant to HR 133.

On August 28, 2020, the Governor released a revised system of guidelines for reopening - Blueprint for a Safer Economy (“Blueprint”). The Blueprint assigns each of the State’s 58 counties into four color-coded tiers - purple, red, orange and yellow - in descending order of severity, based on the number of new daily cases of COVID-19 and the percentage of positive tests. Counties must remain in a tier for at least three weeks before advancing to the next one. To move forward, a county must meet the next tier’s criteria for two consecutive weeks. If a county’s case rate and positivity rate fall into different tiers, the county remains in the stricter tier. Schools can reopen for limited in-person instruction once their county has been in the red tier (daily new cases of 4-7 per 100,000 people and 5-8% positive tests) for at least two weeks. Implementation of the Blueprint as part of a phased reopening will depend on local conditions, including the level of COVID-19 infections and hospitalization rates for a minimum of 14 days, testing resources of the District and the City and County, and preparedness of the City and County’s healthcare system. Counties in the red tier can reopen schools for in-person instruction after remaining in such red tier for at least 14 days. As of March 2, 2021, the City and County was assigned to the red tier. The District is currently operating the 2020-21 school year through distance learning, consistent with State guidance and legislation. On December 3, 2020, the Governor announced Regional Stay at Home Orders for four regions in the State. The Bay Area Regional Stay at Home Order went into effect on December 17, 2020 and remained in effect until January 25, 2021, when the Bay Area’s four-week intensive care unit projection showed a capacity of greater than or equal to 15%.

The District currently anticipates that it will continue to provide remote learning until it meets the State’s criteria for safe reopening, including completion of bargaining agreements and establishment of regular testing for staff and students. On February 23, 2021, the Board ratified a memorandum of understanding between the District and its labor organizations regarding health and safety standards with respect to reopening schools for in-person instruction. The District will utilize a gradual phased in approach when it returns to in-person instruction beginning with a hybrid model of stable groups of students by grade level and school site pursuant to the State’s Public Health Guidance for K-12 schools.

67 The City and County has filed a lawsuit against the District and Board of Education, in an effort to reopen District schools and resume in-person instruction. See “OTHER LEGAL MATTERS – Absence of Material Litigation.”

This situation, and the guidance from federal, State, and local officials in response to the outbreak, is rapidly developing, and the District cannot predict what future impacts the outbreak may have on its operations and budget. The District cannot predict costs associated with a potential infectious disease outbreak such as operational costs to clean, sanitize and maintain its facilities either before or after an outbreak of an infectious disease, or costs to hire substitute certificated or classified employees. The District also cannot predict what impact the COVID-19 outbreak, or responses by federal, State or local governments thereto, might have on the amount of funding the District receives from the State, or on the District’s average daily attendance, which is a factor in determining the District’s State apportionment.

The District cannot predict the extent or duration of the outbreak, or what impact the outbreak and any resulting economic situation, or governmental responses thereto, might have on the District’s financial condition or operations, disruption of the regional and local economy with corresponding decreases in tax revenues (including property tax revenue, sales tax revenue and other revenues), potential declines in property values, potential increases in property tax delinquencies, and decreases in new home sales and real estate development. The economic consequences and the declines in the U.S. and global stock markets resulting from the spread of COVID-19, and responses thereto by local, State, and the federal governments, could have a material impact on the investments in the State pension trusts, which could materially increase the unfunded actuarial accrued liability of the CalSTRS Defined Benefit Program and SFERS, which, in turn, could result in material changes to the District’s required contribution rates in future fiscal years. See “DISTRICT FINANCIAL AND OPERATING INFORMATION – District Expenditures – Retirement Programs.” The District cannot predict what future impacts the outbreak may have on its operations and budget.

The District is currently receiving guidance on the coronavirus from City and County health officials and the City and County health officials and monitoring the coronavirus situation in accordance with coronavirus guidelines for schools published by the Centers for Disease Control and Prevention.

TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel to the District (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Notes is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX A hereto.

Notice 94-84, 1994-2 C.B. 559, states that the Internal Revenue Service (the “IRS”) is studying whether the amount of the payment at maturity on debt obligations such as the Notes that is excluded from gross income for federal income tax purposes is (i) the stated interest payable at maturity, or (ii) the difference between the issue price of the Notes and the aggregate amount to be paid at maturity of the Notes (the “original issue discount”). For this purpose, the issue price of the Notes is the first price at which a substantial amount of the Notes is sold to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). Until the IRS provides further guidance, taxpayers may treat either the stated interest payable at maturity or the

68 original issue discount as interest that is excluded from gross income for federal income tax purposes. However, taxpayers must treat the amount to be paid at maturity on all tax exempt debt obligations with a term that is not more than one year from the date of issue in a consistent manner. Taxpayers should consult their own tax advisors with respect to the tax consequences of ownership of the Notes if original issue discount treatment is elected.

Notes purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of obligations, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Notes. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Notes will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Notes being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Notes. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Notes may adversely affect the value of, or the tax status of interest on, the Notes. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

One of the covenants of the District referred to above requires the District to reasonably and prudently calculate the amount, if any, of excess investment earnings on the proceeds of the Notes which must be rebated to the United States, to set aside from lawfully available sources sufficient moneys to pay such amounts and to otherwise do all things necessary and within its power and authority to ensure that interest on the Notes is excluded from gross income for federal income tax purposes. Under the Code, if the District spends 100% of the proceeds of the Notes within six months after issuance, there is no requirement that there be a rebate of investment profits in order for interest on the Notes to be excluded from gross income for federal income tax purposes. The Code also provides that such proceeds are not deemed spent until all other available moneys (less a reasonable working capital reserve) are spent. The District expects to satisfy this expenditure test or, if it fails to do so, to make any required rebate payments from moneys received or accrued during the 2020-21 fiscal year. To the extent that any rebate cannot be paid from such moneys, California law is unclear as to whether such covenant would require the District to pay any such rebate. This would be an issue only if it were determined that the District’s calculation of expenditures of Notes proceeds or of rebatable arbitrage profits, if any, was incorrect.

Although Bond Counsel is of the opinion that interest on the Notes is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Notes may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

69 Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Notes to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Notes. Prospective purchasers of the Notes should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Notes for federal income tax purposes. It is not binding on the IRS or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Notes ends with the issuance of the Notes, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Notes in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Notes for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Notes, and may cause the District or the Beneficial Owners to incur significant expense.

OTHER LEGAL MATTERS

Legal Opinion

The validity of the Notes and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of Bond Counsel opinion is set forth in APPENDIX A – “PROPOSED FORM OF OPINION OF BOND COUNSEL.” Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

Legality for Investment in the State of California

Under the provisions of the Financial Code of the State, the Notes are legal investments for commercial banks in the State to the extent that the Notes, in the informed opinion of the bank, are prudent for the investment funds of its depositors, and under provisions of the Government Code of the State are eligible securities for deposits of public moneys in the State.

Continuing Disclosure

The District has covenanted for the benefit of the holders and beneficial owners of the Notes to provide, or cause to be provided, to the Municipal Securities Rulemaking Board for purposes of Rule

70 15c2-12(b)(5) adopted by the Securities and Exchange Commission (the “Rule”) notice of the occurrence of certain enumerated events. See APPENDIX C – “FORM OF CONTINUING DISCLOSURE CERTIFICATE” for a description of the specific nature of the notices of events and a summary description of the terms of the Continuing Disclosure Certificate pursuant to which such notices are to be made. These covenants have been made in order to assist the Underwriter in complying with the Rule.

A review of the District’s compliance with its previous continuing disclosure undertakings was conducted and it was found that, during the previous five years, with respect to each of its annual reports, the District did not submit certain operating data related to property tax levies and collections in the same format as had been presented in the Official Statements for two older bond issues. The format providing similar information was changed for subsequent bond issues and the District has filed that information completely and timely. In addition, a remedial filing has been completed that includes the full information required by the older undertakings (such filing only relates to one bond issue that remains outstanding). The District has also hired third parties to assist the District in complying with its continuing disclosure undertakings.

Absence of Material Litigation

The City and County has filed a lawsuit against the District and Board of Education, in an effort to reopen District schools and resume in-person instruction. It is anticipated that the City Attorney for the City and County will file a motion on February 11, 2021, seeking an emergency order requiring the District to formulate a reopening plan. The City and County’s lawsuit does not seek monetary damages, and at this time the District does not anticipate a material effect on its financial position as a result of such lawsuit. The District cannot predict the outcome of the City and County’s lawsuit nor the effect such lawsuit may have on the District’s financial position or operations.

Four former officials and employees of the District, who formerly held positions as Associate Superintendent, Budget Analyst, Executive Director of Student Health Programs and Excel Supervisor, respectively, were charged in 2015 with multiple felonies relating to financial crimes involving the misappropriation of approximately $6.25 million in State and federal funds. Two of these individuals subsequently pleaded guilty; the remaining two are awaiting trial. The District has since recovered the full amount of misappropriated funds, and the California Department of Education has allowed the District to retain the recovered funds to be spent on approved uses. The District has since undertaken a review of “carryover” funds held by chief business officials of the District; revised its policies related to invoicing and delivery of services to require more detail and increased internal controls; trained departments on proper maintenance and archiving of records; clarified and strengthened enforcement of its policy relating to outside employment; and instituted a policy prohibiting any department from setting up its own information technology system and instead requiring use of District information technology servers.

No litigation is pending or to the knowledge of the District threatened concerning the validity of the Notes, the District’s ability to receive ad valorem taxes and to collect other revenues, or contesting the District’s ability to issue and retire the Notes. No litigation is pending or to the knowledge of the District threatened questioning the political existence of the District or contesting the title to their offices of District or City and County officials who will sign the Notes and other certifications relating to the Notes, or the powers of those offices. A certificate (or certificates) to that effect will be furnished to purchasers at the time of the original delivery of the Notes.

The District is routinely subject to lawsuits and claims. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under these lawsuits and claims will not materially affect the financial position or operations of the District.

71 MISCELLANEOUS

Rating

Moody’s Investors Service (“Moody’s”) has assigned its municipal note rating of “MIG 1” to the Notes. The rating issued reflects only the views of the rating agency, and any explanation of the significance of such rating should be obtained from Moody’s at www.moodys.com. Generally, a rating agency bases its rating on the information and materials furnished to it, and on investigations, studies, and assumptions of its own. The District has provided certain information to the rating agency which is not included in this Official Statement. There is no assurance that a rating assigned will not be revised downward or withdrawn entirely by a rating agency at any time if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Notes. The District undertakes no responsibility to oppose any such downward revision, suspension or withdrawal.

The District has covenanted in a Continuing Disclosure Certificate to file on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website (“EMMA”) notices of any ratings changes on the Notes. See APPENDIX C – “FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. Notwithstanding such covenant, information relating to ratings changes on the Notes may be publicly available from the rating agency prior to such information being provided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Notes are directed to the ratings agency and its website and official media outlets for the most current ratings changes with respect to the Notes after the initial issuance of the Notes.

Professionals Involved in the Offering

Orrick, Herrington & Sutcliffe LLP, is acting as Bond Counsel to the District with respect to the Notes. Orrick, Herrington & Sutcliffe LLP will receive compensation from the District contingent upon the sale and delivery of the Notes. Backstrom McCarley Berry & Co., LLC is acting as Municipal Advisor to the District with respect to the Notes. Backstrom McCarley Berry & Co., LLC will receive compensation from the District contingent upon the sale and delivery of the Notes. Stradling Yocca Carlson & Rauth, a Professional Corporation, is acting as counsel to the Underwriter with respect to the Notes, and will receive compensation from the Underwriter contingent upon the sale and delivery of the Notes.

Underwriting

The Notes were purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) pursuant to a note purchase agreement (the “Purchase Contract”) by and between the District and the Underwriter, dated February 23, 2021, at a price of $101,423,000.00 (consisting of the principal amount of the Notes, plus original issue premium of $1,498,000.00 and less an underwriters’ discount of $75,000.00). Pursuant to the Purchase Contract, the Underwriter will purchase all of the Notes if any are purchased.

The Underwriter and its affiliates are full-service financial institutions engaged in various activities that may include securities trading, commercial and investment banking, municipal advisory, brokerage, and asset management. In the ordinary course of business, the Underwriter and its affiliates may actively trade debt and, if applicable, equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its affiliates may engage in transactions for their own accounts involving the securities and instruments made the subject of this securities offering or other offering of the District. The

72 Underwriter and its affiliates may make a market in credit default swaps with respect to municipal securities in the future. The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the District.

While the Underwriter does not believe that the following represent a potential or actual material conflict of interest, it notes that: The Underwriter’s Fabric of Society program provided a scholarship to graduating seniors from the District in 2018, 2019 and 2020.

73 Additional Information

Quotations from and summaries and explanations of the Notes, the District Resolution providing for issuance of the Notes, and the constitutional provisions, statutes and other documents described herein, do not purport to be complete, and reference is hereby made to said documents, constitutional provisions and statutes for the complete provisions thereof.

All data contained herein have been taken or constructed from the District’s records and other sources, as indicated.

______

The preparation, execution and distribution of this Official Statement have been duly authorized and approved by the Board of Education of the District.

SAN FRANCISCO UNIFIED SCHOOL DISTRICT

By: /s/ Meghan Wallace Chief Financial Officer

74 APPENDIX A

PROPOSED FORM OF OPINION OF BOND COUNSEL

[Closing Date]

Board of Education San Francisco Unified School District San Francisco, California

San Francisco Unified School District 2020-21 Tax and Revenue Anticipation Notes (Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the San Francisco Unified School District (the “District”), which is located in the City and County of San Francisco, California (the “City and County”), in connection with issuance by the District of $100,000,000 aggregate principal amount of temporary notes designated the “San Francisco Unified School District 2020-21 Tax and Revenue Anticipation Notes” (the “Notes”), issued pursuant to and by authority of a resolution of the Board of Education of the District adopted on February 9, 2021 (the “District Resolution”), under and by authority of Title 5, Division 2, Part 1, Chapter 4, Article 7.6 (commencing with Section 53850) of the California Government Code.

In such connection, we have reviewed the District Resolution, the tax certificate of the District relating to the Notes dated the date hereof (the “Tax Certificate”), certifications of officers of the City and County, the District and others, and such other documents and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after original delivery of the Notes on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after original delivery of the Notes on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Notes has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures provided to us and the due and legal execution and delivery thereof by, and validity against, any parties other than the District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the District Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Notes to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Notes, the District Resolution, and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium

A-1 and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against school districts and counties in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute or having the effect of a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Notes and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Notes constitute the valid and binding obligations of the District. The principal of and interest on the Notes are payable from Pledged Revenues (as that term is defined in the District Resolution), and to the extent not so paid, are payable from any other moneys of the District lawfully available therefor.

2. Interest on the Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. The amount treated as interest on the Notes and excluded from gross income will depend upon the taxpayer’s election under Internal Revenue Service Notice 94- 84. Interest on the Notes is not a specific preference item for purposes of the federal alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Notes.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

A-2 APPENDIX B

FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019

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TABLE OF CONTENTS JUNE 30, 2019

FINANCIAL SECTION Independent Auditor’s Report 2 Management’s Discussion and Analysis 5 Basic Financial Statements Government‐Wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds ‐ Balance Sheet 17 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 19 Governmental Funds ‐ Statement of Revenues, Expenditures, and Changes in Fund 20 Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 22 Proprietary Fund ‐ Statement of Net Position 24 Proprietary Fund ‐ Statement of Revenues, Expenses, and Changes in Fund Net Position 25 Proprietary Fund ‐ Statement of Cash Flows 26 Fiduciary Funds ‐ Statement of Fiduciary Net Position 27 Notes to Financial Statements 28

REQUIRED SUPPLEMENTARY INFORMATION General Fund ‐ Budgetary Comparison Schedule 69 County School Service Fund – Budgetary Comparison Schedule 70 Schedule of Changes in the District's Total OPEB Liability and Related Ratios 71 Schedule of the District’s Proportionate Share of the Net Pension Liability 72 Schedule of District Pension Contributions 73 Note to Required Supplementary Information 74

SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 76 Local Education Agency Organization Structure 79 Schedule of Average Daily Attendance 80 Schedule of Instructional Time 81 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 82 Schedule of Financial Trends and Analysis 83 Schedule of Charter Schools 84 Combining Statements ‐ Nonmajor Governmental Funds Combining Balance Sheet 85 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 87 Combining Schedules ‐ General Unrestricted and Restricted Funds Balance Sheet Schedules 89 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 90 Note to Supplementary Information 91

SAN FRANCISCO UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTS JUNE 30, 2019

INDEPENDENT AUDITOR’S REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 94 Report on Compliance for Each Major Program on Internal Control Over Compliance Required by the Uniform Guidance 96 Report on State Compliance 98

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor’s Results 102 Financial Statement Findings 103 Federal Awards Findings and Questioned Costs 104 State Awards Findings and Questioned Costs 105 Summary Schedule of Prior Audit Findings 109

FINANCIAL SECTION

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INDEPENDENT AUDITOR'S REPORT

Board of Education San Francisco Unified School District San Francisco, California

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the San Francisco Unified School District (District) as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the 2018‐2019 Guide for Annual Audits of K‐12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the San Francisco Unified School District, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and other required supplementary information as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the other supplementary information as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The Schedule of Expenditures of Federal Awards and other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information including the Schedule of Expenditures of Federal Awards and other supplementary information, is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 24, 2019, on our consideration of the San Francisco Unified School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of San Francisco Unified School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering San Francisco Unified School District's internal control over financial reporting and compliance.

Palo Alto, California December 24, 2019

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MANAGEMENT'S DISCUSSION AND ANALYSIS

PROFILE OF THE DISTRICT

The San Francisco Unified School District (“SFUSD” or the “District”) is the sixth largest school district in California, and currently educates approximately 57,000 students, including charter school pupils, who live in the 49 square mile area of the City and County of San Francisco. The San Francisco Unified School District was established in 1851. The District is governed by an elected Board of seven members. The District also administers the County Office of Education.

The District and County Office of Education provide pre‐kindergarten, transitional kindergarten, kindergarten, elementary, middle and secondary education in the City and County of San Francisco through a network of 136 schools as follows:

 12 early education schools  64 elementary schools (TK‐5)  8 alternatively configured schools (TK‐8)  13 middle schools (6‐8)  14 high schools (9‐12)  3 continuation/alternative schools, including an independent study school  8 court and county community schools and programs  14 district‐authorized charter schools

The District’s diverse student demographics includes 35% Asian, 27% Hispanic, 15% White, 7% African American, 5% Filipino, 1% Pacific Islander and 10% “Other”. Approximately 29% of the student population is designated as English Language Learners, 11% Special Education and 55% is free and reduced‐price lunch eligible.

The majority of the District’s elementary schools have designated attendance areas giving priority to students living within those attendance boundaries. The remaining elementary schools are “City‐wide schools” with no designated attendance area. Each middle school is linked to several elementary schools through feeder patterns; however, all SFUSD schools enroll students based on parent/guardian request and provide significant opportunities for parental choice in enrollment.

The District is also the chartering entity and has oversight responsibility for fourteen charter schools: City Arts and Technology High School, Creative Arts Charter School, Five Keys Charter School, Five Keys Adult School, Five Keys Independence High School, Gateway High School, Gateway Middle School, KIPP Bayview Academy, KIPP San Francisco Bay Academy, KIPP San Francisco College Preparatory, Leadership High School, Life Learning Academy, Thomas Edison Charter Academy and Mission Preparatory.

SFUSD’s commitment to high‐quality teaching and learning for all students and our commitment to delivering on the promises that we make to our students and families has led us to be the highest performing large urban school district in the state of California. Despite persistent challenges around the adequacy of funding for K‐12 education at the state level (California remains in the bottom 25% in the nation in per‐pupil funding), the District’s students have achieved more than a decade of continuous growth in academic performance, including significant gains by all groups of students. In the first year of implementation of the new statewide standardized test, the Smarter Balanced Assessment Consortium (SBAC), SFUSD outperformed all other large urban districts in California. The 2017 SBAC results show SFUSD students remaining ahead of their peers in California and in most large urban districts in both English Language Arts and Mathematics. 55% of district students overall are now meeting or exceeding the standards in English Language Arts, up from 53% in the previous year, and higher

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than the state average of 49%.

In Math, 51% of students are now meeting or exceeding the standards, an increase from 50% from last year, and higher than the state average of 38%. Students from our district graduate high school in four years at a rate of 84%. At the same time, however, wide gaps in achievement between subgroups of students persist.

SFUSD began a deliberate course of action in 2008 with its strategic plan, Beyond the Talk: Taking Action to Educate Every Child Now. Beyond the Talk represented our community’s bold aspirational goals that have remained unchanged, while we continue our deep and unrelenting commitment to our three District goals:

 Access and Equity – Make social justice a reality by ensuring every student has access to high quality teaching and learning.  Student Achievement – Create learning environments in all SFUSD schools that foster highly engaged and joyful learners and that support every student reaching their potential.  Accountability – Keep district promises to students and families and enlist everyone in the community to join in doing so.

These goals are reflected in both the current strategic plan, Transform Learning, Transform Lives. A Guidebook Towards Vision 2025, as well as SFUSD’s Local Control and Accountability Plan (LCAP). Both the strategic plan and the LCAP can be found at www.sfusd.edu.

In the fall of 2013, the superintendent of San Francisco Unified School District (SFUSD), under the leadership of the Board of Education, launched an ambitious undertaking: to develop a new vision for the future of public education in San Francisco, and then use that vision as a guide to transform the city’s school system, over the next decade, into one of the premier systems in the world. SFUSD maintains its commitment to preparing all students to thrive in the 21st Century by develop strong academic knowledge and skills, as well as a host of dispositions and behaviors, that increase their curiosity and engagement, activate their full potential for learning, and prepare them for life, work, and study beyond their secondary school years. While the pace and the path toward achieving these outcomes will vary among students and unfold along a set of learning progressions, the goal is for every SFUSD student to possess these capacities by the time they graduate. These capacities are outlined in the Graduate Profile.

SFUSD’s aim is to make sure all students graduate from high school with the skills, capacities and dispositions for 21st Century success. Our focal areas of support for student success include:

 Content Knowledge – we help our students master the fundamentals in math, English, computer science and art, and develop problem‐solving and critical analytical skills.  Creativity – we provide opportunities for our students to be creative, tackle environmental problems and make communities more inclusive.  Career and Life Skills – we help students to acquire knowledge, skills, and experience they need to navigate in the world, think critically and communicate effectively.  Global, Local and Digital Identity – we help to equip students with the skills of the future, including learning new languages, understanding new technologies, and participating in local apprenticeships.  Leadership, Empathy, and Collaboration – we organize and encourage teamwork and collaboration, both with peers and partners outside the classroom, such as family members and mentors.  Sense of Purpose and Sense of Self – we nurture our students growth and teach them life lessons so they can recognize their purpose and value, and encourage each student to reach their full potential, whether they require extra support or a new challenge.

