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The California Public Employees Retirement System confirmed Wednesday that it is not asking Sacramento City Unified to return roughly $20.6 million withdrawn from its retiree health fund.
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The agency’s position comes a week after it disclosed that the district had requested the money to reimburse 2025-26 retiree health costs — a request tied to an agreement between SCUSD and its teachers union that was rescinded by the Sacramento County Office of Education.
“CalPERS is not requesting that the Sacramento City Unified School District return the funds disbursed from the CERBT since the district followed the appropriate disbursement request process,” Amy Morgan, a spokesperson for CalPERS, wrote in an email to The Sacramento Bee.
The California Employers’ Retiree Benefit Trust, or CERBT, is a fund for “other post-employment benefits,” known as OPEB. CalPERS administers the fund under a contract with the district, primarily to help cover health benefits for district retirees.
“Under this contract, the district has the authority to make contributions and request disbursements,” Morgan wrote in an earlier email.
The development came amid growing state involvement in the district’s fiscal crisis following a late-July dispute with the county Office of Education over the rescinded teachers union agreement. The agreement was designed in part to use retiree health trust money to cover benefits, extending the district’s cash runway as it seeks $150 million in financial solutions by June 2027.
The county office-appointed fiscal adviser said the agreement merely shifted assets between accounts and that its three-year contract extension would limit the district’s ability to secure future labor savings. County Superintendent David Gordon also warned that the withdrawal was not free money, saying the district would eventually need to replenish the trust to cover retiree health costs.
As uncertainty persisted among district, state and county education officials over the agreement’s status and the related money, CalPERS confirmed that it had sent the reimbursement check on Aug. 19.
Jasjit Singh, a district trustee who has represented the district in recent meetings with state and county education officials, welcomed CalPERS’ statement and reaffirmed the district’s intention to use the disbursed money it received from the retiree health benefits trust.
Singh said he was pleased that CalPERS’ position aligned with what he and other board members had understood from the beginning, that “we, along with the Sacramento City Teachers Association, are the trustees on this agreement for the OPEB funds, and we are excited to use these funds to help us close the insolvency gap.”
Singh dismissed Gordon’s argument that the money would have to be repaid, saying the agreement does not require the district to replenish the trust and characterizing the withdrawal as the use of a “rainy day fund,” rather than a loan.
The Sacramento City Teachers Association President Nikki Milevsky echoed Singh’s position, saying the trust’s funds do not have to be repaid.
“The union said it agreed to the district’s use of $67 million from the fund to help stave off insolvency while addressing its long-term financial problems, and accused Gordon of making ‘false assertions’ about repayment,” Milevsky wrote in an email.
Meanwhile, the escalating fiscal dispute reached the Capitol on Tuesday, when California County Superintendents, an association representing the state’s 58 county offices of education, urged lawmakers to pass legislation limiting the state superintendent’s power to take over a county office’s fiscal oversight of a school district.
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State Superintendent Tony Thurmond largely sided with Sac City Unified in the dispute over the teachers union agreement and put the county office on notice that he could intervene in the future if he deems its actions ineffective.
Fiscal expert challenges CalPERS’ position
Michael Fine, CEO of the state-funded Fiscal Crisis and Management Assistance Team, criticized CalPERS’ statement, saying he expected the agency to follow the law and be responsive to the Legislature.
“They expect that of all the rest of us!” Fine wrote in a text message.
Fine has maintained that CalPERS’ senior leadership will eventually recognize that the agreement was rescinded and is therefore “invalid,” and ask the district to return the money.
“It will be interesting to see how CalPERS reacts if the district is insolvent and can’t make their monthly remittance of retirement contributions,” Fine said.
Sac City Unified estimates it would run out of cash by February 2027 without the financial relief tied to the teachers union agreement. According to Singh, the district could have enough cash to last until roughly the third week of May if the OPEB funding and other planned measures are realized.
When a school district runs out of money and takes out an emergency loan from the state, it enters state receivership, meaning its elected board is stripped of its governing authority, and a county-appointed administrator replaces the superintendent. The district remains under strict state oversight until it repays the loan with interest.
But the teachers union agreement is “not a solution” to Sac City Unified’s solvency crisis, Fine said.
“At best it is a bridge to a still unknown long-term plan,” Fine said. “CalPERS’ perspective changes very little for my focus. The district is still short of cash this fiscal year, and we must find a suitable long-term solution, and a short-term bridge to that long-term solution.”
District asks county office to reverse rescission
Singh said he had made the district’s request clear to the county office — reverse its rescission of the MOU.
“That is our ask,” Singh said, adding the county office’s rejection of the agreement was rooted more in philosophical differences over how to address the district’s finances than in legal concerns.
Singh said the county office had neither proposed an alternative to the rescinded labor agreement nor explained how reopening negotiations would produce savings comparable to the agreement’s projected $97.6 million in relief.
“If someone can show me how we’re supposed to save $100 million in concession bargaining, I’m willing to listen,” Singh said, pushing back on describing the OPEB money as a short-term solution. The savings expected from the agreement are part of the broader fiscal plan and serve as “a bridge towards long-term fiscal solvency,” buying the district time to implement longer-term financial fixes, he continued.
“The only people set to lose if this doesn’t work out is our students. So the idea that the union must lose, or someone else must lose, or there’s a winner in all this — there’s no winner, but there’s definitely a loser, and the only loser is our kids.”
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This story was originally published August 27, 2026 at