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Dr. Vincent C. Matthews who was hired as the new Superintendent in May, 2017, continues to be committed to continuing the work started by the District’s previous Superintendent, Mr. Richard Carranza, in building a rigorous Common Core‐based curriculum, investing in the professional learning of teachers, leaders and school staff, enlisting partners and engaging families, and building an accountability system that includes a comprehensive assessment of student learning

The District's staff share a commitment to deliver programs that will create the foundation for all students to achieve success. Each year, the SFUSD’s educators and administrators assess each school’s progress against established priorities, goals and objectives. Through the ongoing and expanding use of evaluation data, SFUSD continually reassesses its strategies, practices and allocation of resources. The District has been successful in introducing strategies that have helped in closing gaps in academic achievement outcomes among groups of students. Parents are also becoming more aware of high instructional quality and appealing programs at public schools across San Francisco, and more of the District’s schools are continuing to gain state and federal recognition.

District staff also continue to refine practices in financial planning and monitoring spending levels. SFUSD’s ability to analyze and estimate revenues and expenses is essential due to the historical unpredictability of financial resources and the federal and state‐wide political and economic trends that may continue to affect the District’s financial condition over the next several years, even as the State continues to fully implement the new Local Control Funding Formula. The State of California’s fiscal challenges, including volatility in revenues, particularly over the past decade, have had a significant impact on the funds available for school budgets. As the state’s economy stabilizes and K‐12 education funding is restored to its inflation‐adjusted pre‐recession level through the implementation of the Local Control Funding Formula, the District has continued to deliver high‐quality educational services by directing additional resources to schools, as well as providing competitive compensation increases to our teachers and educators, while continuing to maintain a healthy fiscal status. As financial resources gradually stabilize and improve, the District’s teachers, site administrators, and other staff members are continuing their efforts to raise academic achievement of already high performing students and dramatically accelerate the achievement of those who need the most support to achieve SFUSD’s vision for student success.

According to new data released from the California Department of Education (CDE) School Dashboard, the graduation rate for the San Francisco Unified School District (SFUSD) rose to 89% for the 2018‐19 school year. We are motivated to continue improving upon these graduation rates and make progress on other important indicators of how well we are preparing our students. SFUSD also continued to show improvement trends for college and career readiness.

FINANCIAL HIGHLIGHTS

RESULTS OF OPERATIONs

Unrestricted General Fund Results of Operations

During fiscal year 2018‐19, the District’s unrestricted general fund ending balance, which includes nonspendable, assigned, and unassigned balances, decreased from $50.4 million to $40.8 million, a $9.6 million or 19% decrease. Total unrestricted general fund revenues in the current year were $600.6 million, an increase of $29.0 million, or 5% compared to 2017‐18. This increase was due primarily to higher LCFF revenues resulting from a cost of living adjustment of 1.56% over the previous year’s per ADA funding level, as well as a slight increase in the average daily attendance.

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Total unrestricted general fund expenditures and transfers out of $609.6 million represent an increase of $18.6 million or 3% over 2017‐18. This is due primarily to an increase in employee salaries negotiated under a new three year contract that became effective as of the start of the fiscal year as well as increases in the CALSTRS retirement contribution rate. Total salaries increased by 7% to $305.6 million from $285.5 million the previous year, while the employer contribution rate for teachers’ retirement rose from 12.58% of certificated payroll to 14.43% of certificated payroll, a 1.82% increase.

The unrestricted general fund was required to contribute to other funds, primarily to the debt service, child development, and cafeteria funds. Transfers to other funds in the amount of $9.3 million are $2.6 million or 22% lower than 2017‐18 levels due primarily to a reduction in the unrestricted general fund contribution to the child development program.

General Fund Ending Balance and Reserves

The District’s combined general fund ending balance at June 30, 2019 (restricted plus unrestricted) was $105.8 million. The restricted portion of $65.0 million will largely be used for instructional activities, although its use is restricted for specific program activities and cannot be counted as available (i.e., unrestricted reserves). The District’s available reserves, consisting of reserves for economic uncertainty, and other unassigned fund balances of the general fund, were $30.1 million, which is a decrease of $9.8 million or 24% over fiscal year 2017‐18.

The following comparison of revenue and expenditures focuses solely on general fund operations. Table I shows the year to year revenue and Table II shows the same comparison of expenditures.

Table I

Variance (Amounts in thousands) 2018 2019 $ % Local control funding formula$ 501,473 $ 522,499 $ 21,026 4.2% Federal sources 25,569 22,289 (3,280) ‐12.8% Other state sources 72,008 102,007 29,999 41.7% Local sources 202,436 273,621 71,185 35.2% $ 801,486 $ 920,416 $ 118,930 14.8%

Table II

Variance (Amounts in thousands) 2018 2019 $ % Instruction$ 414,235 $ 485,193 $ 70,958 17.1% Instruction related activities 175,535 176,415 880 0.5% Pupil services 61,808 70,539 8,731 14.1% General administration 39,506 43,296 3,790 9.6% Plant services 64,923 68,529 3,606 5.6% Facility acquisition and construction 8,708 10,601 1,893 21.7% Ancilliary and enterprise services 4,962 5,054 92 1.9% Other outgo 40,591 41,155 564 1.4% Transfers out 13,796 12,525 (1,271) ‐9.2% $ 824,064 $ 913,307 $ 89,243 10.8%

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The $70.9 million increase in instruction expenditure is largely due to negotiated salary increases due to collective bargaining agreements, increases in the district’s contributions to teachers’ retirement plans, as well as expenditures related to state categorical programs like the College Readiness Block Grant.

Budgeting

The SFUSD adopted budget is developed based on the latest information on revenue projections received from the Governor’s May revision to the state budget, which is typically released a few months before the final State budget is passed. The District held budget hearings and adopted the 2018‐19 budget in accordance with provisions of the California Education Code. The budget reflects the District’s goals to emphasize the achievement of all students and to narrow the achievement gap for our African‐American students. Throughout the budget development process, staff is encouraged to work with the community to develop sound decisions that support the needs of all students.

Only grants that the District is certain of receiving are included in the adopted budget. Additional programs are budgeted as grant awards are received during the course of the year. Grants are budgeted to be fully expended. Carryover funds are budgeted when carryover balances are determined and per instructions from program managers.

As program needs change during the year, changes and revisions to the adopted budget are made throughout the year to reflect these changes. Budget transfers and budget revisions are made on an ongoing basis, and new programs are budgeted throughout the fiscal year. We have included a budgetary comparison schedule on page 70 providing the adopted and final budgets compared with actual revenues and expenditures.

OVERVIEW OF THE FINANCIAL STATEMENTS

This annual report consists of three parts – management’s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District:

 The first two statements are government‐wide financial statements that provide both short‐term and long‐ term information about the District’s overall financial status.  The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District’s operations in more detail than the government‐wide statements.  The governmental funds statements tell how basic services like regular and special education were financed in the short term as well as what remains for future spending.  Proprietary fund statements offer financial information about the activities the District operates on a cost reimbursement basis, such as the Self‐insurance Fund.  Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong. Fiduciary fund activity is excluded from the government‐wide financial statements.

The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with comparisons of the District’s General and County School Service Fund budgets, both the adopted and final version, with year‐end actuals.

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Government‐Wide Statements

The government‐wide statements report information about the District as a whole using accounting methods similar to those used by private‐sector companies. The statement of net position includes all of the District’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid.

The two government‐wide statements report the District’s net position and how they have changed. Net position – the difference between assets and liabilities – is one way to measure the District’s financial health.

 Over time, increases or decreases in the District’s net position may be an indicator of whether its financial position is improving or deteriorating, respectively.  To assess the overall health of the District one needs to consider additional non‐financial factors such as changes in the District’s property tax base, its student enrollment data, the State’s fiscal health and the condition of school buildings and other facilities.

Fund Financial Statements

The fund financial statements provide more detailed information about the District’s most significant funds – not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs:

 Some funds are required by State law and by bond covenants.  The District establishes other funds to control and manage money for particular purposes (such as payment of long‐term debt) or to show that it is properly using certain revenues (such as Federal grants).

The District has three kinds of funds:

 Governmental funds – Most of the District’s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year‐end that are available for spending. Consequently, the governmental funds statements provide a detailed short‐term view that helps one determine whether there are more or fewer financial resources that can be spent in the near future to finance the District’s programs. Because this information does not encompass the additional long‐term focus of the district‐wide statements, reconciliations between the district‐wide statements and the fund financial statements are provided.

 Proprietary funds – Services for which the District charges a fee are generally reported in proprietary funds. The District uses one internal service fund – the self‐insurance fund – to account for and report activities related to the self‐insured workers compensation program.

 Fiduciary funds – The District holds assets in a fiduciary capacity that belong to student groups (associated student body). The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. All of the District’s fiduciary activities are reported in a separate statement of fiduciary net position. These activities are excluded from the district‐ wide financial statements because the ASB funds cannot be used to finance operations.

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REPORTING THE DISTRICT AS A WHOLE

The Statement of Net Position and the Statement of Activities

The statement of net position and the statement of activities report information about the District as a whole and about its activities. These statements include all assets and liabilities of the District using the accrual basis of accounting, which is similar to the accounting used by most private‐sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the District's net position and changes in them. Net position is the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources, which is one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position will serve as a useful indicator of whether the financial position of the District is improving or deteriorating. Other factors to consider are changes in the District's property tax base and the condition of the District's facilities.

The relationship between revenues and expenses is the District's operating results. Since the governing board's responsibility is to provide services to our students and not to generate profit as commercial entities do, one must consider other factors when evaluating the overall health of the District. The quality of the education and the safety of our schools will likely be an important component in this evaluation.

The statement of net position and the statement of activities report all of the District’s financial activity as in support of “governmental activities.” Governmental activities includes the education of kindergarten through grade twelve students, county office of education programs, the operation of child development activities, and the on‐going effort to improve and maintain buildings and sites. Property taxes, state income taxes, user fees, interest income, federal, state, and local grants, as well as general obligation bonds, finance these activities.

REPORTING THE DISTRICT'S MOST SIGNIFICANT FUNDS

Fund Financial Statements

The fund financial statements provide detailed information about the most significant funds ‐ not the District as a whole. Some funds are required to be established by state law and by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money that it receives from the U.S. Department of Education.

Governmental Funds ‐ Most of the District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year‐end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short‐term view of the District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The differences of results in the governmental fund financial statements to those in the government‐wide financial statements are explained in a reconciliation following each governmental fund financial statement.

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Proprietary Funds ‐ We use an internal service fund (a component of proprietary funds) to report activities that provide supplies and services for the District's other programs and activities, such as the District's self‐insured workers compensation program. This activity is reported with governmental activities in the government‐wide financial statements.

THE DISTRICT AS A TRUSTEE

Reporting the Districts Fiduciary Responsibilities

The District is the trustee, or fiduciary, for funds held on behalf of associated student body groups. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE

Net Position

The District’s government‐wide deficit net position at June 30, 2019 totaled $(295.8) million. Of this amount, $786.0 million represents net investment in capital assets, while $206.1 million is restricted for various purposes. The deficit unrestricted net position of $(1,288) million is primarily due to the aggregate net pension liability and the total postemployment benefits obligation, which totals $780.7 million and $756.5 million, respectively at June 30, 2019. The aggregate net pension liability increased $8.8 million or 1.15% from June 30, 2018. The postemployment benefits liability increased $23.0 million or 3.13% from June 30, 2018. A reconciliation of the unrestricted deficit net position and the positive unassigned general fund is on page 50.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

For financial accounting purposes, capital assets are valued at historical cost less accumulated depreciation, and are not intended to present an estimate of fair market value. At the close of the year ended June 30, 2019, the District’s capital assets totaled $2,291 million. Accumulated depreciation was $634.2 million at year end. Depreciation expense for the year totaled $57.7 million. Net book value (the amount of total assets after applying depreciation) increased by $50.0 million to $1,657 million.

The original historical construction cost of most school sites dating back to the date the school district was first opened have not been included as such costs would have been fully depreciated by the beginning year date of July 1, 2001, when accounting standards required such information to be reported. See note 4 on page 44 to the accompanying financial statements for a complete summary of the District’s capital assets.

Long‐Term Obligations

Long‐term obligations consist primarily of the unfunded portions of employee pensions, unfunded portions of post‐employment medical benefits and general obligation bonded debt. The following tables presents a summary of the District’s most significant long‐long obligations on June 30, 2019, and presents the increase from the previous fiscal year.

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Net Variance (Amounts in thousands) 2018 2019 $ % CalSTRS and SFERS unfunded pension amounts $ 771,834 $ 780,676 $ 8,842.4 1.1% Post‐employment medical unfunded amounts 733,481 756,461 22,980.1 3.1% Bonded debt 1,045,995 969,432 (76,563.0) ‐7.3% Other 54,764 52,174 (2,590.1) ‐4.7% $ 2,606,074 $ 2,558,743 $ (47,331) ‐1.8%

The total OPEB liability and the net pension liability is (collectively $1.5 billion) in‐effect “unpaid compensation” to employees for past service. Unlike other forms of long‐term liabilities such as general obligation bonds, these amounts will be funded with District resources, primarily from the general fund. The District has earmarked $25.4 million within the self‐insurance fund towards the $756 million OPEB liability. Complete information regarding OPEB and pension is described in Note 11 and Note 13.

FACTORS BEARING ON THE DISTRICT’S FUTURE

The District’s staff continues to use assessments to measure and re‐evaluate our investments in sound, educational and programmatic activities while ensuring financial solvency. The District achieved its required reserve target of 2% for fiscal year 2018‐19, and currently projects that it will maintain its minimum reserve in both fiscal year 2019‐20 and fiscal year 2020‐21.

In addition to the Local Control Funding Formula revenue source, the District also received approximately $696.5 million of other program funding from Federal, State, and local sources. In June 2008, Proposition A, the Quality Teacher & Education Act (“QTEA”), was passed by the voters of San Francisco, bringing $40+ million per year to the District for the next twenty years beginning in fiscal year 2008‐09. These resources assist in recruiting and retaining effective teachers, supporting innovative instructional strategies, increasing accountability, and improving the District’s technology infrastructure. The District received $43.5 million of QTEA funding in FY 2018‐ 19.

Another local revenue source that has been greatly beneficial to SFUSD is the Public Education Enrichment Fund (PEEF), a ballot initiative that was approved by the voters of San Francisco in March, 2004, and established as law in the City Charter, Section 16.123.1‐10. Originally set to expire on June 30, 2015, Proposition C, the “Children and Families First” initiative passed in November, 2014, extended the PEEF funding through 2041, and ensured a sustained and guaranteed investment in our children’s future. PEEF funds have been critical in allowing the district to maintain, and in most cases, expand, programs during the economic downturn. The district receives two‐thirds of the annual PEEF allocation from the City with the remaining one‐third going to the City’s Department of Early Care and Education for support to preschool. The district’s portion of PEEF is used to support sports, libraries, the arts and music (SLAM) as well as programs such as Wellness Centers, Student Support Professionals at schools, Translation Services, STEAM curriculum, and Peer Resources, to name a few. The District received $88.3 million of PEEF revenue in 2018‐19.

Proposition G, The Living Wage for Educators Act (LWEA), is a new parcel tax measure that was placed on the June 8, 2018 ballot and passed with a 61% vote. Upon resolution of pending legal challenges, the measure is projected to generate $50 million of revenue annually, the majority of which, is targeted to increasing educator salaries and supporting teacher professional development. Due to a legal challenge filed against the City and County of San Francisco in 2018 regarding the necessary threshold for voter approval of Proposition G, these parcel taxes have been collected but have not yet been disbursed to the District.

13 As it relates to future State Budgets, the District’s ability to predict what actions will be taken in the future by the State Legislature and Governor to address the State’s current or future budget and cash management practices is limited. Future State budgets will be affected by national and state economic conditions and other factors over which the District has no control. Prospects for State funding are stable due to a sustained improvement in California’s economy and the implementation of the Local Control Funding Formula which has provided increased funds to K‐14 education under the Governor’s budget.

The District’s Superintendent and senior staff members will continue to work very closely with the Board of Education to monitor revenues and manage expenditures. SFUSD is fully committed to take whatever measures are necessary to maintain a strong and stable financial position. At the same time, the District will also continue its dedicated mission to ensure improvement in academic achievement, closing achievement gaps, improving its facilities, and meeting the priorities of the Board of Education and the San Francisco community. It is the District’s goal to ensure that all children receive a quality education and a positive foundation necessary for them to achieve academic success and to prepare them for success in the twenty‐first century.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of the District’s finances and to assist interested parties in understanding the District’s sources and uses of resources. If you have questions about this report or need additional financial information, please contact Meghan Wallace, Chief Financial Officer of the San Francisco Unified School District, 135 Van Ness Avenue, San Francisco, California, 94102 or (415) 241‐6542.

14 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATEMENT OF NET POSITION JUNE 30, 2019

Governmental Assets Activities Cash and investments $ 381,845,536 Receivables 77,342,548 Other assets 1,010,626 Capital assets Land and construction in progress 7,100,000 Other capital assets, net of depreciation 1,649,868,916 Total capital assets 1,656,968,916 Total assets 2,117,167,626

Deferred outflows of resources Deferred amounts on refunding 2,570,896 Deferred amounts related to OPEB 56,870,502 Deferred amounts related to pensions 301,541,825 Total deferred outflows of resources 360,983,223

Liabilities Accounts payable and accrued expenses 52,828,991 Overdrafts 4,745,285 Interest payable 1,801,249 Unearned revenue 6,564,447 Long‐term liabilities Due within one year 72,848,727 Due in more than one year 918,324,638 Claims liability 30,432,553 Total post‐employment benefits liability 756,461,071 Aggregate net pension liability 780,676,405 Total liabilities 2,624,683,366

Deferred inflows of resources Deferred inflows of resources related to pensions 122,509,418 Deferred inflows of resources related to OPEB 26,778,742 Total deferred inflows of resources 149,288,160

Net position Net investment in capital assets 785,995,972 Restricted for: Educational programs 69,327,252 Debt service 37,050,916 Capital projects 84,077,119 Self insurance 15,598,763 Unrestricted (deficit) (1,287,870,699) Total net position $ (295,820,677)

The accompanying notes are an integral part of these financial statements. 15 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Net Revenues (Expenses) and Changes Program Revenues in Net Position Charges for Operating Services and Grants and Governmental Functions/Programs Expenses Sales Contributions Activities Governmental Activities Instruction$ 618,741,792 $ 846,927 $ 174,336,820 $ (443,558,045) Instruction related activities Supervision of instruction 148,182,359 478,510 74,620,811 (73,083,038) Instructional library and technology 14,531,417 112,707 8,463,543 (5,955,167) School site administration 62,692,576 27,979 8,548,336 (54,116,261) Pupil services Home‐to‐school transportaon 37,360,691 2,853 207,825 (37,150,013) Food services 31,706,583 1,393,219 21,991,868 (8,321,496) All other pupil services 101,287,362 257,485 32,286,312 (68,743,565) General administration Data processing 11,652,512 10,832 797,294 (10,844,386) All other general administration 40,274,762 88,004 6,442,731 (33,744,027) Plant services 71,586,813 12,366 1,161,153 (70,413,294) Ancillary services 5,532,229 41,442 4,010,226 (1,480,561) Other outgo 1,326,608 11,241 4,131,852 2,816,485 Interest on long‐term obligations 36,435,975 ‐ ‐ (36,435,975) Total governmental activities$ 1,181,311,679 $ 3,283,565 $ 336,998,771 (841,029,343)

General revenues and subventions Property taxes, levied for general purposes 328,018,954 Property taxes, levied for debt service 106,284,606 Taxes levied for other specific purposes 95,977,415 Federal and state aid not restricted to specific purposes 261,256,864 Interest and investment earnings 5,201,871 Miscellaneous 74,769,302 Subtotal, general revenues 871,509,012 Change in net position 30,479,669 Net Position (deficit) ‐ Beginning of year (326,300,346) Net Position (deficit) ‐ Ending $ (295,820,677)

The accompanying notes are an integral part of these financial statements.

16 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2019

County School General Service Building Fund Fund Fund ASSETS Cash and investments$ 99,119,159 $ 9,058,259 $ 115,871,951 Receivables 27,884,113 13,638,927 938,552 Prepaid expenditures 97,167 ‐ ‐ Stores inventories 883,967 ‐ ‐ Total sssets$ 127,984,406 $ 22,697,186 $ 116,810,503

LIABILITIES AND FUND BALANCES Liabilities Overdrafts$ ‐ $ ‐ $ ‐ Accounts payable 16,288,987 14,283,523 14,129,651 Unearned revenue 5,897,057 187,012 ‐ Total liabilities 22,186,044 14,470,535 14,129,651

Fund Balances Nonspendable 981,634 ‐ ‐ Restricted 65,025,276 843,723 102,680,852 Committed ‐ ‐ ‐ Assigned 9,630,000 7,382,928 ‐ Unassigned 30,161,452 ‐ ‐ Total Fund Balances 105,798,362 8,226,651 102,680,852 Total Liabilies and Fund Balances $ 127,984,406 $ 22,697,186 $ 116,810,503

The accompanying notes are an integral part of these financial statements.

17

Bond Interest Nonmajor Total And Redemption Governmental Governmental Fund Funds Funds

$ 38,230,334 $ 70,020,078 $ 332,299,781 588,562 33,914,640 76,964,794 ‐ ‐ 97,167 ‐ 29,492 913,459 38,818,896 $ 103,964,210 $ 410,275,201

$ ‐ $ 4,745,285 $ 4,745,285 ‐ 7,449,738 52,151,899 ‐ 480,378 6,564,447 ‐ 12,675,401 63,461,631

‐ ‐ 981,634 38,818,896 87,568,641 294,937,388 ‐ 3,720,168 3,720,168 ‐ ‐ 17,012,928 ‐ ‐ 30,161,452 38,818,896 91,288,809 346,813,570 $ 38,818,896 $ 103,964,210 $ 410,275,201

18 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2019

Amounts reported for governmental funds in the statement of net position are different from the amounts reported in the fund level statements because of these items: Total fund balance ‐ governmental funds$ 346,813,570

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. The cost of capital assets is$ 2,291,140,769 Accumulated depreciation is (634,171,853) Net capital assets 1,656,968,916 In governmental funds, unmatured interest on long‐term obligations is recognized in the period when it is due. In the government‐wide statements, unmatured interest on long‐term obligations is recognized when it is incurred. (1,801,249) An internal service fund is used by the District's management to charge the costs of the workers' compensation insurance program to the individual funds. The assets and liabilities of the internal service fund are included with governmental activities. 18,813,864 Unamortized deferred charge on refunding is recognized as a deferred outflow on the statement of net position. The deferred charges are recognized in the governmental funds when they were paid. 2,570,896 Long‐term liabilities are not due and payable in the current period and therefore, are not reported as liabilities in the governmental funds. Long‐term liabilities at year end consist of the following items: General obligation bonds and premium (969,432,045) Capital leases payable (6,792,647) Compensated absences (vacations) (14,948,673) Aggregate net pension liability net of deferrals (601,643,998) Total post‐employment benefits liability net of deferrals (726,369,311) Total long‐term liabilities (2,319,186,674) Total net position ‐ governmental activities$ (295,820,677)

The accompanying notes are an integral part of these financial statements.

19

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SAN FRANCISCO UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019

County General School Service Building Fund Fund Fund REVENUES Local control funding formula$ 522,498,955 $ 45,956,687 $ ‐ Federal sources 22,289,023 16,190,062 ‐ Other state sources 102,006,965 12,175,256 ‐ Local sources 273,621,340 39,828,796 4,224,579 Total Revenues 920,416,283 114,150,801 4,224,579

EXPENDITURES Current Instruction 485,193,190 46,263,782 ‐ Instruction related activities: Supervision of instruction 112,725,437 14,500,665 ‐ Instructional library and technology 12,863,873 360,357 ‐ School site administration 50,825,713 1,404,678 ‐ Pupil Services Home‐to‐school transportation 5,060,581 28,939,294 ‐ Food services ‐ ‐ ‐ All other pupil services 65,478,707 27,102,955 ‐ General administration Data processing 10,604,128 172 ‐ All other general administration 32,692,109 1,213,078 ‐ Plant services 68,529,389 113,004 ‐ Ancillary services 5,034,572 ‐ ‐ Other outgo 41,174,494 ‐ ‐ Capital outlay 10,601,336 57,104 63,689,308 Debt service Principal ‐ ‐ ‐ Interest and other ‐ ‐ ‐ Total Expenditures 900,783,529 119,955,089 63,689,308 Excess (Deficiency) of Revenues Over Expenditures 19,632,754 (5,804,288) (59,464,729)

OTHER SOURCES (USES) Transfers in ‐ ‐ 50,000 Transfers out (12,525,469) ‐ ‐ Net Financing Sources (Uses) (12,525,469) ‐ 50,000 Net chnace in fund balances 7,107,285 (5,804,288) (59,414,729) Fund Balance ‐ Beginning 98,691,077 14,030,939 162,095,581 Fund Balance ‐ Ending$ 105,798,362 $ 8,226,651 $ 102,680,852

The accompanying notes are an integral part of these financial statements.

20

Bond Interest Nonmajor Total Redemption Governmental Governmental Fund Funds Funds

$ ‐ $ ‐ $ 568,455,642 2,021,210 23,724,923 64,225,218 242,807 49,137,843 163,562,871 107,038,003 43,969,055 468,681,773 109,302,020 116,831,821 1,264,925,504

‐ 28,448,419 559,905,391

‐ 7,626,374 134,852,476 ‐ ‐ 13,224,230 ‐ 4,822,616 57,053,007

‐ ‐ 33,999,875 ‐ 27,994,083 27,994,083 ‐ 454,605 93,036,267

‐ ‐ 10,604,300 ‐ 2,746,620 36,651,807 ‐ 892,429 69,534,822 ‐ ‐ 5,034,572 ‐ ‐ 41,174,494 ‐ 32,650,599 106,998,347

70,130,000 2,275,741 72,405,741 42,195,189 530,150 42,725,339 112,325,189 108,441,636 1,305,194,751

(3,023,169) 8,390,185 (40,269,247)

‐ 12,475,469 12,525,469 ‐ ‐ (12,525,469) ‐ 12,475,469 ‐ (3,023,169) 20,865,654 (40,269,247) 41,842,065 70,423,155 387,082,817 $ 38,818,896 $ 91,288,809 $ 346,813,570

21 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Amounts reported for governmental activities in the statement of activities are different because of the following items:

Total net change in fund balances ‐ governmental funds $ (40,269,247)

Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures, however, for governmental activities those costs are capitalized in the statement of net position as property and equipment. The cost is allocated over the estimated useful life of the asset as depreciation expense in the statement of activities.

This is the amount by which capitalized capital outlays exceed depreciation in the current period. Capital asset additions ‐ current year $ 107,667,667 Less current year depreciaton expense (57,676,459) 49,991,208

Repayment of capital leases is an expenditure in the governmental funds, but it reduces long‐term liabilities in the statement of net position and does not affect the statement of activities. 2,275,741

Repayment of general obligation bond principal is an expenditure in the governmental funds, but it reduces long‐term liabilities in the statement of net position and does not affect the statement of activities. 70,130,000

Amortization of bond premium is a revenue source in the statement of activities, but is not recognized in the governmental funds. 6,432,682

In the statement of activities, compensated absences are measured by the amounts earned during the year. In the governmental funds, compensated absences are measured by the amount of financial resources used (essentially, the amounts actually paid). (3,490,934)

In the governmental funds, OPEB costs are based on employer medical insurance premiums paid. However, in the full‐accrual statement of activities, OPEB expense is the net effect of all changes in the deferred outflows, deferred inflows, and total actuarially determined OPEB liability during the year. (23,646,613)

The accompanying notes are an integral part of these financial statements.

22 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2019

Amortization of deferred charges on refunding reduces deferred balance in the statement of net position and is recorded in the statement of activities as an expense, but does not affect the governmental funds. (469,654)

Interest on long‐term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is paid, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is paid. The interest expense reported in the statement of activities is the result of this difference. 326,336

In the governmental funds, pension costs are based on employer contributions made to CalSTRS and SFERS during the year. However, in the statement of activities, pension expense is the net effect of all changes in the deferred outflows, deferred inflows and the actuarially determined net pension liability during the year. (12,646,069)

An internal service fund is used by the District's management to charge the costs of the self insurance programs to the individual funds and to accumulate resources for post‐employment mendical benefits. The increase in net position of the internal service fund is not reported in the governmental funds, but is reported in the statement of activities. (18,153,781)

Change in net position of governmental activities $ 30,479,669

The accompanying notes are an integral part of these financial statements.

23 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

PROPRIETARY FUND STATEMENT OF NET POSITION JUNE 30, 2019

Governmental Activities Internal Service Fund ASSETS Current assets: Cash and cash deposits$ 1,880,611 Investments 47,665,144 Total cash and investments$ 49,545,755 Receivables 377,754 Total assets 49,923,509

LIABILITIES Current liabilities: Accounts payable 677,092 Noncurrent liabilities: Claim liability ‐ workers' compensation 30,067,000 Claim liability ‐ dental 365,553 Total Liabilities 31,109,645

NET POSITION Restricted for self‐insurance 15,598,763 Unrestricted 3,215,101 Total Net Position$ 18,813,864

The accompanying notes are an integral part of these financial statements.

24 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

PROPRIETARY FUND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2019

Governmental Activities Internal Service Fund

OPERATING REVENUES In‐district premiums$ 19,603,953 Contributions earmarked for post‐employment medical benefits 2,000,000 Total operating revenues 21,603,953

OPERATING EXPENSES Payroll costs 913,774 Contributions to OPEB trust 25,426,899 Claims expense 15,616,734 Total operating expenses 41,957,407 Net operating income (20,353,454)

NONOPERATING REVENUES Interest income 2,199,673 Total nonoperating revenues 2,199,673

Change in Net Position (18,153,781) Net Position ‐ Beginning 36,967,645 Net Position ‐ Ending $ 18,813,864

The accompanying notes are an integral part of these financial statements.

25 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

PROPRIETARY FUND STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2019

Governmental Activities Internal Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from Intra‐District charges$ 19,603,953 Cash receipts earmarked for post‐employment medical benefits 2,000,000 Cash payments for insurance claims (19,422,016) Cash disbursements to the CalPERS CERBT trust for OPEB (25,426,899) Cash payments for payroll expense (695,130) Net cash used for operating activities (23,940,092)

CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 2,878,336 Net cash provided by investing activities 2,878,336

Net decrease in cash and cash equivalents (21,061,756) Cash and cash equivalents ‐ Beginning of year 70,607,511 Cash and cash equivalents ‐ End of year$ 49,545,755

RECONCILIATION OF OPERATING PROFIT TO NET CASH USED FOR OPERATING ACTIVITIES Operating income$ (20,353,454) decrease in accrued liabilities and interfund balances (3,586,638) Net cash provided by operating activities$ (23,940,092)

The accompanying notes are an integral part of these financial statements.

26 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2019

Agengy Fund ASSETS Cash and cash equivalents$ 3,108,969 Investments 11,775,043 Receivables 49,063 Total Assets $ 14,933,075

LIABILITIES Salaries and benefits payable$ 11,824,106 Due to student groups 3,108,969 Total Liabilities $ 14,933,075

The accompanying notes are an integral part of these financial statements.

27 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The San Francisco Unified School District (the District) was established as the San Francisco School System in 1851 under the laws of the State of California. The District and County Office of Education (COE) operate under a locally‐ elected seven‐member Board form of government and provide educational services to grades K ‐ 12 as mandated by state and federal agencies. The District and COE provide child care, elementary and secondary education in the City and County of San Francisco, California. The District operates 8 alternatively configured (TK‐8), 64 elementary schools, 13 middle schools, 17 senior high schools (including two continuation schools and an independent study school), 8 court and county community schools, 34 state‐funded preschool sites, and 12 early education centers. The District sponsors 14 independent charter schools.

For financial reporting purposes, the District includes all funds, account groups, agencies, and authorities that are controlled by or are dependent on the District’s executive or legislative branches. Control by or dependence on the District was determined on the basis of budget adoption, taxing authority, outstanding debt secured by revenues or general obligations of the District, obligations of the District to finance any deficits that may occur, or receipt of significant subsidies from the District.

A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. This includes general operations, food service and student related activities of the District and the COE.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Component units may include organizations that are fiscally dependent on the District in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization’s relationship with the District is such that exclusion would cause the District’s financial statements to be misleading or incomplete. For financial reporting purposes, the District Financing Corporation (Financing Corporation) component unit has a financial and operational relationship which meets the reporting entity definition criteria of the Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity, and thus is included in the financial statements using the blended presentation method as if it were part of the District’s operations. The governing board of the Financing Corporation is the same as the governing board of the District. The Financing Corporation does not issue separate financial statements.

28 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Other Related Entities

Charter Schools The District has approved charters for City Arts and Technology High School, Creative Arts Charter School, Five Keys Charter School, Five Keys Adult School, Five Keys Independence High School, Gateway High School, Gateway Middle School, KIPP Bayview Academy, KIPP San Francisco Bay Academy, KIPP San Francisco College Preparatory, Leadership High School, Life Learning Academy, Mission Preparatory, and Thomas Edison Charter Academy pursuant to Education Code Section 47605. The charter schools are sponsored by the District but operate independently. Their financial activity is not presented in the District's financial statements except for the pass‐through of state aid and property tax revenues.

Basis of Presentation ‐ Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self‐balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The District’s funds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.

Major Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District’s major governmental funds:

General Fund The general fund is the chief operating fund and is used to account for the ordinary operations of the District. All transactions except those accounted for in another fund are accounted for in this fund.

County School Service Special Revenue Fund The county school service special revenue fund is used to account for resources committed to special education or other school programs that would otherwise be operated by a county office of education, as well as to general and administrative oversight.

Building Fund The building fund exists primarily to account separately for proceeds from the sale of general obligation bonds (Education Code Section 15146). The expenditures reported in this fund are restricted to capital outlays authorized for the purpose for which the related general obligation bonds were issued.

Bond Interest and Redemption Fund The bond interest and redemption fund is used for the repayment of bonds issued for a district (Education Code Sections 15125‐15262).

Nonmajor Governmental Funds

Special Revenue Funds The special revenue funds are used to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to expenditures for specified purposes and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund.

29 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Cafeteria Fund The cafeteria fund is used to account separately for Federal, State, and local resources to operate the food service program (Education Code Sections 38090‐38093) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections 38091 and 38100).

Child Development Fund The child development fund is used to account separately for Federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs.

Deferred Maintenance Fund The deferred maintenance fund is used to account separately for revenues that are restricted or committed for deferred maintenance purposes (Education Code Section 17582).

Debt Service Funds The debt service funds are used to account for the accumulation of restricted, committed, or assigned resources for and the payment of principal and interest on general long‐term obligations.

Tax Override Fund The tax override fund is used for the repayment of voted indebtedness (other than Bond Interest and Redemption Fund repayments) to be financed from ad valorem tax levies.

Capital Projects Funds The capital project funds are used to account for financial resources that are restricted, committed, or assigned to the acquisition or construction of major capital facilities and other capital assets (other than those financed by proprietary funds and trust funds).

Capital Facilities Fund The capital facilities fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections 17620‐17626). Expenditures are restricted to the purposes specified in Government Code Sections 65970‐65981 or to the items specified in agreements with the developer (Government Code Section 66006).

State School Building Lease‐Purchase Fund The state school building lease‐purchase fund is used primarily to account separately for State apportionments for the reconstruction, remodeling, or replacing of existing school buildings or the acquisition of new school sites and buildings, as provided in the Leroy F. Greene State School Building Lease‐Purchase Law of 1976 (Education Code Section 17000 et seq.).

County School Facilities Fund The county school facilities fund is established pursuant to Education Code Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund (Proposition 1A), the 2002 State School Facilities Fund (Proposition 47), the 2004 State School Facilities Fund (Proposition 55) or the 2006 State Schools Facilities Fund (Proposition 1D) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section 17070 et seq.).

Special Reserve Fund for Capital Outlay Projects The special reserve fund for capital outlay projects exists primarily to provide for the accumulation of general fund monies for capital outlay purposes (Education Code Section 42840).

30 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Mello‐Roos Capital Projects Fund This fund is used to account for capital projects financed by mello‐roos community facilities districts and similar entities that are considered blended component units of the District. The Mello‐Roos Community Facilities Act of 1982 (Government Code Section 53311 et seq.) allows any county, city, special district, school district, or joint powers authority to establish, upon approval of two‐thirds of the voters in the district, a “Community Facilities District” (CFD). This fund reports the financial activity of the 2010 Proposition A School Facilities Special Tax, the 1990 School Facilities Special Tax, and ADA capital improvements.

Proprietary Funds Proprietary funds are used to account for activities that are more business‐like than government‐like in nature. The District reports self‐insurance related activity in such a fund.

Self‐Insurance Internal Service Fund Internal service funds may be used to account for goods or services provided to other funds of the District on a cost‐reimbursement basis. The District operates a self‐insurance fund for its workers’ compensation, dental, and other post‐employment retiree benefits self‐insurance programs.

Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the District's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private‐purpose trust funds, and agency funds. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held.

Trust funds are used to account for the assets held by the District under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the District’s own programs. Private‐purpose trust funds are accounted for as a restricted component of the General Fund. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District maintains the following two agency funds:

Payroll Revolving Agency Fund The payroll revolving fund is used to account for assets held for employees for payroll withholding for subsequent remittance to taxing agencies or benefit providers.

Student Body Agency Fund The student body agency fund is used to account for assets held for student organizations of schools in the District.

Basis of Accounting ‐ Measurement Focus

Government‐Wide Financial Statements The government‐wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The government‐wide statement of activities presents a comparison between expenses, both direct and indirect, of the District and for each governmental function, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Indirect expenses for centralized services and administrative overhead are allocated among the programs, functions and segments using a full cost allocation approach and are presented separately to enhance comparability of direct expenses between governments that allocate direct expenses and those that do not. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each governmental function is self‐ financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities.

Net position is reported as restricted when constraints are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation.

Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The internal service fund is presented in a single column.

Governmental Funds All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures, and changes in fund balances reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the way the governmental activities of the government‐wide statements are prepared. Governmental fund financial statements therefore include reconciliations with brief explanations to better identify the relationship between the government‐wide statements, prepared on the accrual basis of accounting using the economic resources measurement focus, and the governmental fund statements, prepared on the modified accrual basis of accounting and using the flow of current financial resources measurement focus.

Proprietary Funds Proprietary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities associated with the operation of this fund are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Position presents increases (revenues) and decreases (expenses) in net total position. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary fund.

Fiduciary Funds Fiduciary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Revenues ‐ Exchange and Non‐exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On the modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. To achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to state‐aid apportionments, the California Department of Education has defined available for districts as collectible within one year.

Non‐exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements and donations. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose requirements. On the modified accrual basis, revenue from non‐exchange transactions must also be available before it can be recognized.

Unearned Revenue Unearned revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the balance sheet and revenue is recognized.

Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred. However, principal and interest on general long‐term obligations are recognized when paid in the governmental funds. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the government‐wide statements.

Cash and Deposits

The District's cash and deposits are considered to be cash on hand, demand deposits, and short‐term investments with original maturities of three months or less from the date of acquisition. Cash equivalents include cash with county treasury balances for purposes of the statement of cash flows.

Investments

Investments are stated at fair value. Fair value is estimated based on quoted market price at year‐end. On June 30, 2019, investments consist of cash deposits with the City and County of San Francisco Treasury Investment Pool.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Restricted Assets

Restricted assets arise when restrictions on their use change the normal understanding of the availability of the asset. Such constraints are either imposed by creditors, contributors, grantors, or laws of other governments or imposed by enabling legislation.

Prepaid Expenditures

Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost on weighted average basis. The cost of using inventory items is recorded as expenditures when used in the governmental funds.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. Capital assets are long‐lived assets of the District as a whole. The District maintains a capitalization threshold of $25,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in the government‐wide statement of net position. The valuation basis for capital assets is historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capital assets are recorded at estimated acquisition value at the date of donation.

Depreciation is computed using the straight‐line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements/infrastructure, 5 to 50 years; equipment, 2 to 15 years.

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government‐wide statement of net position. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year end that have not yet been paid with expendable available financial resources. The amounts are reported in the fund from which the employees who have accumulated leave are paid.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Certificated Sick leave is accumulated without limit for each eligible employee at the rate of one unit for each month worked. Leave with pay is provided when employees are absent from reasons as stated in the various contracts. Employees who are retiring receive service credit for unused sick leave and employees transferring to other public school districts can have their sick leave accrual forwarded to the new district. Employees who resign or are terminated do not get paid for unused sick leave accruals.

Instructional Aides Sick leave is accumulated at a rate of 0.05 times the number of regularly scheduled worked hours. Leave with pay is provided when employees are absent for reasons stated in the contract. Employees who are retiring receive payment for unused sick hours with a value of over $200 and those hours are transferred to the school district’s third‐party vendor for payment into a 403(b) account in compliance with all applicable rules and regulations. Employees may accumulate unused sick leave up to a maximum of 1,040 hours.

Classified Sick leave is accumulated at a rate of 0.05 times the number of regularly scheduled worked hours. Leave with pay is provided when employees are absent for reasons as stated in the various contracts. Employees may accumulate unused sick leave up to the maximum of 1,040 hours.

Accrued Liabilities and Long‐term Obligations

All payables, accrued liabilities and long‐term obligations are reported in the government‐wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the funds.

However, claims and judgments compensated absences, special termination benefits and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current year. Long‐term obligations are not recognized as liabilities in governmental funds but are disclosed in the notes to financial statements. Debt service expenditures, including principal and interest on bonds and capital leases, are recognized as expenditures in governmental funds when paid.

Debt Issuance Costs, Premiums and Discounts

Long‐term obligations are reported as liabilities in the governmental activities column on the statement of net position. Debt premiums and discounts are amortized over the life of the bonds using the straight‐line method.

In governmental fund financial statements, bond premiums and discounts, as well as debt issuance costs are recognized in the current period. The face amount of the debt is reported as other financing sources. Premiums received on debt issuance are also reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds, are reported as debt service expenditures.

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position also reports deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an expense or expenditure until then. The District reports deferred outflows of resources for deferred charges on refunding of debt, for pension related items, and for OPEB related items.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

In addition to liabilities, the Statement of Net Position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as revenue until then. The District reports deferred inflows of resources for deferred charges on refunding of debt, for pension related items, and for OPEB related items.

Pensions

For purposes of measuring the net pension liability and deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the California State Teachers' Retirement System (CalSTRS) and the San Francisco Public Employees' Retirement System (SFERS) and additions to/deductions from the plans' fiduciary net position have been determined on the same basis as they are reported by CalSTRS and SFERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Member contributions are recognized in the period in which they are earned. Investments are reported at fair value.

Fund Balances ‐ Governmental Funds

As of June 30, 2019, fund balances of the governmental funds are classified as follows:

Nonspendable ‐ amounts that cannot be spent either because they are not in spendable form such as inventory or prepaid amounts.

Restricted ‐ amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed ‐ amounts that can be used only for specific purposes determined by a formal action of the Board of Education. The Board of Education is the highest level of decision‐making authority for the District. Commitments may be established, modified, or rescinded only through resolutions or other action as approved by the governing board.

Assigned ‐ amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's policy, only the governing board or chief financial officer or designee, may assign amounts for specific purposes.

Unassigned ‐ all other spendable amounts.

Spending Order Policy

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which assigned or unassigned fund balances are available, the District considers amounts to have been spent first out of the assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Net Position

Net position represents the difference between assets and liabilities. Net position net of investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments.

Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the District, these revenues are in‐district insurance premiums. Operating expenses are necessary costs incurred to provide the good or service that is the primary activity of the fund. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. lnterfund Activity

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after non‐operating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Budgetary Data

The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Property Taxes

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The City and County of San Francisco bills and collects the taxes in behalf of the District. Local property tax revenues are recorded when received.

New Accounting Pronouncements Effective This Fiscal Year

In November 2016, the GASB issued Statement No. 83, Certain Asset Retirement Obligations. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. The District has implemented the provisions of this Statement as of June 30, 2019. There was no material impact from adoption.

In April 2018, the GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. The District has implemented the provisions of this Statement as of June 30, 2019. There was no material impact from adoption.

New Accounting Pronouncements Effective in Future Fiscal Years

In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The requirements of this Statement are effective for the reporting periods beginning after December 15, 2018. Early implementation is encouraged. It is anticipated that the Payroll Revolving Fund may be combined with the General Fund for financial reporting upon adoption.

In June 2017, the GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. The requirements of this Statement are effective for the reporting periods beginning after December 15, 2019. The District has not determined the effect of the statement.

In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged. The requirements of this Statement should be applied prospectively. The District has not determined the effect of the statement. 38 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

In August 2018, the GASB issued Statement 90, Majority Equity Interests – An Amendment of GASB Statements No. 14 and No. 60. The primary objectives of this Statement are to improve the consistency and comparability of reporting a government's majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged. The requirements of this Statement should be applied prospectively. The District has not determined the effect of the statement.

In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. The requirements of this Statement are effective for the reporting periods beginning after December 15, 2020. Early implementation is encouraged. The District has not determined the effect of the statement.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 2 ‐ CASH AND INVESTMENTS

Summary of Cash and Investments

Deposits and investments on June 30, 2019, are classified in the accompanying financial statements as follows:

Governmental funds$ 332,299,781 Less: deficit cash (overdraft) (4,745,285) Total governmental funds$ 327,554,496 Proprietary fund 49,545,755 Fiduciary funds 14,884,012 Total Deposits and Investments $ 391,984,263

Deposits and investments as of June 30, 2019, consist of the following:

Cash on hand and in banks$ 5,072,696 Deposits with county treasurer 391,656,852 Less: deficit cash (overdraft) (4,745,285) Total deposits with county treasurer 386,911,567 Total Deposits and Investments $ 391,984,263

Policies and Practices

The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies; certificates of participation; obligations with first priority security; and collateralized mortgage obligations.

Investment in County Treasury ‐ The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with the county treasurer (Education Code Section 41001). The fair value of the District's investment in the treasury pool is reported in the accounting financial statements at amounts based upon the District's pro‐rata share of amortized cost which approximates fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the City and County of San Francisco Treasurer, which is recorded on the amortized cost basis.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

General Authorizations

Limitations as they relate to interest rate risk and concentration of credit risk are indicated in the schedules below:

Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio In One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium‐Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass‐Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the City and County of San Francisco Treasury Investment Pool. The sensitivity of the fair values of the District's investments to market interest rate fluctuation is measured as the weighted average maturity of the investment portfolio, which was 466 days on June 30, 2019.

Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The District's investment in the county pool is not rated as of June 30, 2019.

41 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Custodial Credit Risk ‐ Deposits

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the District’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits other than the following provision: the California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2019, the District’s bank balance of $4.1 million was exposed to custodial credit risk because it was uninsured and collateralized with securities held by the pledging financial institution’s trust department or agent, but not in the name of the District.

Fair Value Measurements

The District categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset's fair value. The following provides a summary of the hierarchy used to measure fair value:

Level 1 ‐ Quoted prices in active markets for identical assets that the District has the ability to access at the measurement date.

Level 2 ‐ Observable inputs other than Level 1 prices such as quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active.

Level 3 ‐ Unobservable inputs should be developed using the best information available under the circumstances, which might include the District's own data.

Uncategorized ‐ Deposits and withdrawals in the City and County of San Francisco Treasury Investment Pool are made on the basis of $1 and not fair value. Accordingly, the District’s investments with the pool at June 30, 2019 is an uncategorized input not defined as a Level 1, Level 2, or Level 3 input.

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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 3 ‐ RECEIVABLES

Receivables at June 30, 2019, consisted of intergovernmental grants, entitlements, interest and other local sources. All receivables are considered collectible in full.

Bond Interest County and General School Service Building Redemption Fund Fund Fund Fund

Federal sources$ 2,519,501 $ 12,704,081 $ ‐ $ ‐ State sources 6,349,165 934,846 ‐ ‐ Local sources 17,978,754 ‐ ‐ ‐ Investments 1,036,693 ‐ 938,552 588,562 Total $ 27,884,113 $ 13,638,927 $ 938,552 $ 588,562

Nonmajor Total Governmental Governmental Proprietary Funds Funds Fund Federal sources$ 4,579,604 $ 19,803,186 $ ‐ State sources 23,838,745 31,122,756 ‐ Local sources 5,048,550 23,027,304 ‐ Investments 447,741 3,011,548 377,754 Total $ 33,914,640 $ 76,964,794 $ 377,754

43 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 4 ‐ CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2019, was as follows:

Balance Balance June 30, 2018 Additions June 30, 2019 Governmental Activities Capital assets not depreciated Land$ 7,100,000 $ ‐ $ 7,100,000 Capital assets being depreciated Buildings and improvements 2,125,291,813 107,070,233 2,232,362,046 Furniture and equipment 51,081,289 597,434 51,678,723 Total capital assets 2,183,473,102 107,667,667 2,291,140,769

Less accumulated depreciation Buildings and improvements 534,915,852 55,764,152 590,680,004 Furniture and equipment 41,579,542 1,912,307 43,491,849 Total accumulated depreciation 576,495,394 57,676,459 634,171,853 Governmental activities ‐ capital assets, net $ 1,606,977,708 $ 49,991,208 $ 1,656,968,916

Depreciation expense was charged as a direct expense to governmental functions as follows:

Governmental Activities Instruction$ 30,994,374 Supervision of instruction 7,464,954 Instructional library and technology 732,046 School site administration 3,158,252 Home to school transporation 1,882,113 Food services 1,597,277 All other pupil services 5,102,534 Anciliary services 278,696 Enterprise activities 1,084 All general administration 2,028,914 Data processing services 587,015 Plant services 3,849,200 Total depreciation expense, governmental activities$ 57,676,459

44 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 5 ‐ INTERFUND TRANSACTIONS

Interfund Transfers

Interfund transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

For the year ended June 30, 2019, interfund transfers consisted of $12.5 million as follows:

 The general fund transferred $4.7 million to the child development fund to cover its operating deficit.  The general fund transferred $4.9 million to the cafeteria fund to cover its operating deficit.  The general fund transferred $2.8 million to the special reserve capital outlay fund for the energy retrofit capital lease payments.  The general fund transferred $10,000 to the Mello‐Roos Capital Project fund for window replacement construction project reimbursed by Prop 39 CA Clean Energy Jobs Fund.  The general fund transferred $50,000 to the building fund for window replacement construction project reimbursed by Prop 39 CA Clean Energy Jobs Fund.

Exchange Transactions

Included as other local sources in the statement of revenues, expenditures, and changes in fund balances of the county school service special revenue fund is $39.8 million, of which the source is the general fund. This represents general fund expenditures incurred primarily in support of special education and other county office of education functions that are funded by the general fund.

NOTE 6 ‐ ACCOUNTS PAYABLE

Accounts payable at June 30, 2019, consisted of the following:

County Nonmajor Total General School Service Building Governmental Governmental Fund Fund Fund Funds Funds Trade payables$ 15,951,608 $ 14,199,565 $ 14,129,651 $ 7,372,766 $ 51,653,590 State government 337,379 83,958 ‐ 76,972 498,309 Total $ 16,288,987 $ 14,283,523 $ 14,129,651 $ 7,449,738 $ 52,151,899

Additional interest payable in the statement of net position includes $1,801,249 for accrued interest on long term obligations.

45 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 7 ‐ UNEARNED REVENUE

Unearned revenue at June 30, 2019, consisted of the following:

County Nonmajor Total General School Service Governmental Governmental Fund Fund Funds Funds Federal financial assistance$ 2,812,738 $ 121,419 $ 124,629 $ 3,058,786 State categorical aid 3,084,319 65,593 355,749 3,505,661 Total$ 5,897,057 $ 187,012 $ 480,378 $ 6,564,447

NOTE 8 ‐ LONG‐TERM OBLIGATIONS (in thousands)

Summary

Changes in the District's long‐term obligations during the year consisted of the following:

Balance Balance Due in July 1, 2018 Additions Deductions June 30, 2019 one year General obligation bonds$ 968,915 $ ‐ $ 70,130 $ 898,785 $ 65,465 Bond premiums 77,080 ‐ 6,433 70,647 ‐ Accumulated vacation 11,458 3,491 ‐ 14,949 ‐ Capital leases 9,068 ‐ 2,276 6,792 2,890 $ 1,066,521 $ 3,491 $ 78,839 $ 991,173 $ 68,355

Payment of the general obligation bonds will be made by the bond interest and redemption fund, using property tax revenues collected repayment of principal and interest on these obligations. The accumulated vacation, other post‐employment benefits, and pension benefits will be paid by the fund for which the employee works. Payments on capital leases will be made by the special reserve capital fund, which receives contributions from the general fund.

46 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Outstanding General Obligation Bonded Debt

Issued Maturity Interest (Redeemed/ Bond Issuance Issue Date Date Rate Original Issue July 1, 2018 Defeased) June 30, 2019 2006, Series 2007A 02/28/07 6/15/27 3.00‐5.00%$ 100,000 $ 27,820 $ ‐ $ 27,820 2006, Series 2009B 01/22/09 6/15/27 1.50‐5.25% 150,000 10,345 (10,345) ‐ 2006, Series 2010E 05/19/10 6/15/23 0.50‐5.00% 99,675 46,385 (8,395) 37,990 2011, Series 2012A 03/06/12 6/15/32 4.00‐5.00% 115,000 90,455 (4,835) 85,620 2012 Refunding 03/06/12 6/15/25 0.30‐5.00% 116,140 67,675 (9,005) 58,670 2011, Series 2014B 01/23/14 6/15/33 3.0%‐5.0% 205,000 169,265 (8,060) 161,205 2006, Series 2015F 10/08/15 6/15/35 3.0%‐5.0% 15,000 13,620 (555) 13,065 2011, Series 2015C 10/08/15 6/15/35 3.0%‐5.0% 211,000 191,480 (7,780) 183,700 2015 Refunding 10/08/15 6/15/26 2.0%‐5.0% 63,655 51,940 (7,645) 44,295 2016, Series 2016A 03/17/17 6/15/24 2.0%‐5.0% 180,000 161,660 (13,510) 148,150 2017 Refunding 03/17/17 6/15/37 2.0%‐5.0% 53,890 52,945 ‐ 52,945 $ 968,915 $ (70,130) 898,785 Unamortized bond premium 70,647 Total$ 969,432

Debt Service Requirement to Maturity

Interest to Fiscal Year Principal Maturity Total 2020 65,465 38,151 103,616 2021 66,595 35,211 101,806 2022 69,620 32,145 101,765 2023 72,300 29,226 101,526 2024 76,050 26,609 102,659 2025‐2029 285,860 88,250 374,110 2030‐2034 210,745 32,659 243,404 2035‐2037 52,150 3,485 55,635 Total$ 898,785 $ 285,736 $ 1,184,521

Accumulated Unpaid Employee Vacation and Vested Sick Leave

Full‐time District employees are entitled to 10‐20 vacation days a year, depending upon length of service, for which up to 30 working days in excess of the employee’s annual vacation award may be carried over to the next year.

Increases to vested compensated absences reflect net changes during the year ended June 30, 2019. Also, the City and County of San Francisco Charter provisions allow classified employees to accumulate up to 130 working days of sick leave. Certificated employees, under State law, are allowed to accumulate unlimited days of sick leave. Upon normal retirement, the District will redeem 100 percent of the sick leave accrued by classified personnel prior to December 5, 1978, and no sick leave accrued after December 5, 1978. No sick leave amounts are payable to certificated personnel upon normal retirement, or to employees who terminate for any reason prior to retirement. 47 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Capital Leases

Reported with capital assets is the energy retrofit capital lease of $32.9 million and corresponding accumulated depreciation of $26.4 million at June 30, 2019. The District's liabilities on lease agreements with options to purchase are summarized below (in thousands):

Energy Retrofit Balance, Beginning of Year$ 9,068 Payments (2,276) Balance, End of Year$ 6,792

The capital lease has minimum lease payments as follows (in thousands):

Year Ending Lease June 30, Payment 2020$ 2,890 2021 2,977 2022 1,583 Total 7,450 Less: Amount Representing Interest 658 Present Value of Minimum Lease Payments$ 6,792

48 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 9 ‐ COMPONENTS OF FUND BALANCES AND NET POSITION OF THE SELF‐INSURANCE FUND (in thousands)

Fund balances are composed of the following elements on June 30, 2019:

County Bond Interest Nonmajor Total General School Service Building and Redemption Governmental Governmental Fund Fund Fund Fund Funds Funds Nonspendable Revolving cash$ 1 $ ‐ $ ‐ $ ‐ $ ‐ $ 1 Stores inventories 884 ‐ ‐ ‐ ‐ 884 Prepaid expenditures 97 ‐ ‐ ‐ ‐ 97 Total nonspendable 982 ‐ ‐ ‐ ‐ 982

Restricted Educational programs 65,025 844 ‐ ‐ 3,458 69,327 Capital projects ‐ ‐ 102,681 ‐ 84,077 186,758 Debt services ‐ ‐ ‐ 38,819 33 38,852 Total restricted 65,025 844 102,681 38,819 87,568 294,937

Committed Capital projects ‐ ‐ ‐ ‐ 3,720 3,720 Total committed ‐ ‐ ‐ ‐ 3,720 3,720

Assigned Special education ‐ 7,383 ‐ ‐ ‐ 7,383 Technology upgrades 9,630 ‐ ‐ ‐ ‐ 9,630 Total assigned 9,630 7,383 ‐ ‐ ‐ 17,013

Unassigned Reserve for economic uncertainties 18,266 ‐ ‐ ‐ ‐ 18,266 Remaining unassigned 11,895 ‐ ‐ ‐ ‐ 11,895 Total unassigned 30,161 ‐ ‐ ‐ ‐ 30,161 Total fund balances$ 105,798 $ 8,227 $ 102,681 $ 38,819 $ 91,288 $ 346,813

49 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The following is a reconciliation of the difference between the unassigned general fund balance and the unrestricted net deficit reported in the statement of net position (in thousands):

Balance per governmental funds balance sheet$ 30,161 Add Back County school fund assigned fund balance 7,383 General fund prepaid operating expenditures 97 General fund inventory 884 General fund assigned fund balance 9,630 Deferred maintenance fund assigned fund balance 3,720 Resources earmarked for post‐employment benefits which are reported in the self‐insurance fund 3,215 Deduct Compensated absences liability (14,949) Aggregate net pension liability and related deferrals (601,644) Other post employment benefits liability and realted deferrals (726,368) Balance per statement of net position$ (1,287,871)

Net position of the self‐insurance fund is comprised of the following components as of June 30, 2019 (in thousands):

Restricted Self‐insurance programs$ 15,315 Insurance settlements 284 Total restricted 15,599

Unrestricted Earmarked for Post‐employment benefits (OPEB) 2,543 Post‐employment benefits (PARS) 672 Total unrestricted 3,215 Total net position$ 18,814

50 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 10 ‐ LEASE REVENUES (in thousands)

Lease agreements have been entered into with various lessees for terms that exceed one year. None of the agreements contain purchase options. All of the agreements contain a termination clause providing for cancellation after a specified number of days written notice to lease, but is unlikely that the District will cancel any of the agreements prior to their expiration date. The future minimum lease payments expected to be received under these agreements are as follows:

Year Ending Lease June 30, Revenue 2020$ 7,359 2021 3,440 2022 3,576 2023 3,559 2024 3,390 Thereafter 17,607 Total$ 38,931

51 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 11 ‐ POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)

As of June 30, 2019, the District reported the following amounts for total OPEB liability, deferred outflows of resources, deferred inflows of resources, and OPEB expense:

Total Deferred Deferred OPEB Outflows Inflows OPEB Liability of Resources of Resources Expense $ 756,461,071 $ 56,870,502 $ 26,778,742 $ 80,517,115

General Information About the OPEB Plan

Plan Description

The San Francisco Unified School District Other Postemployment Benefit Plan (Plan) is an agent multiple‐employer (agent) defined benefit healthcare plan administered by the City and County of San Francisco Health Service System (HSS). The Plan provides medical insurance benefits to eligible retirees and their spouses. HSS is responsible for designing health care benefits, selecting and managing plan providers, and determining some aspects of benefit eligibility to supplement the eligibility rules contained in the City Charter and applicable ordinances. In addition, HSS is responsible for administration of health care benefits, including maintaining employee membership and financial accounting records. There are no assets accumulated in a trust that meet the criteria in paragraph 4 GASB Statement No. 75 as of the June 30, 2018 measurement date.

Benefits Provided

The Plan provides medical insurance benefits to eligible retirees and their spouses. To be eligible for retiree health benefits, employees hired after January 9, 2009 must have at least five years of credited service with a City employer: City and County of San Francisco, San Francisco Unified School District, San Francisco Community College District, or San Francisco Superior Court. Other government service is not credited.

Employees must retire within 180 days of separation from employment to be eligible for retiree health benefits. That means an employee must have the credited service and the age required for retirement at the time of separation from service to be eligible for retiree health benefits. A surviving dependent may be eligible for retiree health benefits if a deceased employee accrued 10 or more years of credited service with City employers.

Different premium contribution rates apply for classified employees hired after January 9, 2009, based on years of credited service with the City employers.

 With at least 5 years, but less than 10 years of credited service, the retiree member must pay the full premium rate and does not receive any employer premium contribution.  With at least 10 years but less, than 15 years of credited service, the retiree will receive 50% of the employer premium contribution for themselves and eligible dependents.  With at least 15 years, but less than 20 years of credited service, the retiree will receive 75% of the employer premium contribution for themselves and eligible dependents.  With 20 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

52 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Certificated teachers hired after July 1, 2004, with 20 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

Paraprofessionals hired after July 1, 2004, with 10 or more years of credited service or disability retirement, the retiree will receive 100% of the employer premium contribution for themselves and eligible dependents.

Employees who separated service from a City employer before June 30, 2001 and retire after January 6, 2012 receive the employer health premium subsidies in effect at the time of their separation. The retiree member receives 100% of the employer premium contribution defined by the City Charter. The retiree pays the full premium for any other enrolled dependents.

Employees Covered by Benefit Terms

As of the June 30, 2018 measurement date, the benefit terms covered the following employees:

Inactive employees or beneficiaries currently receiving benefits payments 4,922 Active employees 8,013 12,935

Total OPEB Liability

The District’s total OPEB liability of $756,461,071 was measured as of June 30, 2018 and was determined by an actuarial valuation as of that date.

Actuarial Assumptions and Other Inputs

The total OPEB liability in the June 30, 2018 actuarial valuation was determined using the following assumptions, applied to all periods included in the measurement, unless otherwise specified:

Inflation 2.75 percent Salary increases 2.75 percent, average, including inflation Discount rate 3.80 percent, net of OPEB plan investment expense, including inflation Healthcare cost trend rates 4.00 percent per year

53 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The discount rate was based on the Bond Buyer 20‐bond General Obligation Index.

Mortality rates were based on the 2009 CalSTRS Mortality Table for certificated employees and PR2000 Active Mortality for classified employees.

Retirement assumptions were based on the Retirement Tables of San Francisco ERS and 2009 CalSTRS Retirement Rates.

Turnover assumptions were based on the Turnover Tables of 2009 CalSTRS Termination Rates and 2009 CalSTRS Termination Rates for School Employees.

Changes in the Total OPEB Liability

Total OPEB Liability Balance at the June 30, 2017 measurement date$ 733,480,927 Changes for the year: Service cost 54,233,883 Interest 28,342,781 Changes of assumptions or other inputs (30,126,085) Benefit payments (29,470,435) Net changes 22,980,144 Balance at the June 30, 2018 measurement date$ 756,461,071

Sensitivity of the Total OPEB Liability to Changes in the Discount Rate

The following presents the total OPEB liability of the District, as well as what the District's total OPEB liability would be if it were calculated using a discount rate that is one percent lower or higher than the current rate:

Total OPEB Discount Rate Liability 1% decrease (2.80%)$ 859,449,730 Current discount rate (3.80%) 756,461,071 1% increase (4.80%) 670,607,931

54 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates

The following presents the total OPEB liability of the District, as well as what the District's total OPEB liability would be if it were calculated using healthcare cost trend rates that are one percent lower or higher than the current healthcare costs trend rates:

Total OPEB Healthcare Cost Trend Rates Liability 1% decrease (3.00%)$ 663,011,063 Current healthcare cost trend rate (4.00%) 756,461,071 1% increase (5.00%) 866,797,649

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the year ended June 30, 2019, the District recognized OPEB expense of $80,517,115.

At June 30, 2019, the District reported deferred outflows of resources for OPEB contributions subsequent to measurement date of $56,870,502. This deferred outflow of resources will be recognized in OPEB expense during fiscal year 2019‐20.

At June 30, 2019, the District reported deferred inflows of resources for OPEB for change of assumptions of $26,778,742. This deferred inflow of resources will be recognized in OPEB expense as follows:

Deferred Year Ended Outflows/(Inflows) June 30, of Resources 2020 $ (3,347,343) 2021 (3,347,343) 2022 (3,347,343) 2022 (3,347,343) 2023 (3,347,343) Thereafter (10,042,027) $ (26,778,742)

NOTE 12 ‐ RISK MANAGEMENT

The District’s risk management activities are recorded in the general fund and self‐insurance funds. Employee life, health, and disability programs are administered through the purchase of commercial insurance. Employee dental and workers’ compensation insurance is provided on a self‐funded basis.

55 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Commercial insurance is purchased for excess workers’ compensation, property, general liability, crime, cyber, terrorism, and student accidents. For workers’ compensation coverage, the District maintains a $500,000 self‐ insured retention, with Statutory Limits through ARCH Insurance Group for excess coverage. For liability exposures, the Districts maintains a layered insurance program with limits of $55 million per occurrence, with a $250,000 self‐insured retention per claim. As part of the liability insurance structure, the District participates in Schools Excess Liability Fund (SELF) joint powers authority (JPA). The District pays annual contributions to SELF for additional excess liability coverage over $5M. The District maintains property coverage through Axis Insurance and RSUI Indemnity Company in the amount of $300 million per occurrence, with a $100,000 deductible. The District does not maintain insurance for earthquake risks.

For insured programs, there have been no significant reductions in insurance coverage to date. Settlement amounts have not exceeded insurance coverage for the current year or the three prior years.

Claim Liabilities ‐ Self Insurance Fund

The District records an estimated liability for indemnity torts and other claims against the District. Claims liabilities for workers’ compensation are based on a current actuarial study using the “expected value” as the basis for the total liability. The workers' compensation liabilities are reported at their present value using an expected future investment yield assumption of two percent. The following represents the changes in approximate aggregate liabilities for the District from July 1, 2017 to June 30, 2019:

Total Liability Balance, June 30, 2017 36,522,534 Claims and changes in estimates 14,263,522 Claims payments (16,548,221) Liability Balance, June 30, 2018 34,237,835 Claims and changes in estimates 11,811,452 Claims payments (15,616,734) Liability Balance, June 30, 2019$ 30,432,553

Assets available to pay claims at June 30, 2018$ 46,031,316

56 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 13 ‐ EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are eligible to participate in the District’s cost‐sharing multiple‐employer defined benefit pension plans, administered by the California State Teachers' Retirement System (CalSTRS) or the San Francisco Employees' Retirement System (SFERS). Academic employees are members of CalSTRS while classified employees are members of SFERS.

For the fiscal year ended June 30, 2019, the District reported net pension liabilities, deferred outflows of resources, deferred inflows of resources, and pension expense for each of the above plans as follows:

Deferred Outflows Deferred Inflows Pension Plan Net Pension Liability of Resources of Resources Pension Expense CalSTRS$ 645,548,405 $ 252,540,605 $ 95,257,418 $ 81,041,348 SFERS 135,128,000 49,001,220 27,252,000 19,460,000 Aggregate$ 780,676,405 $ 301,541,825 $ 122,509,418 $ 100,501,348

The details of each plan are as follows:

California State Teachers' Retirement System (CalSTRS)

Plan Description

The District contributes to the State Teachers Retirement Plan (STRP) administered by the California State Teachers' Retirement System (CalSTRS). STRP is a cost‐sharing multiple‐employer public employee retirement system defined benefit pension plan. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers' Retirement Law.

A full description of the pension plan regarding benefit provisions, assumptions (for funding, but not accounting purposes), and membership information is listed in the June 30, 2017, annual actuarial valuation report, Defined Benefit Program Actuarial Valuation. This report and CalSTRS audited financial information are publicly available reports that can be found on the CalSTRS website under Publications. The CalSTRS website can be accessed at this address: http://www.calstrs.com/member‐publications.

Benefits Provided

The STRP provides retirement, disability and survivor benefits to beneficiaries. Benefits are based on members' final compensation, age and years of service credit. Members hired on or before December 31, 2012, with five years of credited service are eligible for the normal retirement benefit at age 60. Members hired on or after January 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service.

57 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The STRP is comprised of four programs: Defined Benefit Program, Defined Benefit Supplement Program, Cash Balance Benefit Program and Replacement Benefits Program. The STRP holds assets for the exclusive purpose of providing benefits to members and beneficiaries of these programs. CalSTRS also uses plan assets to defray reasonable expenses of administering the STRP. Although CalSTRS is the administrator of the STRP, the state is the sponsor of the STRP and obligor of the trust. In addition, the state is both an employer and nonemployer contributing entity to the STRP.

The District contributes exclusively to the STRP Defined Benefit Program, thus disclosures are not included for the other plans.

The STRP provisions and benefits in effect at June 30, 2019, are summarized as follows:

STRP Defined Benefit Program

On or before On or after Hire date December 31, 2012 January 1, 2013 Benefit formula 2% at 60 2% at 62 Benefit vesting schedule 5 years of service 5 years of service Benefit payments Monthly for life Monthly for life Retirement age 60 62 Monthly benefits as a percentage of eligible compensation 2.0% ‐ 2.4% 2.0% ‐ 2.4% Required employee contribution rate 10.25% 10.205% Required employer contribution rate 16.28% 16.28% Required state contribution rate 9.828% 9.828%

Contributions

Required member, District and State of California contributions rates are set by the California Legislature and Governor and detailed in Teachers' Retirement Law. The contributions rates are expressed as a level percentage of payroll using the entry age normal actuarial method. In accordance with AB 1469, employer contributions into the CalSTRS will be increasing to a total of 19.1 percent of applicable member earnings phased over a seven year period. The contribution rates for each plan for the year ended June 30, 2019, are presented above and the District's total contributions were $58,925,984.

58 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Pension Liabilities, Pension Expense, and Deferred Outflows/Inflows of Resources Related to Pensions

At June 30, 2019, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related state support and the total portion of the net pension liability that was associated with the District were as follows:

Total net pension liability, including State share District's proportionate share of net pension liability $ 645,548,405 State's proportionate share of the net pension liability associated with the District 369,606,654 Total $ 1,015,155,059

The net pension liability was measured as of June 30, 2018. The District's proportion of the net pension liability was based on a projection of the District's long‐term share of contributions to the pension plan relative to the projected contributions of all participating school districts and the state, actuarially determined. The District's proportionate share for the measurement period June 30, 2018 and June 30, 2017, was 0.702 percent and 0.668 percent respectively, resulting in a net increase in the proportionate share of 0.044 percent.

For the year ended June 30, 2019, the District recognized pension expense of $81.0 million. In addition, the District recognized pension expense and revenue of $43.4 million for support provided by the State. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date$ 67,354,862 $ ‐ Net change in proportionate share of net pension liability 82,896,239 61,022,780 Changes of assumptions 100,287,684 ‐ Difference between projected and actual earnings on pension plan investments ‐ 24,857,691 Differences between expected and actual experience in the measurement of the total pension liability 2,001,820 9,376,947 Total$ 252,540,605 $ 95,257,418

59 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the subsequent fiscal year. The deferred outflows/(inflows) of resources related to the difference between projected and actual earnings on pension plan investments are amortized over a closed multi‐year period and will be recognized in pension expense as follows:

Year Ended Deferred Outflows/(Inflows) June 30, of Resources 2020$ 5,397,305 2021 (3,916,427) 2022 (20,854,635) 2023 (5,483,934) Total $ (24,857,691)

The deferred outflows/(inflows) of resources related to the net change in proportionate share of net pension liability, differences between expected and actual experience in the measurement of the total pension liability, and changes of assumptions will be amortized over the Expected Average Remaining Service Life (EARSL) of all members that are provided benefits (active, inactive, and retirees) as of the beginning of the measurement period. The EARSL for the measurement period is seven years and will be recognized in pension expense as follows:

Year Ended Deferred Outflows/(Inflows) June 30, of Resources 2020$ 23,073,944 2021 23,073,944 2022 23,073,944 2023 12,630,067 2024 29,097,390 Thereafter 3,836,727 Total$ 114,786,016

Actuarial Methods and Assumptions

Total pension liability for STRP was determined by applying updated procedures to the financial reporting actuarial valuation as of June 30, 2017, and rolling forward the total pension liability to June 30, 2018. The financial reporting actuarial valuation as of June 30, 2017, used the following methods and assumptions, applied to all prior periods included in the measurement:

Valuation date June 30, 2017 Measurement date June 30, 2018 Experience study July 1, 2010 through June 30, 2015 Actuarial cost method Entry age normal Discount rate 7.10% Investment rate of return 7.10% Consumer price inflation 2.75% Wage growth 3.50%

60 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

CalSTRS uses a generational mortality assumption, which involves the use of a base mortality table and projection scales to reflect expected annual reductions in mortality rates at each age, resulting in increases in life expectancies each year into the future. The base mortality tables are CalSTRS custom tables derived to best fit the patterns of mortality among its members. The projection scale was set equal to 110 percent of the ultimate improvement factor from the Mortality Improvement Scale (MP‐2016) table, issued by the Society of Actuaries.

The long‐term expected rate of return on pension plan investments was determined using a building‐block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant (Pension Consulting Alliance‐PCA) as an input to the process. The actuarial investment rate of return assumption was adopted by the board in February 2017 in conjunction with the most recent experience study. For each future valuation, CalSTRS consulting actuary (Milliman) reviews the return assumption for reasonableness based on the most current capital market assumptions. Best estimates of 20‐year geometrically‐linked real rates of return and the assumed asset allocation for each major asset class for the year ended June 30, 2018, are summarized in the following table:

Long‐Term Assumed Asset Expected Real Asset Class Allocation Rate of Return Global equity 47% 6.30% Fixed income 12% 0.30% Real estate 13% 5.20% Private equity 13% 9.30% Absolute Return/Risk Mitigating Strategies 9% 2.90% Inflation sensitive 4% 3.80% Cash/liquidity 2% ‐1.00% 100%

Discount Rate

The discount rate used to measure the total pension liability was 7.10 percent. The projection of cash flows used to determine the discount rate assumed the contributions from plan members and employers will be made at statutory contribution rates. Projected inflows from investment earnings were calculated using the long‐term assumed investment rate of return (7.10 percent) and assuming that contributions, benefit payments and administrative expense occurred midyear. Based on these assumptions, the STRP's fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long‐term assumed investment rate of return was applied to all periods of projected benefit payments to determine total pension liability.

61 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The following presents the District's proportionate share of the net pension liability calculated using the current discount rate as well as what the net pension liability would be if it were calculated using a discount rate that is one percent lower or higher than the current rate:

Net Pension Discount Rate Liability 1% decrease (6.10%)$ 945,652,871 Current discount rate (7.10%) 645,548,405 1% increase (8.10%) 396,732,682

San Francisco Employees’ Retirement System (SFERS)

Plan Description

Qualified employees are eligible to participate in the San Francisco Employees’ Retirement System (SFERS); a cost‐ sharing multiple‐employer, public employee, defined benefit pension plan administered by the City and County of San Francisco (the City). SFERS is a separate department of the City, deriving its powers, functions, and responsibility from the City Charter and ordinances of the Board of Supervisors of the City. Substantially all employees of the City and County are members, including most of the District’s classified permanent full‐time employees and certain certificated employees hired prior to July 1, 1972. Members are classified according to City bargaining units as police, fire, and miscellaneous. District employees are members of the miscellaneous pool. SFERS issues a separate annual financial report that includes financial statements and required supplementary information. The SFERS annual financial report is available online at www.sfers.org.

Benefits Provided

The retirement system provides service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and annual cost‐of‐living adjustments after retirement. Employees with 20 years of service who have attained age 50 or those with 10 years of service who have attained age 60 are eligible for retirement benefits. The City Charter and the Administrative Code are the authorities that establish and amend the benefit provisions of the plan and employer and member obligations to the plan.

The membership groups and the related service retirement benefits are included in the notes to the basic financial statements of the retirement system, which are available on the SFERS website.

All retired members receive a benefit adjustment each July 1, which is the basic cost of living adjustment (COLA). The majority of adjustments are determined by changes in the Consumer Price Index with increases capped at 2%. The Plan provides for a supplemental COLA in years when there are sufficient “excess” investment earnings in the Plan and the Plan is fully funded on a market value of assets basis. The maximum benefit adjustment is 3.5% including that Basic COLA. For members hired on or after January 7, 2012, supplemental COLAs will not be permanent adjustments to retirement benefits.

62 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Contributions

Contributions are made to the plan by both the employers and the participating employees. The basic employer contributions are the amounts deemed necessary, on an actuarial basis using the entry age normal cost method, to provide the plan with assets sufficient to pay the basic benefits that are not provided for by employees’ contributions. Employee and employer contributions are mandatory, as required by the City Charter. The District's contributions to SFERS, for the year ended June 30, 2019 were $20.5 million. Employee contribution rates for fiscal year 2018‐2019 varied from 7.5% to 12.0% as a percentage of gross covered salary. The District is required to contribute at an actuarially determined rate. Based on the July 1, 2017 actuarial report, the required employer contribution rate for fiscal year 2018‐2019 was 20.07% to 20.90%.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

As of June 30, 2019, the District reported net pension liabilities for its proportionate share of the collective SFERS net pension liability totaling $135.1 million. The net pension liability of the plan is measured as of June 30, 2018, and the total pension liability for the plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2017, rolled forward to June 30, 2018 using standard update procedures. The District’s proportion of the net pension liability was based on a projection of the District’s long‐term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The following table illustrates the change in the District’s proportion during the year:

Miscellaneous Non‐safety Proportion ‐ June 30, 2017 measurement date 3.0930% Proportion ‐ June 30, 2018 measurement date 3.1552% Change in proportion 0.0622%

63 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

For the year ended June 30, 2019, the District recognized pension expense of $26.6 million, including amortization of deferred outflows/inflows related pension items. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Pension contributions subsequent to measurement date$ 20,496,220 $ ‐ Difference between expected and actual experience 1,096,000 3,824,000 Changes in assumptions 21,069,000 ‐ Adjustment due to differences in proportions 6,340,000 1,708,000 Net difference between projected and actual earnings on plan investments ‐ 21,720,000 Total $ 49,001,220 $ 27,252,000

The deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the subsequent fiscal year. The deferred outflows/(inflows) of resources related to the difference between projected and actual earnings on pension plan investments will be amortized over a closed five‐year period. The deferred outflows/(inflows) of resources related to the net change in proportionate share of net pension liability, differences between expected and actual experience in the measurement of the total pension liability, and changes of assumptions will be amortized over the Expected Average Remaining Service Life (EARSL) of all members that are provided benefits (active, inactive, and retirees) as of the beginning of the measurement period. The EARSL for the measurement period is 4.0 years.

The amounts to be recognized in pension expense are as follows:

Year Ended June 30, Amortization 2020$ 10,279,000 2021 4,521,000 2022 (9,474,000) 2023 (4,073,000) Total$ 1,253,000

64 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

Actuarial Methods and Assumptions

The total pension liability was determined by an actuarial valuation as of June 30, 2017, which was rolled forward to June 30, 2018 using generally accepted actuarial procedures. The following is a summary of the actuarial methods and assumptions used in the actuarial valuation:

Valuation date June 30, 2017 updated to June 30, 2018 Measurement date June 30, 2018 Actuarial cost method Entry‐age normal cost Inflation 3.25% Salary increases 3.75% plus merit component Investment rate of return 7.50%, net of investment expense and inflation Municipal bond yield 3.87% Discount rate 7.50% Administrative expense 0.60% of payroll Basic COLA 2.00%

Mortality rates for active members were based upon the RP‐2000 Employee Tables for Males and Females projected using Scale AA to 2030 for females and to 2005 for males. Mortality rates for healthy annuitants were based upon the RP‐2000 Healthy Annuitant Tables for Males and Females projected using Scale AA to 2020.

Discount Rate

The discount rate used to measure the total pension liability as of June 30, 2018 was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2017 actuarial valuation. That policy includes contributions equal to the employer portion of the entry age normal costs for members as of the valuation data plus an amortization payment on the unfunded actuarial liability.

The plan’s fiduciary net position was projected to be available to make projected future benefit payments for current members until fiscal year‐end 2096, when only a portion of the projected benefit payments can be made from the projected fiduciary net position. Projected benefit payments are discounted at the long‐term expected return on assets of 7.50% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 3.87% to the extent they are not available. Since the payments discounted at the municipal bond rate are relatively few and far in the future, the municipal bond rate does not affect the single equivalent rate when rounded to two decimal places. Consequently, the single equivalent rate used to determine the total pension liability as of June 30, 2018 is 7.50%.

65 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

The long‐term expected rate of return on pension plan investments was 7.50%. It was set by the Retirement Board after consideration of both expected future returns and historical returns experienced by the by the Retirement System. Expected future returns were determined by using a building‐block method in which best‐estimate ranges of expected future real rates of return were developed for each major asset class. These ranges were combined to produce the long‐term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Target allocation and best estimates of geometric long‐term expected real rates of return (net of pension plan investment expense and inflation) for each major asset class are summarized in the following table:

Long‐Term Assumed Asset Expected Real Asset Class Allocation Rate of Return Global equity 40% 5.3% Fixed income 20% 1.6% Private equity 18% 6.5% Real estate 17% 4.6% Hedge funds/absolute return 5% 3.6% Total 100%

The following presents the District’s allocation of the its proportionate share of the net pension liability, calculated using the 7.50% discount rate, as well as what the District’s allocation would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate:

Net Pension Discount rate Liability 1% decrease (6.50%)$ 253,081,000 Current discount rate (7.50%) 135,128,000 1% increase (8.50%) 37,591,000

On Behalf Payments

The State of California makes contributions to CalSTRS and CalPERS on behalf of the District. The State contributions are recorded in these financial statements as a component of state revenue and pension expense.

Percent of General County School Child Development Total State Annual Payroll Fund Fund Fund Contribution 10.455%$ 53,130,641 $ 3,734,841 $ 2,060,502 $ 58,925,984

66 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 14 ‐ COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from federal and state agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the general fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2019.

Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion of management, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, 2019.

Construction Commitments

As of June 30, 2019, the District had the following commitments with respect to the unfinished capital projects as follows:

 Proposition A 2006 general obligation bond program, $1.2 million committed through September 2019.  Proposition A 2011 general obligation bond program, $2.3 million committed through December 2019.  Proposition A 2016 general obligation bond program, $80.3 million committed through October 2020.  General facilities, $6.0 million committed through December 2019.

NOTE 15 ‐ RELATED PARTY TRANSACTIONS

The District is a member of the School Project for Utility Rate Reduction (SPURR) and participates in the Schools Excess Liability Fund (SELF) joint powers authority (JPA). The District pays annual contributions to SELF for additional excess liability coverage. During the fiscal year ending June 30, 2019 the District paid SELF $457 thousand for member contribution insurance premiums.

The relationship between the District and the JPA’s is such that they are not component units of the District for financial reporting purposes. These entities have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are generally available from the respective entities.

67

REQUIRED SUPPLEMENTARY INFORMATION

68 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variances ‐ Favorable (Unfavorable) Budgeted Amounts Final Revenues Original Final Actual to Actual Local control funding formula$ 525,608,064 $ 526,072,718 $ 522,498,955 $ (3,573,763) Federal sources 30,601,083 30,787,594 22,289,023 (8,498,571) Other state sources 38,285,071 43,863,176 48,876,324 5,013,148 Other local sources 189,621,055 258,142,106 273,621,340 15,479,234 TOTAL REVENUES 784,115,273 858,865,594 867,285,642 8,420,048

Expenditures Current Certificated salaries 317,864,269 360,426,516 381,939,507 (21,512,991) Classified salaries 102,918,493 115,098,873 125,392,412 (10,293,539) Employee benefits 166,206,537 204,033,124 192,647,778 11,385,346 Books and supplies 23,122,391 22,892,640 24,745,850 (1,853,210) Services and operating expenditures 73,891,361 72,351,893 77,022,563 (4,670,670) Other outgo 103,925,636 35,136,637 38,408,279 (3,271,642) Capital outlay 115,700 232,200 7,496,499 (7,264,299) TOTAL EXPENDITURES 788,044,387 810,171,883 847,652,888 (37,481,005)

Excess (deficiency) of revenues over expenditures (3,929,114) 48,693,711 19,632,754 (29,060,957)

Other Financing Uses Transfers out (14,519,475) (14,819,475) (12,525,469) 2,294,006 Other uses (906,204) ‐ ‐ ‐ TOTAL FINANCING SOURCES (USES) (15,425,679) (14,819,475) (12,525,469) 2,294,006 NET CHANGE IN FUND BALANCES (19,354,793) 33,874,236 7,107,285 (26,766,951) Fund balance ‐ Beginning 98,691,077 98,691,077 98,691,077 ‐ Fund balance ‐ Ending$ 79,336,284 $ 132,565,313 $ 105,798,362 $ (26,766,951)

69 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

COUNTY SCHOOL SERVICE FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variances ‐ Favorable (Unfavorable) Budgeted Amounts Final Revenue Original Final Actual to Actual Local control funding formula$ 10,520,071 $ 10,520,071 45,956,687$ 35,436,616 Federal sources 13,990,012 14,925,838 16,190,062 1,264,224 Other state sources 42,943,469 47,403,286 12,175,256 (35,228,030) Other local sources 105,097,073 37,308,074 39,828,796 2,520,722 TOTAL REVENUES 172,550,625 110,157,269 114,150,801 3,993,532

Expenditures Current Certificated salaries 57,190,449 23,248,149 26,931,815 (3,683,666) Classified salaries 32,907,196 14,165,752 14,940,745 (774,993) Employee benefits 34,518,094 18,255,890 19,123,638 (867,748) Books and supplies 1,487,772 1,475,097 1,423,625 51,472 Services and operating expenditures 45,707,472 52,253,744 57,535,266 (5,281,522) TOTAL EXPENDITURES 171,810,983 109,398,632 119,955,089 (10,556,457)

NET CHANGE IN FUND BALANCES 739,642 758,637 (5,804,288) (6,562,925) Fund balance ‐ Beginning 14,030,939 14,030,939 14,030,939 ‐ Fund balance ‐ Ending$ 14,770,581 $ 14,789,576 $ 8,226,651 $ (6,562,925)

70 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF CHANGES IN THE DISTRICT'S TOTAL OPEB LIABILITY AND RELATED RATIOS FOR THE YEAR ENDED JUNE 30, 2019

2019 2018 Total OPEB Liability Service cost $ 54,233,883 $ 52,782,368 Interest 28,342,781 24,365,832 Changes of assumptions (30,126,085) ‐ Benefit payments (29,470,435) (28,336,957) Net change in total OPEB liability 22,980,144 48,811,243 Total OPEB liability ‐ beginning 733,480,927 684,669,684 Total OPEB liability ‐ ending $ 756,461,071 $ 733,480,927

Covered‐employee payroll $ 433,224,000 $ 411,662,000

Total OPEB liability as a percentage of covered‐employee payroll 175% 178%

Measurement date June 30, 2018 June 30, 2017

Note: Until the full ten year trend is compiled, information is presented only for those years which information is available.

71 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY FOR THE YEAR ENDED JUNE 30, 2019

(Amounts in thousands) 2015 2016 2017 2018 2019 CalSTRS District's proportion of the net pension liability 0.655% 0.768% 0.624% 0.668% 0.702% District's proportionate share of the net pension liability$ 382,762 $ 517,072 $ 504,375 $ 617,389 $ 645,548 State's proportionate share of the net pension liability associated with the District 231,113 273,474 287,132 365,242 369,607 Total$ 613,875 $ 790,546 $ 791,507 $ 982,631 $ 1,015,155 District's covered employee payroll at the measurement date$ 300,327 $ 314,358 $ 334,115 $ 353,820 $ 372,505 District's proportionate share of the net pension liability as a percentage of its covered payroll 127.45% 164.49% 150.96% 174.49% 173.30%

Plan fiduciary net position as a percentage of the total pension liability 77% 74% 77% 69% 71% Measurement Date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018

SFERS District's proportion of the net pension liability 2.976% 3.119% 2.970% 3.0930% 3.1552% District's proportionate share of the net pension liability$ 52,686 $ 71,606 $ 172,628 $ 154,445 $ 135,128 District's covered payroll at the measurement date$ 63,892 $ 69,040 $ 77,547 $ 79,404 $ 82,059

District's proportionate share of the net pension liability as a percentage of its covered payroll 82.46% 103.72% 222.61% 194.51% 164.67%

Plan fiduciary net position as a percentage of the total pension liability 92% 90% 78% 82% 85% Measurement Date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018

Note: Until the full ten year trend is compiled, information is presented only for those years which information is available.

72 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF DISTRICT PENSION CONTRIBUTIONS FOR THE YEAR ENDED JUNE 30, 2019

(Amounts in thousands) 2012 2013 2014 2015 2016 2017 2018 2019 CalSTRS

Contractually required contribution$ 23,290 $ 23,740 $ 24,777 $ 27,915 $ 35,778 $ 44,510 $ 53,764 $ 67,355 Contributions in relation to the contractually required contribution (23,290) (23,740) (24,777) (27,915) (35,778) (44,510) (53,764) (67,355) Contribution deficiency (excess)$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ District's covered payroll$ 282,303 $ 287,758 $ 300,327 $ 314,358 $ 334,115 $ 353,820 $ 372,505 $ 413,728 Contributions as a percentage of covered payroll 8.25% 8.25% 8.25% 8.88% 10.71% 12.58% 14.43% 16.28%

SFERS

Contractually required contribution$ 11,692 $ 12,388 $ 15,858 $ 18,483 $ 15,645 $ 17,068 $ 19,530 $ 20,496 Contributions in relation to the contractually required contribution (11,692) (12,388) (15,858) (18,483) (15,645) (17,068) (19,530) (20,496) Contribution deficiency (excess)$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ District's covered payroll$ 64,632 $ 67,168 $ 63,892 $ 69,040 $ 77,547 $ 79,404 $ 82,059 $ 106,640

Contributions as a percentage of covered payroll 18.09% 18.44% 24.82% 26.77% 20.17% 21.50% 23.80% 19.22%

73 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2019

NOTE 1 ‐ PURPOSE OF SCHEDULES

Budgetary Comparison Schedule

The District employs budget control by object codes and by individual appropriation accounts. Budgets are prepared on the modified accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The budgets are revised during the year by the board of education to provide for revised priorities. Expenditures cannot legally exceed appropriations by major object code. The originally adopted and final revised budgets for the general fund and county school service fund are presented as required supplementary information. The basis of budgeting is the same as GAAP, except state of California on behalf payments described in note 14 are excluded from state revenues and benefits expense for comparability.

Schedule of Changes in the District's Total OPEB Liability and Related Ratios

This schedule presents information on the District's changes in the total OPEB liability, including beginning and ending balances. In the future, as data becomes available, ten years of information will be presented. Until the full ten‐year trend is compiled, information is presented only for those years which information is available.

Schedule of District Pension Contributions

This schedule presents information on the District's required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. Until the full ten‐year trend is compiled, information is presented only for those years which information is available.

Changes in Benefit Terms

There were no changes in benefit terms since the previous valuation for either CalSTRS, SFERS, or OPEB.

Changes in Assumptions

There were no changes in economic assumptions for either the CalSTRS or SFERS from the previous valuations.

74

SUPPLEMENTARY INFORMATION

75 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2019

Pass‐through Federal Grantor/Pass‐Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF EDUCATION Passed through California Department of Education Career and Technical Education 84.048 14891/14894$ 426,051 Title I grants to Local Educational Agencies ARRA ‐ School Improvement Grant 84.388 15004 842 Title I, Part A, Basic Grants Low Income and Neglected 84.010 14329 13,543,644 Title I, Part D, Local Delinquent Programs 84.010 14357 331,494 Total, Title I grants to Local Educational Agencies 13,875,980 Title I, Migration Education Title I, Part C, Migrant Ed ‐ Regular Program 84.011 14838 154,219 Title I, Part C, Migrant Ed ‐ Summer Program 84.011 10005 17,328 Title I, Part C, Migrant Ed ‐ Even Start Migrant Education 84.011 10144 7,725 Total Title I, Migrant Education 179,272 Title II, Supporting Effective Instruction State Grant Title II, Part A, Teacher Quality 84.367 14341 1,478,313 Total Title II, Supporting Effective Instruction State Grant 1,478,313 Title III, English Language Acquisition State Grants Title III, Immigrant Education Program 84.365 15146 164,425 Title III, Limited English Proficient Student Program 84.365 14346 1,922,470 Total Title III, English Language Acquisition State Grants 2,086,895 Title IV, Sudent Support and Acadenuc Enrichment Grants SSA Enrichment Grant 84.424 15391 276,867 21st Century Community Learning Centers Technical Assistance 84.287 14350 26,250 Part A, Student Support and Academic Enrichment Grants 84.482 15396 801,661 Part B, 21st Century Community Learning Centers 84.287 14349 1,638,905 Total Title IV, Sudent Support and Acadenuc Enrichment Grants 2,743,683 Title X, Education for Homeless Children and Youth 84.196 14332 60,955

See accompanying note to supplementary information.

76 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2019

Pass‐through Federal Grantor/Pass‐Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF EDUCATION (CONTINUED) Individuals with Disabilities Education Act Cluster IDEA Basic Local Assistance Entitlement, Part B, Sec 611 84.027 13379 12,280,330 IDEA Mental Health Allocation Plan, Part B, Sec 611 84.027 15197 1,088,411 IDEA Preschool Local Entitlement, Part B, Sec 611 84.027A 13682 1,019,697 IDEA Preschool Grants, Part B, Sec 619 84.173 13430 333,315 IDEA Alternate Dispute Resolution, Part B, Sec 611 84.173A 13007 57,016 IDEA Preschool Staff Development, Part B, Sec 611 84.173A 13431 3,193 IDEA Grants for Infants and families 84.181 23761 162,626 Total, Individuals with Disabilities Education Act Cluster 14,944,588 Passed through California Department of Rehabilitation Workability II, Transition Partnership 84.158 10006 72,874 Mission Promise Neighborhood 84.215 1 4,108 Computer Science 1 37,089 School Safety National Activities 84.184 1 855,540 Indian Education Grants to Local Educational Agencies 84.060 1 31,044 Total, U.S. Department of Education 36,796,392

U.S. DEPARTMENT OF AGRICULTURE Passed through California Department of Education Child Nutrition Cluster Especially Needy Breakfast Program 10.553 13526 2,726,989 School Breakfast Program 10.553 13390 12,030 National School Lunch Program 10.555 13391/13396 11,099,378 Commodity Supplemental Food Program 10.555 1 626,629 Total, Child Nutrition Cluster 14,465,026 Child Care Food Program ‐ Centers and Family Day Homes 10.558 13393 4,811,488 Fresh Fruit and Vegetable Program 10.582 14968 15,231 Total, U.S. Department of Agriculture 19,291,745

See accompanying note to supplementary information.

77 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2019

Grant Federal Grantor/Pass‐Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF DEFENSE Passed through California Department of Education Junior Reserve Officers Training Corps 12.000 1 520,286 Total, U.S. Department of Defense 520,286

U.S. DEPARTMENT OF JUSTICE Direct Grant SSSD: 21ST CCLC‐FB 16.000 Not Available 36,166 I3 Grant New Teacher Center 16.000 Not Available 576,447 Passed through University of Georgia Juvenile Mentoring Program 16.726 1 1,004 Total, U.S. Department of Justice 613,617

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through California Department of Education

Child Care Mandatory and Matching Funds of the Child Care and Development Fund 93.596 13609 5,059,807 Passed through Centers for Disease Control

Cooperative Agreements to Promote Adolecent Health through School‐Based HIV/STD Prevention and School‐Based Surveillance 93.079 1 375,790 Passed through California Department of Health Care Services Medical Assistance Program 93.778 10013 173,000 Total, U.S. Department of Health and Human Services 5,608,597 Total, Expenditures of Federal Awards$ 62,830,637

1 Pass‐through identifying number not applicable/available.

See accompanying note to supplementary information.

78 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE JUNE 30, 2019

ORGANIZATION

The San Francisco Unified School District was established in 1851 and consists of an area comprising approximately 49 square miles. The District operates 8 alternatively configured (TK‐8), 64 elementary schools, 13 middle schools, 17 senior high schools (including two continuation schools and an independent study school), 8 court and county community schools, 34 state‐funded preschool sites, and 12 early education centers. The District sponsors 14 independent charter schools.

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES Stevon Cook President 2021 Mark Sanchez Vice‐President 2021 Alison M. Collins Commissioner 2022 Jenny Lam Commissioner 2022 Gabriela Lopez Commissioner 2022 Rachel Norton Commissioner 2021 Faauuga Moliga Commissioner 2022

ADMINISTRATION Vincent Matthews Superintendent of Schools Danielle Houck General Counsel Enikia Ford‐Morthel Deputy Superintendent, Instruction, Innovation and Social Justice Myong Leigh Deputy Superintendent, Policy & Operations Gentle Blythe Deputy Superintendent, Strategic Partnerships and Comminications Viva Mogi Interim Chief of Strategy and Fund Development Ana De Arce Assistant Superintendent, K‐8 ‐ Cohort I David Wong Assistant Superintendent, K‐8 ‐ Cohort II Enikia Ford Assistant Superintendent, K‐8 ‐ Cohort III Anakarita Allen Assistant Superintendent, K‐8 ‐ Cohort IV Richard Curci Assistant Superintendent, K‐8 ‐ Cohort V Cadwallader Payne Assistant Superintendent, K‐8 ‐ Cohort VI Bill Sanderson Assistant Superintendent, High Schools Jean Robertson Chief, Special Education Meenoo Yashar Chief of Early Childhood Education Melissa Dodd Chief Technology Officer Jill Hoogendyk Chief, Staff Ritu Khanna Chief, Research Planning and Assessment Meghan Wallace Chief, Financial Dr. Nicole Priestly Chief, Academic Kevin Truitt Chief, Student, Family and Community Support Daniel Menezes Chief, Human Resources Dawn Kamalanathan Chief, Facilities

See accompanying note to supplementary information.

79 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF AVERAGE DAILY ATTENDANCE FOR THE YEAR ENDED JUNE 30, 2019

Final Report Amended Second Annual Period Report Report Regular ADA Transitional kindergarten through third 16,704.87 16,723.92 Fourth through sixth 11,248.92 11,258.25 Seventh and eighth 7,021.58 7,032.12 Ninth through twelfth 14,721.63 14,693.33 Total Regular ADA 49,697.00 49,707.62

Extended Year Special Education Transitional kindergarten through third 27.74 27.74 Fourth through sixth 14.11 14.11 Seventh and eighth 10.59 10.59 Ninth through twelfth 32.87 32.87 Total Extended Year Special Educaon 85.31 85.31

Special Education, Nonpublic, Nonsectarian Schools Transitional kindergarten through third 4.31 4.97 Fourth through sixth 13.74 13.81 Seventh and eighth 20.37 21.72 Ninth through twelfth 71.45 75.91 Total Special Education, Nonpublic, Nonsectarian Schools 109.87 116.41

Extended Year Special Education, Nonpublic, Nonsectarian Schools Transitional kindergarten through third 0.22 0.22 Fourth through sixth 1.38 1.38 Seventh and eighth 2.35 2.35 Ninth through twelfth 11.35 11.35 Total Extended Year Special Education, 15.30 15.30

Community Day School Seventh and eighth 2.92 3.68 Ninth through twelfth 30.79 31.72 Total Community Day School 33.71 35.40

Juvenile Halls, Homes and Camp, Probation Referred Elementary 4.38 5.22 High School 62.77 58.89 Total Juvenile Halls, Homes and Camp, Probation Referred 67.15 64.11 Total ADA 50,008.34 50,024.15

See accompanying note to supplementary information.

80 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED JUNE 30, 2019

Number 1986‐87 2018‐19 of Days Minutes Actual Traditional Grade Level Requirement Minutes Calendar Status Kindergarten 36,000 44,400 180 Complied Grades 1 ‐ 3 Grade 1 50,400 50,400 180 Complied Grade 2 50,400 50,400 180 Complied Grade 3 50,400 50,700 180 Complied Grades 4 ‐ 6 Grade 4 54,000 54,000 180 Complied Grade 5 54,000 54,000 180 Complied Grade 6 54,000 55,890 180 Complied Grades 7 ‐ 8 Grade 7 54,000 55,890 180 Complied Grade 8 54,000 55,890 180 Complied Grades 9 ‐ 12 Grade 9 64,800 64,820 180 Complied Grade 10 64,800 64,820 180 Complied Grade 11 64,800 64,820 180 Complied Grade 12 64,800 64,820 180 Complied

See accompanying note to supplementary information.

81 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2019

Self Insurance Fund Balance, June 30, 2019, unaudited actual financial report$ 44,240,763 Transfers to CalPERS CERBT for OPEB (25,426,899) Balance, June 30, 2019, audited financial statements$ 18,813,864

See accompanying note to supplementary information.

82 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2019

(Amounts in thousands, except average daily attendance)

(Budget) 2020 1 2019 2018 2017 GENERAL FUND Revenues$ 863,070 $ 920,416 $ 801,486 $ 769,889

Expenditures 848,712 900,784 810,267 753,751 Other uses and transfers out 15,917 12,525 13,796 13,454

Total Expenditures and Other Uses 864,629 913,309 824,063 767,205

CHANGE IN FUND BALANCE$ (1,559) $ 7,107 $ (22,577) $ 2,684 ENDING FUND BALANCE $ 104,240 $ 105,799 $ 98,692 $ 121,269 AVAILABLE RESERVES $ 28,602 $ 30,161 $ 39,915 $ 59,100 AVAILABLE RESERVES AS A PERCENTAGE OF TOTAL OUTGO 3.31% 3.30% 4.84% 7.70% LONG‐TERM OBLIGATIONS$ 2,519,437 $ 2,606,073 $ 2,606,073 $ 2,536,649 AVERAGE DAILY ATTENDANCE AT P‐2 2 50,543 50,008 50,518 50,788

The general fund balance has decreased by $15.5 million over the past two years. The fiscal year 2019‐20 budget projects a decrease of $1.6 million, or 1.5 percent. For a district this size, the state recommends available reserves of at least two percent of total general fund expenditures, transfers out, and other uses (total outgo). Available reserves on June 30, 2019 were 3.30%, which is a decrease of $9.8 million or 24.4% from fiscal year 2017‐18.

The District has incurred two operating surpluses in the general fund over the multi‐year period starting with fiscal year 2016‐17. During fiscal year 2018‐19, the general fund incurred an operating surplus. However, The District expects a general fund operating deficit during the 2019‐20 fiscal year. CalSTRS on behalf revenue and expenditures are included in the 2019‐20 budget column for comparability with the GAAP financial statements.

Total long‐term liabilities have increased by $69.4 million over the past two years.

Average daily attendance has decreased by 780 over the past two years. An increase of 535 ADA is budgeted for fiscal year 2019‐20.

1 Budget 2020 is based on the most current District projection and is included for analytical purposes only and has not been subjected to audit. 2 ADA amounts include District and County programs.

See accompanying note to supplementary information.

83 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SCHEDULE OF CHARTER SCHOOLS FOR THE YEAR ENDED JUNE 30, 2019

Included in Charter # Name of Charter School Audit Report 0599 City Arts and Technology High School No 0040 Creative Arts Charter School No 1029 Five Keys Adult School No 0567 Five Keys Charter School No 1028 Five Keys Independence High School No 0141 Gateway High School No 1267 Gateway Middle School No 0549 KIPP Bayview Academy No 0551 KIPP San Francisco Bay Academy No 1502 KIPP San Francisco College Preparatory No 0122 Leadership High School No 0140 Life Learning Academy No 1270 Mission Preparatrory No 0158 Thomas Edison Charter Academy No

See accompanying note to supplementary information.

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SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2019

Child Deferred Development Cafeteria Maintenance ASSETS Cash and Investments$ ‐ $ 75,018 $ 3,819,458 Receivables 5,473,286 4,969,642 30,311 Stores inventories ‐ 29,492 ‐ Total Assets $ 5,473,286 $ 5,074,152 $ 3,849,769

LIABILITIES AND FUND BALANCES Liabilities Overdrafts$ 1,934,417 $ 2,810,868 $ ‐ Accounts payable 195,433 2,023,838 129,601 Unearned revenue 34,258 90,371 ‐ Total Liabilities 2,164,108 4,925,077 129,601

Fund Balances Restricted 3,309,178 149,075 ‐ Committed ‐ ‐ 3,720,168 Total Fund Balances 3,309,178 149,075 3,720,168 Total Liabilities and Fund Balances $ 5,473,286 $ 5,074,152 $ 3,849,769

See accompanying note to supplementary information.

85

State County Special Mello‐Roos Nonmajor Capital School School Reserve Capital Tax Governmental Facilities Building Facilities Capital Outlay Project Override Funds

$ 37,368,057 $ 1,710,683 $ 1,201,096 $ 13,656,884 $ 12,155,613 $ 33,269 $ 70,020,078 296,994 13,606 23,033,515 ‐ 97,286 ‐ 33,914,640 ‐ ‐ ‐ ‐ ‐ ‐ 29,492 $ 37,665,051 $ 1,724,289 $ 24,234,611 $ 13,656,884 $ 12,252,899 $ 33,269 $ 103,964,210

$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 4,745,285 2,901,072 195,074 55,858 473,841 1,475,021 ‐ 7,449,738 ‐ ‐ ‐ 355,749 ‐ ‐ 480,378 2,901,072 195,074 55,858 829,590 1,475,021 ‐ 12,675,401

34,763,979 1,529,215 24,178,753 12,827,294 10,777,878 33,269 87,568,641 ‐ ‐ ‐ ‐ ‐ ‐ 3,720,168 34,763,979 1,529,215 24,178,753 12,827,294 10,777,878 33,269 91,288,809 $ 37,665,051 $ 1,724,289 $ 24,234,611 $ 13,656,884 $ 12,252,899 $ 33,269 $ 103,964,210

86 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019

Child Deferred Development Cafeteria Maintenance REVENUES Federal sources $ 5,059,807 $ 18,665,116 $ ‐ Other state sources 24,994,122 1,104,185 ‐ Other local sources 12,297,585 2,325,287 128,618 Total Revenues 42,351,514 22,094,588 128,618 EXPENDITURES Current Instruction 28,448,419 ‐ ‐ Instruction related activities: Supervision of instruction 7,626,374 ‐ ‐ School site administration 4,822,616 ‐ ‐ Pupil Services: Food services 2,075,756 25,918,327 ‐ All other pupil services 454,605 ‐ ‐ General administration: All other general administration 1,678,161 1,068,459 ‐ Plant services 892,429 ‐ ‐ Capital Outlay 2,720 ‐ 254,151 Debt service Principal ‐ ‐ ‐ Interest and other ‐ ‐ ‐ Total Expenditures 46,001,080 26,986,786 254,151

Excess (deficiency) of revenues over expenditures (3,649,566) (4,892,198) (125,533) Other Financing Sources: Transfers in 4,724,966 4,924,612 ‐ Net Financing Sources 4,724,966 4,924,612 ‐ NET CHANGE IN FUND BALANCES 1,075,400 32,414 (125,533) Fund Balance ‐ Beginning 2,233,778 116,661 3,845,701 Fund Balance ‐ Ending $ 3,309,178 $ 149,075 $ 3,720,168

See accompanying note to supplementary information.

87

State County Special Mello‐Roos Nonmajor Capital School School Reserve Capital Tax Governmental Facilities Building Facilities Capital Outlay Project Override Funds

$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 23,724,923 ‐ ‐ 23,023,971 15,565 ‐ ‐ 49,137,843 15,381,003 56,829 40,985 3,413,035 10,325,713 ‐ 43,969,055 15,381,003 56,829 23,064,956 3,428,600 10,325,713 ‐ 116,831,821

‐ ‐ ‐ ‐ ‐ ‐ 28,448,419

‐ ‐ ‐ ‐ ‐ ‐ 7,626,374 ‐ ‐ ‐ ‐ ‐ ‐ 4,822,616

‐ ‐ ‐ ‐ ‐ ‐ 27,994,083 ‐ ‐ ‐ ‐ ‐ ‐ 454,605

‐ ‐ ‐ ‐ ‐ ‐ 2,746,620 ‐ ‐ ‐ ‐ ‐ ‐ 892,429 20,229,312 326,844 48,729 2,108,392 9,680,451 ‐ 32,650,599

‐ ‐ ‐ 2,275,741 ‐ ‐ 2,275,741 ‐ ‐ ‐ 530,150 ‐ ‐ 530,150 20,229,312 326,844 48,729 4,914,283 9,680,451 ‐ 108,441,636

(4,848,309) (270,015) 23,016,227 (1,485,683) 645,262 ‐ 8,390,185

‐ ‐ ‐ 2,815,891 10,000 ‐ 12,475,469 ‐ ‐ ‐ 2,815,891 10,000 ‐ 12,475,469 (4,848,309) (270,015) 23,016,227 1,330,208 655,262 ‐ 20,865,654 39,612,288 1,799,230 1,162,526 11,497,086 10,122,616 33,269 70,423,155 $ 34,763,979 $ 1,529,215 $ 24,178,753 $ 12,827,294 $ 10,777,878 $ 33,269 $ 91,288,809

88 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

GENERAL UNRESTRICTED AND RESTRICTED FUNDS BALANCE SHEET SCHEDULES JUNE 30, 2019

Total Unrestricted Restricted General Fund ASSETS Cash and investments$ 33,136,686 $ 65,982,473 $ 99,119,159 Receivables 12,456,369 15,427,744 27,884,113 Prepaid expenditures 83,256 13,911 97,167 Stores inventories 883,967 ‐ 883,967 Total assets$ 46,560,278 $ 81,424,128 $ 127,984,406

LIABILITIES AND FUND BALANCES Liabilities Accounts payable$ 5,746,615 $ 10,542,372 $ 16,288,987 Unearned revenue 54,488 5,842,569 5,897,057 Total liabilities 5,801,103 16,384,941 22,186,044

Fund Balances Nonspendable 967,723 13,911 981,634 Restricted ‐ 65,025,276 65,025,276 Assigned 9,630,000 ‐ 9,630,000 Unassigned 30,161,452 ‐ 30,161,452 Total Fund Balances 40,759,175 65,039,187 105,798,362 Total Liabilities and Fund Balances$ 46,560,278 $ 81,424,128 $ 127,984,406

See accompanying note to supplementary information.

89 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

GENERAL UNRESTRICTED AND RESTRICTED FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019

Total Unrestricted Restricted General Fund REVENUES Local control funding formula$ 522,498,955 $ ‐ $ 522,498,955 Federal sources 347,285 21,941,738 22,289,023 Other state sources 20,364,461 81,642,504 102,006,965 Other local sources 57,375,682 216,245,658 273,621,340 Total Revenues 600,586,383 319,829,900 920,416,283

EXPENDITURES Current Instruction 271,060,923 214,132,267 485,193,190 Instruction related activities 76,280,360 100,134,663 176,415,023 Pupil Services 32,720,001 37,819,287 70,539,288 General administration 35,854,321 7,441,916 43,296,237 Ancilliary services 377,705 4,656,867 5,034,572 Plant services 34,790,738 33,738,651 68,529,389 Other outgo 39,949,351 1,225,143 41,174,494 Capital outlay 10,601,336 ‐ 10,601,336 Total Expenditures 501,634,735 399,148,794 900,783,529

Excess of expenditures over revenues 98,951,648 (79,318,894) 19,632,754

OTHER FINANCING SOURCES (USES): Transfers out (9,521,625) (3,003,844) (12,525,469) Interfund transfers (99,049,079) 99,049,079 ‐ Net Financing Uses (108,570,704) 96,045,235 (12,525,469)

NET CHANGE IN FUND BALANCES (9,619,056) 16,726,341 7,107,285 Fund Balance ‐ Beginning 50,378,231 48,312,846 98,691,077 Fund Balance ‐ Ending $ 40,759,175 $ 65,039,187 $ 105,798,362

See accompanying note to supplementary information.

90 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2019

NOTE 1 ‐ PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. The District has not elected to use the ten percent de minimis cost rate as covered in Section 200.414 Indirect (F&A) costs of the Uniform Guidance.

The following schedule provides reconciliation between revenues reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances and the related expenditures reported on the Schedule of Expenditures of Federal Awards.

CFDA Number Amount

Total federal revenues reported on the statement of revenues, expenditures and changes in fund balance:$ 64,225,218 Federal interest subsidy on qualified construction bonds and build america bonds Not Applicable (2,021,210) Noncash federal awards are not recorded on the financial statements 10.555 626,629 Total schedule of expenditures of federal awards$ 62,830,637

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries and schools operated, members of the governing board, and members of the administration.

Schedule of Average Daily Attendance (ADA)

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. The District neither met nor exceeded its target funding. The schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections 46200 through 46206. Districts must maintain their instructional minutes at the 1986‐87 requirements, as required by Education Code Section 46201.

91 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2019

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balance of all funds reported on the unaudited actual financial report, to the audited financial statements.

Schedule of Financial Trends and Analysis

This schedule discloses the District's financial trends by displaying past years' data along with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time.

Schedule of Charter Schools

This schedule lists all schools chartered by the District or County Office of Education, and displays information for each charter school on whether or not the school is included in the District audit.

Nonmajor Governmental Funds – Combining Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balances

The nonmajor governmental funds combining balance sheet and statement of revenues, expenditures and changes in fund balances is included to provide information regarding the individual funds that have been included in the nonmajor governmental funds column on the governmental funds balance sheet and statement of revenues, expenditures and changes in fund balances.

General Unrestricted and Restricted Funds – Balance Sheet Schedule and Schedule of Revenues, Expenditures and Changes in Fund Balances

The general unrestricted and restricted funds balance sheet and schedule of revenues, expenditures and changes in fund balances is included to provide information regarding the unrestricted and restricted funds that have been included in the general funds column on the governmental funds balance sheet and statement of revenues, expenditures and changes in fund balances.

92

INDEPENDENT AUDITOR’S REPORTS

93

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Education San Francisco Unified School District San Francisco, California

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of San Francisco Unified School District (District) as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated December 24, 2019.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain a deficiency in internal control, described in the accompanying schedule of findings and questioned costs as item 2019‐001 that we consider to be a significant deficiency.

94

Compliance and Other Matters As part of obtaining reasonable assurance about whether District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

The District’s Response to Finding The District’s response to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The District’s response was not subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we express no opinion on it.

Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Palo Alto, California December 24, 2019

95

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

Board of Education San Francisco Unified School District San Francisco, California

Report on Compliance for Each Major Federal Program We have audited San Francisco Unified School District's (District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the District’s major federal programs for the year ended June 30, 2019. The District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of San Francisco Unified School District’s compliance.

96

Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.

Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Palo Alto, California December 24, 2019

97

INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE

Board of Education San Francisco Unified School District San Francisco, California

Report on State Compliance We have audited San Francisco Unified School District's (District) compliance with the types of compliance requirements identified in the 2018‐2019 Guide for Annual Audits of K‐12 Local Education Agencies and State Compliance Reporting that could have a direct and material effect on each of the District's State government programs as noted below for the year ended June 30, 2019.

Management's Responsibility Management is responsible for compliance with the requirements of State laws, regulations, and the terms and conditions of its State awards applicable to its State programs.

Auditor's Responsibility Our responsibility is to express an opinion on compliance of each of the San Francisco Unified School District's State programs based on our audit of the types of compliance requirements referred to above. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the 2018‐2019 Guide for Annual Audits of K‐12 Local Education Agencies and State Compliance Reporting. These standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on the applicable government programs noted below. An audit includes examining, on a test basis, evidence about San Francisco Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. Our audit does not provide a legal determination of San Francisco Unified School District's compliance with those requirements.

98

Basis for Qualified Opinion on Unduplicated Local Control Funding Formula Pupil Counts and Comprehensive School Safety Plan As described in the accompanying schedule of findings and questioned costs, the District did not comply with requirements regarding Unduplicated Local Control Funding Formula Pupil Counts and Comprehensive School Safety Plan. Compliance with such requirements is necessary, in our opinion, for San Francisco Unified School District to comply with the requirements applicable to those programs.

Qualified Opinion on Unduplicated Local Control Funding Formula Pupil Counts and Comprehensive School Safety Plan In our opinion, except for the noncompliance described in the basis for qualified opinion paragraph, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on Unduplicated Local Control Funding Formula Pupil Counts and Comprehensive School Safety Plan for the year ended June 30, 2019.

Unmodified Opinion on Each of the Other Programs In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that are applicable to the other state programs noted below that were audited for the year ended June 30, 2019.

Other Matters In connection with the audit referred to above, we selected and tested transactions and records to determine San Francisco Unified School District's compliance with the State laws and regulations applicable to the following items:

Procedures Performed LOCAL EDUCATION AGENCIES OTHER THAN CHARTER SCHOOLS Attendance Yes Teacher Certification and Misassignments Yes Kindergarten Continuance Yes Independent Study Yes Continuation Education Yes Instructional Time Yes Instructional Materials Yes Ratios of Administrative Employees to Teachers Yes Classroom Teacher Salaries Yes Early Retirement Incentive No, see below Gann Limit Calculation Yes

99

Procedures Performed School Accountability Report Card Yes Juvenile Court Schools Yes Middle or Early College High Schools No, see below K‐3 Grade Span Adjustment Yes Transportation Maintenance of Effort Yes Apprenticeship: Related and Supplemental Instruction No, see below Comprehensive School Safety Plan Yes District of Choice No, see below

SCHOOL DISTRICTS, COUNTY OFFICES OF EDUCATION, AND CHARTER SCHOOLS California Clean Energy Jobs Act Yes After/Before School Education and Safety Program: General Requirements Yes After School Yes Before School No, see below Proper Expenditure of Education Protection Account Funds Yes Unduplicated Local Control Funding Formula Pupil Counts Yes Local Control Accountability Plan Yes Independent Study ‐ Course Based No, see below

CHARTER SCHOOLS Attendance No, see below Mode of Instruction No, see below Non Classroom‐Based Instruction/Independent Study for Charter Schools No, see below Determination of Funding for Non Classroom‐Based Instruction No, see below Annual Instruction Minutes Classroom‐Based No, see below Charter School Facility Grant Program No, see below

We did not perform procedures regarding certain State programs for the following reasons: The District did not offer an early retirement incentive program. The District did not have middle or early college high schools. The District did not offer an apprenticeship program. The District is not a District of Choice Program. The District did not offer a before school education and safety program. The District does not offer course based independent study. The Charter Schools are independent of the District; therefore, we did not perform any procedures related to charter schools.

Palo Alto, California December 24, 2019

100

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

101

SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SUMMARY OF AUDITOR’S RESULTS FOR THE YEAR ENDED JUNE 30, 2019

FINANCIAL STATEMENTS Type of auditor's report issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: Material weakness identified? No Significant deficiency identified? Yes Noncompliance material to financial statements noted? No

FEDERAL AWARDS Internal control over major Federal programs: Material weakness identified? No Significant deficiency identified? None reported

Type of auditor's report issued on compliance for major federal programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with Section 200.516(a) of the Uniform Guidance? No

Identification of major Federal programs: CFDA Numbers Name of Federal Program or Cluster 84.365 Title III Part A English Language Acquision State Grants 93.575, 93.596 Child Care and Development Block Grant 10.553, 10.555 Child Nutrition Cluster

Dollar threshold used to distinguish between Type A and Type B programs: $ 1,884,919 Auditee qualified as low‐risk auditee? Yes

STATE AWARDS Type of auditor's report issued on compliance for programs: Unmodified for all programs except for the following programs which were qualified: Name of Program Unduplicated Local Control Funding Formula Pupil Counts Comprehensive School Safety Plan

102 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED JUNE 30, 2019

2019‐001–Pension Maintenance Internal Control Deficiency, Code 30000

Criteria The District provides defined benefit pensions through two cost‐sharing multiple‐employer plans; California State Teachers' Retirement System (CalSTRS) and San Francisco Employees Retirement System (SFERS).

Employer pension contributions are calculated based on pensionable earnings of covered employees' self‐ reported by the District. The District is responsible for ensuring the accuracy of the information reported to the benefit providers.

Condition We noted an instance where the District under‐reported pensionable earnings to a pension plan.

Context Employer pension contributions were about 15% of unrestricted general fund expenditures for the year ending June 30, 2019. The total sample size was 45; this condition applies to one.

Effect This process involves a large volume of transactions. Errors may exist that were not detected by our audit procedures. Potential errors, if material, when taken together, could result in an unrecorded liability of the unrestricted general fund.

Cause Multiple District departments are involved in this process, which means that no one person can be an effective internal control.

Recommendation The internal controls in this area should include specific procedures to ensure completeness and accuracy of amounts reported to pension plans with each pay cycle. To this end, we recommend interdepartmental communication between the personnel who are involved.

Views of responsible officials and planned corrective actions We are developing procedures to verify that amounts reported to pension plans are complete and accurate.

103 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

None reported.

104 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

The following findings represent instances of noncompliance and questioned costs relating to State program laws and regulations. The findings have been coded as follows:

Five Digit Code AB 3627 Finding Type 40000 State Compliance

2019‐002 Unduplicated Local Control Funding Formula Pupil Counts, Code 40000

Criteria Supplemental and concentration grant amounts are calculated based on the percentage of “unduplicated pupils” enrolled in the District on census day (first Wednesday in October). The percentage equals:

Unduplicated count of pupils who (1) are English learners, (2) meet income or categorical eligibility requirements for free or reduced‐price meals under the National School Lunch Program, or (3) are foster youth. Divided by total enrollment in the LEA (EC sections 2574(b)(1) and 42238.02(b)(5)).

“Unduplicated count” means that each pupil is counted only once even if the pupil meets more than one of these criteria (EC sections 2574(b) (2) and 42238.02(b)(1)).

Data submitted by LEAs to CALPADS is used as the starting point for calculating the unduplicated student count. CALPADS Certification Report 1.17 – FRPM/English Learner/Foster Youth – Count, displays the counts of students by category and an unduplicated total.

To be counted in Report 1.17, a student must have an open primary or short‐term enrollment in CALPADS over census day and meet one or more of the following criteria:

• Have a program record with an education program code of Homeless (191), Migrant (135), Free Meal Program (181), or Reduced‐Price Meal Program (182) that is open over census day. • Have an English Language Acquisition Status (ELAS) of “English learner” (EL) that is effective over census day. • Be directly certified in July through November as being eligible for free meals based on a statewide match conducted by CALPADS. • Be identified as a foster youth based on a statewide match conducted by CALPADS. • Be identified as a foster youth through a local data matching process and submitted to and validated by CALPADS.

105 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

Condition Our audit procedures found pupils incorrectly classified as English Learner (EL).

Questioned Costs The method of determining the total impact of this finding on the District was an investigation of all pupils classified as EL, and the resulting questioned costs are $585,496. The amount of principal apportionment reported in the audited financial statement is inclusive of these questioned costs.

Context Three hundred twenty‐five students were incorrectly identified as EL (and did not have any other unduplicated count factors).

The certified total unduplicated pupil count is 97,386. Decreases to unduplicated pupil count based on eligibility for EL funding are 255, that should be “EO” and 70 that should be “RFEF.” The adjusted unduplicated pupil count is 97,061. The enrollment count is unchanged.

Effect By erroneously reporting the unduplicated pupil count, internal budget and financial reports did not present a correct picture of the financial position of the unrestricted general fund throughout the year. The financial effect of this correction is included the audited financial statements and the unaudited actual financial report.

Cause Information extracted from a specific database was not validated before it was uploaded to CalPADS (through Synergy, the student information system).

Recommendation The District should consider if there are other areas that pose a higher risk of error, such as the interaction of different computer systems. Procedures to monitor for higher risk errors should be in place so that errors are identified and corrected during the normal course of business.

Corrective Action Plan The database that caused this discrepancy is no longer in use as of the 2019‐20 school year.

106 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

2019‐003 Comprehensive School Safety Plan, Code 40000

Criteria EDC§32286(a): Each school shall adopt its comprehensive school safety plan by March 1, 2000, and shall review and update its plan by March 1, every year thereafter.

EDC§32288(a): In order to ensure compliance with this article, each school shall forward its comprehensive school safety plan to the school district or county office of education for approval.

EDC§32288(c): In order to ensure compliance with this article, each school district or county office of education shall annually notify the State Department of Education by October 15 of any schools that have not complied with Section 32281.

Condition The District appears to have a comprehensive school safety plan for every site. The District does not maintain documentation in auditable form to show every plan is reviewed and approved annually per the criteria noted in the previous paragraph.

Questioned Costs There is no questioned cost associated with this condition because there is no funding related to the Comprehensive School Safety Plan.

Context The condition is applicable to five of the 21 sampled school sites.

Effect There is a possibility that not all plans were updated per the requirements noted in the criteria paragraph.

Cause The District’s process did not include procedures to formally document compliance.

Recommendation All sites should be required to forward the approved plan to a specific person within the District office. That specific person should store the approvals in a single folder so that they may easily be produced as audit evidence.

107 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

Management’s Response/Corrective Action Plan The district understands California Education Codes 33280 ‐ 32289 and acknowledges the Comprehensive School Safety Plan (CSSP) must be evaluated and amended, as needed, annually by March 1 of each year, and kept on file at both the school site AND the district office and should be readily available for inspection. The district further understands the district shall annually, by October 15th, notify the California Department of Education (CDE) of any schools that have not complied with Section 33281.

Revised Process Going Forward: The CSSP, School Site Council Agenda, School Site Council Minutes and the School Site Council Sign‐In Sheet will be maintained in a location for authorized district staff to comply with inspection requirements upon request.

108 SAN FRANCISCO UNIFIED SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2019

There were no audit findings reported in the prior year Schedule of Findings and Questioned Costs.

109 APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the San Francisco Unified School District (the “District”) in connection with the issuance of $100,000,000 aggregate principal amount of San Francisco Unified School District 2020-21 Tax and Revenue Anticipation Notes (the “Notes”). The Notes are being issued as authorized by a resolution adopted by the Board of Education of the District on February 9, 2021 (the “Resolution”). The District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Notes and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Paying Agent Agreements, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Beneficial Owner” shall mean any person who has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Notes (including persons holding Notes through nominees, depositories or other intermediaries).

“Dissemination Agent” shall mean Digital Assurance Certification, LLC, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Financial Obligation” shall mean, for purposes of the Listed Events set out in Section 3(a)(10) and Section 3(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.

“Holder” shall mean the person in whose name any Note shall be registered.

“Listed Events” shall mean any of the events listed in Section 3(a) or (b) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB currently located at http://emma.msrb.org.

“Official Statement” shall mean the final official statement dated February 23, 2021 relating to the Notes.

“Participating Underwriter” shall mean the original underwriter of the Notes required to comply with the Rule in connection with offering of the Notes.

C-1 “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Reporting of Significant Events.

(a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Notes not later than ten (10) business days after the occurrence of the event:

1. Principal and interest payment delinquencies;

2. Unscheduled draws on debt service reserves reflecting financial difficulties;

3. Unscheduled draws on credit enhancements reflecting financial difficulties;

4. Substitution of credit or liquidity providers, or their failure to perform;

5. Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

6. Tender offers;

7. Defeasances;

8. Rating changes;

9. Bankruptcy, insolvency, receivership or similar event of the District; or

10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties.

Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

(b) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Notes, if material, not later than ten (10) business days after the occurrence of the event:

1. Unless described in Section 3(a)(5), other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Notes or other material events affecting the tax status of the Notes;

C-2 2. Modifications to rights of Note holders;

3. Optional, unscheduled or contingent Note calls;

4. Release, substitution or sale of property securing repayment of the Notes;

5. Non-payment related defaults;

6. The consummation of a merger, consolidation or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms;

7. Appointment of a successor or additional paying agent or the change of name of a paying agent; or

8. Incurrence of a Financial Obligation of the District, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders.

(c) Whenever the District obtains knowledge of the occurrence of a Listed Event described in Section 3(b), the District shall determine if such event would be material under applicable federal securities laws.

(d) If the District learns of the occurrence of a Listed Event described in Section 3(a), or determines that knowledge of a Listed Event described in Section 3(b) would be material under applicable federal securities laws, the District shall within ten business days of occurrence file a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in Section 3(b)(3) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Notes pursuant to the Resolution.

(e) The District intends to comply with the Listed Events described in Section 3(a)(10) and Section 3(b)(8), and the definition of “Financial Obligation” in Section 1, with reference to the Rule, any other applicable federal securities laws and the guidance provided by the Securities and Exchange Commission in Release No. 34-83885 dated August 20, 2018 (the “2018 Release”), and any further amendments or written guidance provided by the Securities and Exchange Commission or its staff with respect to the amendments to the Rule effected by the 2018 Release.

SECTION 4. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Notes. If such termination occurs prior to the final maturity of the Notes, the District shall give notice of such termination in the same manner as for a Listed Event under Section 3(d).

SECTION 5. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be Digital Assurance Certification, LLC.

C-3 SECTION 6. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the District with respect to the Notes, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Notes, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Notes.

SECTION 7. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Certificate to update such information or include it in any future notice of occurrence of a Listed Event.

SECTION 8. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Notes may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate; provided that any such action may be instituted only in Superior Court of the State of California in and for the City and County of San Francisco or in U.S. District Court in or nearest to the City and County. The sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 9. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Notes, and shall create no rights in any other person or entity.

Date: March 9, 2021

SAN FRANCISCO UNIFIED SCHOOL DISTRICT

By Meghan Wallace Chief Financial Officer

C-4 APPENDIX D

CITY AND COUNTY OF SAN FRANCISCO INVESTMENT POLICY AND INVESTMENT REPORT

The following information has been furnished by the Office of the Treasurer, City and County of San Francisco. It describes (i) the policies applicable to investment of District funds, including note proceeds and tax levies, and funds of other agencies held by the Treasurer and (ii) the composition, carrying amount, market value and other information relating to the investment pool. Further information may be obtained directly from the Treasurer, 1 Dr. Carlton B. Goodlett Place, City Hall - Room 140, San Francisco, CA 94102.

D-1 [THIS PAGE INTENTIONALLY LEFT BLANK] CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE TREASURER & TAX COLLECTOR

INVESTMENT POLICY Effective February 2018

1.0 Policy

It is the policy of the Office of the Treasurer & Tax Collector of the City and County of San Francisco (Treasurer’s Office) to invest public funds in a manner which will preserve capital, meet the daily cash flow demands of the City, and provide a market rate of return while conforming to all state and local statutes governing the investment of public funds.

2.0 Scope

This investment policy applies to all funds over which the Treasurer’s Office has been granted fiduciary responsibility and direct control for their management.

3.0 Prudence

The standard of prudence to be used by the Treasurer’s Office shall be the Prudent Investor Standard as set forth by California Government Code, Section 53600.3 and 27000.3. The Section reads as follows: The Prudent Investor Standard states that when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the Treasurer’s Office, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Treasurer’s Office.

This standard of prudence shall be applied in the context of managing those investments that fall under the Treasurer’s direct control. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

4.0 Objective

The primary objectives, in priority order, of the Treasurer’s Office’s investment activities shall be:

4.1 Safety: Safety of principal is the foremost objective of the investment program. Investments of the Treasurer’s Office shall be undertaken in a manner that seeks to ensure the preservation of capital. To attain this objective, the Treasurer’s Office will diversify its investments.

4.2 Liquidity: The Treasurer’s Office investment portfolio will remain sufficiently liquid to enable the Treasurer’s Office to meet cash flow needs which might be reasonably anticipated.

February 2018 4.3 Return on Investments: The portfolio shall be designed with the objective of generating a market rate of return without undue compromise of the first two objectives. 5.0 Delegation of Authority

The Treasurer of the City and County of San Francisco (Treasurer) is authorized by Charter Section 6.106 to invest funds available under California Government Code Title 5, Division 2, Part 1, Chapter 4, Article 1. The Treasurer shall submit any modification to this Investment Policy to the Treasury Oversight Committee members within five (5) working days of the adoption of the change.

6.0 Authorized Broker/Dealer Firms

The City seeks to employ a fair and unbiased broker-dealer selection process, which culminates in an array of medium to large-sized firms that provide the best investment opportunities and service to the City.

The Treasurer’s Office will evaluate and classify broker-dealers based on the qualifications of the firm and firm’s assigned individual. Approved broker-dealers will be evaluated and may be classified into one of the following categories:

FULL ACCESS – Broker-dealers will have significant opportunity to present investment ideas to the investment team.

LIMITED ACCESS – Broker-dealers will have limited opportunity to present investment ideas to the investment team.

All others may apply for Provisional status appointment. Provisional appointments will be made for:

(1) Applicants who have changed firms; (2) Applicants (firm and individual) who were not approved by the Treasurer’s Office in the past year; and (3) Broker-dealers who have been classified as Limited Access, but are seeking Full Access status.

Broker-dealers, who are granted Provisional status, will be treated as Full Access firms for a limited time period of up to six months. During the Provisional status period, the investment team will evaluate the applicant and provide a determination of status (Full Access, Limited Access or Not Approved). Broker- dealers may reapply for Provisional status every two years. A limited number of broker-dealers will be granted Provisional status concurrently.

All broker-dealers are encouraged to apply for consideration. All applicants will be evaluated and classified based on the qualifications of the firm and the firm’s assigned individual. A score will be assigned to each applicant and will serve as the sole determinant for Full Access, Limited Access, or Not-Approved status.

All approved broker-dealers will be re-assessed annually. During the reassessment period, broker-dealers will be sent the City’s most recent Investment Policy and are expected to respond with a policy acknowledgement letter, updated profile information and a completed questionnaire.

All securities shall be purchased and sold in a competitive environment.

The Treasurer’s Office will not do business with a firm which has, within any consecutive 48-month period following January 1, 1996, made a political contribution in an amount exceeding the limitations contained

February 2018 in Rule G-37 of the Municipal Securities Rulemaking Board, to the Treasurer, any member of the Board of Supervisors, or any candidate for those offices.

7.0 Authorized & Suitable Investments

Investments will be made pursuant to the California Government Code (including Section 53601 et seq.) and this investment policy to ensure sufficient liquidity to meet all anticipated disbursements.

Unless otherwise noted, the maximum maturity from the trade settlement date can be no longer than five years.

Types of investment vehicles not authorized by this investment policy are prohibited.

In an effort to limit credit exposure, the Treasurer’s Office will maintain Eligible Issuer, Eligible Counterparty and Eligible Money Market lists for security types where appropriate. These lists are intended to guide investment decisions. Investments, at time of purchase, are limited solely to issuers, counterparties and money market funds listed; however, investment staff may choose to implement further restrictions at any time.

The Treasurer’s Office shall establish a Credit Committee comprised of the Treasurer, Chief Assistant Treasurer, Chief Investment Officer and additional investment personnel at the Treasurer’s discretion. The Committee shall review and approve all eligible issuers and counterparties prior to inclusion on the aforementioned Eligible Issuer and Eligible Counterparty lists. The Committee shall also be charged with determining the collateral securing the City’s repurchase agreements.

In the event of a downgrade of the issuer’s credit rating below the stated requirements herein, the Credit Committee shall convene and determine the appropriate action.

In addition, the Treasurer’s Office shall conduct an independent credit review, or shall cause an independent credit review to be conducted, of the collateralized CD issuers to determine the creditworthiness of the financial institution. The credit review shall include an evaluation of the issuer’s financial strength, experience, and capitalization, including, but not limited to leverage and capital ratios relative to benchmark and regulatory standards (See Section 7.4). The following policy shall govern unless a variance is specifically authorized by the Treasurer and reviewed by the Treasury Oversight Committee pursuant to Section 5.0.

7.1 U.S. Treasuries

United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest.

Allocation Issuer Limit Issue Limit Maximum Maturity/Term Maximum Maximum Maximum 100% of the 100% 100% 5 years portfolio value

7.2 Federal Agencies

Federal agency or United States government-sponsored enterprise obligations, participations, or other

February 2018 instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises.

Allocation Issuer Limit Maturity/Term Issue Limit Maximum Maximum Maximum Maximum 100% of the 100% 100% 5 years portfolio value

7.3 State and Local Government Agency Obligations

The Treasurer’s Office may purchase bonds, notes, warrants, or other evidences of indebtedness of any local or State agency within the 50 United States, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or State, or by a department, board, agency, or authority of the local agency or State.

Allocation Issuer Limit Maturity/Term Issue Limit Maximum Maximum Maximum Maximum 20% of the 5% No Limit 5 years portfolio value

Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of +/-) from at least one NRSRO (Nationally Recognized Statistical Rating Organization). This limitation applies to all local and State agencies within the 50 United States with the exception of the State of California.

7.4 Public Time Deposits (Term Certificates of Deposit)

The Treasurer’s Office may invest in either:

1. Non-negotiable time deposits (Certificates of Deposit or CDs) that have FDIC or similar deposit insurance; or

2. Fully collateralized CDs in approved financial institutions.

The Treasurer’s Office will invest in CDs and Time Deposits only with those firms having at least one branch office within the boundaries of the City and County of San Francisco. As required by Government Code Section 53649, the Treasurer’s Office shall have a signed agreement with any depository accepting City funds.

For Public Time Deposits not employing deposit insurance (such as FDIC), the Treasurer’s Office is authorized to accept two forms of collateral:

A. Deposit Collateral. Collateralized CDs are required to be fully collateralized with 110% of the type of collateral authorized in California Government Code, Section 53651 (a) through (i). The Treasurer’s Office, at its discretion, may waive the collateralization requirements for any portion that is covered by deposit insurance.

February 2018 B. Letters of Credit Issued by the Federal Home Loan Bank of San Francisco. As authorized by Section 53651 (p) of the California Government Code, the Treasurer’s Office may be accepted as collateral and shall conform to the requirements of Section 53651.6 of the California Government Coded include the following terms:

(1) The Administrator, as defined by Section 53630 (g) of the California Government Code, shall be the beneficiary of the letter of credit; and

(2) The letter of credit shall be clean and irrevocable, and shall provide that the Administrator may draw upon it up to the total amount in the event of the failure of the depository savings association or federal association or if the depository savings association or federal association refuses to permit the withdrawal of funds by a treasurer.

Allocation Issuer Limit Issue Limit Maturity/Term Maximum Maximum Maximum Maximum No Limit None N/A 13 months

Issuer Minimum Credit Rating (applies to collateralized CDs only): Maintenance of the minimum standards for “well-capitalized” status as established by the Federal Reserve Board. The current standards are as follows: • Tier 1 risk-based capital ratio of 8% or greater • Combined Tier 1 and Tier 2 capital ratio of 10% or greater • Leverage ratio of 5% or greater

Failure to maintain minimum standards may result in early termination, subject to the discretion of the Treasurer’s Office.

7.5 Negotiable Certificates of Deposit / Yankee Certificates Of Deposit

Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a state-licensed branch of a foreign bank. Yankee certificates of deposit are negotiable instruments that are issued by a branch of a foreign bank.

Allocation Issuer Limit Maturity/Term Issue Limit Maximum Maximum Maximum Maximum 30% of the No Limit N/A 5 years portfolio value

Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of +/-) from at least one NRSRO.

7.6 Bankers Acceptances

Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers'

February 2018 acceptances.

Allocation Issuer Limit Issue Limit Maximum Maturity/Term Maximum Maximum Maximum 40% of the 30% No Limit 180 days portfolio value

Issuer Minimum Credit Rating: None

7.7 Commercial Paper

Obligations issued by a corporation or bank to finance short-term credit needs, such as accounts receivable and inventory, which may be unsecured or secured by pledged assets.

Allocation Issuer Limit Maturity/Term Issue Limit Maximum Maximum Maximum Maximum 25% of the 10% None 270 days portfolio value

Issuer Minimum Credit Rating: Issuers must possess a short-term credit rating of the highest ranking (irrespective of +/-) from at least one NRSRO.

7.8 Medium Term Notes

Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the U.S. or any state, and operating within the U.S.

Issuer Limit Issue Limit Maturity/Term Allocation Maximum Maximum Maximum Maximum 25% of the portfolio 10% 5% 24 months value

Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of +/-) from at least one NRSRO.

February 2018 7.9 Repurchase Agreements

To the extent that the Treasurer’s Office utilizes this investment vehicle, said collateral shall be delivered to a third-party custodian, so that recognition of ownership of the City and County of San Francisco is perfected.

Type of collateral Allocation Maximum Issuer Limit Maturity/Term Maximum Maximum Government securities No Limit N/A 1 year Securities permitted by CA Government 10% N/A 1 year Code, Sections 53601 and 53635

7.10 Reverse Repurchase and Securities Lending Agreements

This procedure shall be limited to occasions when the cost effectiveness dictates execution, specifically to satisfy cash flow needs or when the collateral will secure a special rate. A reverse repurchase agreement shall not exceed 45 days; the amount of the agreement shall not exceed $75MM; and the offsetting purchase shall have a maturity not to exceed the term of the repo.

7.11 Money Market Funds

Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.).

Fund Type Allocation Issuer Limit Percentage of Maturity/Term Maximum Maximum Fund’s Net Assets Maximum Maximum Institutional 20% of total N/A 5% N/A Government Pool assets

Issuer Minimum Credit Rating: Fund must be rated in the highest rating category from not less than two NRSROs .

7.12 Local Agency Investment Fund (LAIF)

Investments in LAIF, a California state investment fund available to California municipalities, are authorized.

February 2018 7.13 Supranationals*

United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by:

 International Bank for Reconstruction and Development,  International Finance Corporation, or  Inter-American Development Bank,

Allocation Issuer Limit Issue Limit Maturity/Term Maximum Maximum Maximum Maximum 30% None None 5 years Issuer Minimum Credit Rating: Issuers must possess either a short-term credit rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of +/-) from at least one NRSRO.

* Effective as of January 1, 2015, as consistent with State Law.

8.0 Interest and Expense Allocations

The costs of managing the investment portfolio, including but not limited to: investment management; accounting for the investment activity; custody of the assets, managing and accounting for the banking; receiving and remitting deposits; oversight controls; and indirect and overhead expenses are charged to the investment earnings based upon actual labor hours worked in respective areas. Costs of these respective areas are accumulated and charged to the Pooled Investment Fund on a quarterly basis, with the exception of San Francisco International Airport costs which are charged directly through a work order.

The San Francisco Controller allocates the net interest earnings of the Pooled Investment Fund. The earnings are allocated monthly based on average balances.

9.0 Safekeeping and Custody

All security transactions, including collateral for repurchase agreements, entered into by the Treasurer’s Office shall be conducted on a delivery-versus-payment (DVP) basis pursuant to approved custodial safekeeping agreements. Securities will be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts.

10.0 Deposit and Withdrawal of Funds

California Government Code Section 53684 et seq. provides criteria for outside local agencies, where the Treasurer does not serve as the agency’s treasurer, to invest in the County’s Pooled Investment Fund, subject to the consent of the Treasurer. Currently, no government agency outside the geographical boundaries of the City and County of San Francisco shall have money invested in City pooled funds.

February 2018 The Treasurer will honor all requests to withdraw funds for normal cash flow purposes that are approved by the San Francisco Controller. Any requests to withdraw funds for purposes other than cash flow, such as for external investing, shall be subject to the consent of the Treasurer. In accordance with California Government Code Sections 27136 et seq. and 27133(h) et seq., such requests for withdrawals must first be made in writing to the Treasurer. These requests are subject to the Treasurer’s consideration for the stability and predictability of the Pooled Investment Fund, or the adverse effect on the interests of the other depositors in the Pooled Investment Fund. Any withdrawal for such purposes shall be at the value shown on the Controller’s books as of the date of withdrawal.

11.0 Limits on Receipt of Honoraria, Gifts and Gratuities

In accordance with California Government Code Section 27133(d) et seq., this Investment Policy hereby establishes limits for the Treasurer, individuals responsible for management of the portfolios, and members of the Treasury Oversight Committee on the receipt of honoraria, gifts and gratuities from advisors, brokers, dealers, bankers or others persons with whom the Treasurer conducts business. Any individual who receives an aggregate total of gifts, honoraria and gratuities in excess of those limits must report the gifts, dates and firms to the Treasurer and complete the appropriate State disclosure.

These limits may be in addition to the limits set by a committee member’s own agency, by state law, or by the California Fair Political Practices Commission. Members of the Treasury Oversight Committee also must abide by the following sections of the Treasurer’s Office Statement of Incompatible Activities: Section III(A)(l)(a), (b) and (c) entitled “Activities that Conflict with Official Duties,” and Section III(C) entitled “Advance Written Determination”.

12.0 Reporting

In accordance with the provisions of California Government Code Section 53646, which states that the Treasurer may render a quarterly report or a monthly report on the status of the investment portfolio to the Board of Supervisors, Controller and Mayor; the Treasurer regularly submits a monthly report. The report includes the investment types, issuer, maturity date, par value, and dollar amount invested; market value as of the date of the report and the source of the valuation; a statement of compliance with the investment policy or an explanation for non-compliance; and a statement of the ability or inability to meet expenditure requirements for six months, as well as an explanation of why moneys will not be available if that is the case.

13.0 Social Responsibility

In addition to and subordinate to the objectives set forth in Section 4.0 herein, investment of funds should be guided by the following socially responsible investment goals when investing in corporate securities and depository institutions. Investments shall be made in compliance with the forgoing socially responsible investment goals to the extent that such investments achieve substantially equivalent safety, liquidity and yield compared to investments permitted by state law.

13.1 Social and Environmental Concerns Investments are encouraged in entities that support community well-being through safe and environmentally sound practices and fair labor practices. Investments are encouraged in entities that support equality of rights regardless of sex, race, age, disability or sexual orientation. Investments are discouraged

February 2018 in entities that manufacture tobacco products, firearms, or nuclear weapons. In addition, investments are encouraged in entities that offer banking products to serve all members of the local community, and investments are discouraged in entities that finance high-cost check-cashing, deferred deposit (payday- lending) businesses and organizations involved in financing, either directly or indirectly, the Dakota Access Pipeline or, as determined by the Treasurer, similar pipeline projects. Prior to making investments, the Treasurer’s Office will verify an entity’s support of the socially responsible goals listed above through direct contact or through the use of a third party such as the Investors Responsibility Research Center, or a similar ratings service. The entity will be evaluated at the time of purchase of the securities.

13.2 Community Investments

Investments are encouraged in entities that promote community economic development. Investments are encouraged in entities that have a demonstrated involvement in the development or rehabilitation of low income affordable housing, and have a demonstrated commitment to reducing predatory mortgage lending and increasing the responsible servicing of mortgage loans. Securities investments are encouraged in financial institutions that have a Community Reinvestment Act (CRA) rating of either Satisfactory or Outstanding, as well as financial institutions that are designated as a Community Development Financial Institution (CDFI) by the United States Treasury Department, or otherwise demonstrate commitment to community economic development.

13.3 City Ordinances

All depository institutions are to be advised of applicable City contracting ordinances, and shall certify their compliance therewith, if required.

14.0 Treasury Oversight Committee

A Treasury Oversight Committee was established by the San Francisco Board of Supervisors in Ordinance No. 316-00. The duties of the Committee shall be the following:

(a) Review and monitor the investment policy described in California Government Code Section 27133 and prepared annually by the Treasurer.

(b) Cause an annual audit to be conducted to determine the Treasurer’s compliance with California Government Code Article 6 including Sections 27130 through 27137 and City Administrative Code Section 10.80-1. The audit may examine the structure of the investment portfolio and risk. This audit may be a part of the County Controller’s usual audit of the Treasurer’s Office by internal audit staff or the outside audit firm reviewing the Controller’s Annual Report.

(c) Nothing herein shall be construed to allow the Committee to direct individual decisions, select individual investment advisors, brokers, or dealers, or impinge on the day-to-day operations of the Treasurer. (See California Government Code, Section 27137.)

February 2018 APPENDIX

Glossary

AGENCIES: Federal agency securities and/or Government-sponsored enterprises.

ASK/OFFER: The price at which securities are offered.

BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.

BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.

BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer.

BROKER: A broker brings buyers and sellers together for a commission.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate. Large-denomination CD’s are typically negotiable.

COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The CAFR is the City’s official annual financial report. It consists of three major sections: introductory, financial, and statistical. The introductory section furnishes general information on the City’s structure, services, and environment. The financial section contains all basic financial statements and required supplementary information, as well as information on all individual funds and discretely presented component units not reported separately in the basic financial statements. The financial section may also include supplementary information not required by GAAP. The statistical section provides trend data and nonfinancial data useful in interpreting the basic financial statements and is especially important for evaluating economic condition.

COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a payment date.

DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.

DEBENTURE: A bond secured only by the general credit of the issuer.

DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.

DEPOSITORY INSTITUTIONS: These institutions hold City and County moneys in the forms of certificates of deposit (negotiable or term), public time deposits and public demand accounts.

February 2018 DERIVATIVES: (l) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities).

DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount.

DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.

DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.

FDIC DEPOSIT INSURANCE COVERAGE: The FDIC is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. Deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds. FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities. There is no need for depositors to apply for FDIC insurance or even to request it. Coverage is automatic. To ensure funds are fully protected, depositors should understand their deposit insurance coverage limits. The FDIC provides separate insurance coverage for deposits held in different ownership categories such as single accounts, joint accounts, Individual Retirement Accounts (IRAs) and trust accounts. Basic FDIC Deposit Insurance Coverage Limits* Single Accounts (owned by one person) $250,000 per owner Joint Accounts (two or more persons) $250,000 per co-owner IRAs and certain other retirement accounts $250,000 per owner Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements** *The financial reform bill, officially named the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, made the $250,000 FDIC coverage limit permanent.

FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters.

FEDERAL FUNDS RATE: The rate of interest that depository institutions lend monies overnight to other depository institutions. Also referred to as the overnight lending rate.This rate is currently pegged by the Federal Reserve through open-market operations.

FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single

February 2018 provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Freddie Mac’s mission is to provide liquidity, stability and affordability to the housing market. Congress defined this mission in (their) 1970 charter. Freddie Mac buys mortgage loans from banks, thrifts and other financial intermediaries, and re-sells these loans to investors, or keeps them for their own portfolio, profiting from the difference between their funding costs and the yield generated by the mortgages.

FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.

FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term “pass-throughs” is often used to describe Ginnie Maes.

GOVERNMENT SECURITIES: Obligations of the U.S. Government and its agencies and instrumentalities.

LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.

LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.

MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.

MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase—reverse repurchase agreements that establishes each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller borrower.

MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.

MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded.

February 2018 NRSRO: Nationally Recognized Statistical Rating Organization; Credit rating agencies that are registered with the SEC. Such agencies provide an opinion on the creditworthiness of an entity and the financial obligations issued by an entity.

OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid.

OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary policy tool.

PAR VALUE: The principal amount of a bond returned by the maturity date.

PORTFOLIO: Collection of securities held by an investor.

PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few unregulated firms.

PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state—the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital.

PUBLIC TIME DEPOSITS (Term Certificates Of Deposit): Time deposits are issued by depository institutions against funds deposited for a specified length of time. Time deposits include instruments such as deposit notes. They are distinct from certificates of deposit (CDs) in that interest payments on time deposits are calculated in a manner similar to that of corporate bonds whereas interest payments on CDs are calculated similar to that of money market instruments.

QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.

RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return.

REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the “seller” money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is, increasing bank reserves.

SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.

February 2018 SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution.

SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation.

SEC RULE l5(C))3-1: See Uniform Net Capital Rule.

STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.

TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.

TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years.

TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years.

UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

February 2018 City and County of San Francisco Pooled Fund Portfolio Statistics

For the month ended January 31, 2021

Average Daily Balance $12,589,626,948 Net Earnings $6,416,477 Earned Income Yield 0.60% Weighted Average Maturity 170 days

Par Book Market Investment Type ($ million) Value Value Value U.S. Treasuries $ 8,148.9 $ 8,164.1 $ 8,171.6 Federal Agencies 2,811.9 2,811.8 2,845.2 State & Local Government Agency Obligations 56.7 56.4 57.0 Public Time Deposits 40.0 40.0 40.0 Negotiable CDs 200.0 200.0 200.1 Money Market Funds 1,084.9 1,084.9 1,084.9 Supranationals 287.1 285.9 288.3 Total $ 12,629.6 $ 12,643.2 $ 12,687.0

State & Local Government 0.45% Public Time Deposits 0.32% Federal Agencies Negotiable CDs 22.43% 1.58% Money Market Funds 8.55% U.S. Treasuries 64.41% Supranationals 2.27%

Asset Allocation by Market Value

As of: January 31, 2021 Totals may not add due to rounding. Posted on: 02/15/2021 APPENDIX E

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix E has been provided by DTC for use in securities offering documents, and the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the beneficial owners either (a) payments of interest, principal or premium, if any, with respect to the Notes or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Notes, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC. As used in this appendix, “Securities” means the Notes, “Issuer” means the District, and “Agent” means the Paying Agent.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their

E-1 purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and

E-2 disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

E-3 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX F

ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE DISTRICT

The San Francisco Unified School District has boundaries that are coterminous with City and County of San Francisco (the “City”) and serves the communities within the City. The following economic and demographic data for the City are presented for informational purposes only. The Notes are not a debt or obligation of the City.

The historical data and results presented in the tables that follow may differ materially from future results as a result of economic or other factors, including as a result of the impact of COVID-19. For more information on the impact of the COVID-19 pandemic, see “MISCELLANEOUS – Risk Related to COVID-19” in the forepart of this Official Statement.

Population

The population of the City and County of San Francisco from 2000 to 2020 are shown in the following table.

POPULATION GROWTH City and County of San Francisco 2000 Through 2020

Annual Year Population % Change

2000 776,733 – 2001 780,614 0.50% 2002 782,765 0.28 2003 782,599 (0.02) 2004 781,308 (0.16) 2005 780,187 (0.14) 2006 781,295 0.14 2007 787,127 0.75 2008 795,002 1.00 2009 800,239 0.66 2010 805,235* 0.62 2011 817,163 1.48 2012 829,289 1.48 2013 844,169 1.79 2014 852,948 1.03 2015 863,623 1.25 2016 872,723 1.05 2017 880,646 0.90 2018 888,575 0.90 2019 891,021 0.27 2020 897,806 0.76

Source: California Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2001-2010 with 2000 & 2010 Census Counts for City and County of San Francisco for years 2000-2009; California Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011–2019, with 2010 Census Benchmark for City and County of San Francisco for years 2010-2019. * As of April 1, 2010.

F-1 Employment

The following table summarizes industry employment in the City and County of San Francisco from 2013 through 2018. Trade, transportation and utilities, professional and business services, and goods producing are the largest employment sectors in the City.

ANNUAL AVERAGE WAGE AND SALARY EMPLOYMENT City and County of San Francisco 2013 through 2018(2)

Industry Employment(1) 2013 2014 2015 2016 2017 2018(2)

Agriculture 100 200 200 100 200 200 Mining, Logging & Construction 15,900 16,900 18,500 20,400 21,100 22,900 Manufacturing 9,300 10,100 10,300 12,200 13,200 12,800 Trade, Transportation & Utilities 68,500 70,700 74,900 78,800 81,000 84,000 Information 25,700 28,300 31,700 39,000 43,000 46,600 Financial Activities 49,300 50,200 52,000 56,100 56,300 57,700 Professional and Business Services 156,800 168,800 184,600 190,600 194,700 203,600 Education and Health Services 82,800 83,000 85,700 87,700 89,000 91,200 Leisure and Hospitality 86,200 90,200 93,300 97,300 96,900 96,200 Other Services 24,300 25,800 26,200 26,900 27,400 28,000 Government 88,400 89,500 91,600 94,300 96,600 98,100 Total 607,500 633,400 668,900 703,600 719,500 741,100 ______(1) Employment is reported by place of work: it does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Columns may not sum to totals due to rounding. (2) Most current information available. Source: California State Department of Employment Development, Labor Market Information Division.

The following tables summarize the civilian labor force, employment and unemployment in the City and County of San Francisco from 2014 to 2019. The annual average unemployment rate in the City in 2019 was approximately 2.2%.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT City and County of San Francisco Annual Averages, 2014 Through 2019

Civilian Employed Unemployed Labor Unemployment Year Labor Force Labor Force(1) Force(2) Rate(3) 2014 531,700 508,500 23,200 4.4% 2015 548,000 528,100 19,900 3.6 2016 555,300 537,000 18,300 3.3 2017 563,800 547,300 16,500 2.9 2018 569,300 555,600 13,700 2.4 2019 583,200 570,400 12,800 2.2 ______(1) Includes persons involved in labor-management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) This rate is computed from unrounded data: it may differ from rates computed from rounded figures in this table Source: California State Department of Employment Development, Labor Market Information Division.

F-2 Major Employers

The following tables show the largest employers located in the City and County of San Francisco in 2018.

LARGEST EMPLOYERS City and County of San Francisco

San Francisco Employees Company Type of Business (FTEs)

University of California, San Francisco Higher Education 34,690 City and County of San Francisco Government 32,749 San Francisco Unified School District K-12 Education 10,506 Salesforce Technology 8,000 Wells Fargo & Co. Financial Services 7,747 Kaiser Permanente Healthcare 6,659 Sutter Health Healthcare 5,359 Uber Technologies Inc. Ridesharing 5,000 Gap Inc. Retail 4,000 PG&E Corporation Utility Provider 3,800 ______Source: Comprehensive Annual Financial Report, City & County of San Francisco, Fiscal Year 2018-19.

Taxable Sales

Taxable sales in the City and County of San Francisco from 2015 through 2019 are shown in the following table.

TAXABLE SALES 2015 through 2019 ($ in Thousands)

2015 2016 2017 2018 2019

Apparel Stores $2,163,743 $2,132,167 $2,056,070 $2,046,414 $2,024,642 General Merchandise 865,958 837,697 773,545 790,844 754,835 Food Stores 830,061 843,717 863,214 856,216 860,691 Eating & Drinking Places 4,441,352 4,670,360 4,743,632 4,844,464 5,037,656 Home Furnishings & Appliances 1,010,769 965,918 916,776 1,018,005 1,027,825 Building Material & Farm Implements 588,279 586,372 605,711 681,368 702,290 Automotive Group 565,638 573,964 628,666 674,007 601,908 Service Stations 471,495 428,473 490,255 583,479 548,674 Other Retail Stores 2,136,115 2,223,653 2,373,519 2,535,666 2,662,901

Total Retail Stores 13,073,413 13,262,326 13,451,392 14,030,468 14,221,424

All Other Outlets 5,839,078 6,174,841 5,981,364 6,312,251 6,671,324

Total All Outlets(1) $18,912,492 $19,437,167 $19,432,757 $20,342,720 $20,892,749

______(1) Columns may not sum to totals due to rounding. Source: California State Board of Equalization.

F-3 Income

The following tables provide a summary of per capita personal income for the City and County of San Francisco, the State of California and the United States, and personal income and annual percent change for the City and County of San Francisco, for recent calendar years.

PER CAPITA PERSONAL INCOME 2014 through 2019

Year San Francisco California United States

2014 $99,990 $52,363 $47,071 2015 108,039 55,808 48,994 2016 114,697 57,801 49,890 2017 121,778 60,219 51,910 2018 130,696 63,711 54,526 2019(1) - 66,661 56,663 ______(1) Data not available for the City and County of San Francisco. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

PERSONAL INCOME 2014 through 2018(1) (in thousands)

Annual Percent Year San Francisco Change

2014 $83,120,429 11.31% 2015 89,553,450 7.74 2016 100,106,827 7.3 2017 107,063,503 6.9 2018 115,444,581 7.8 ______(1) Most recent data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

F-4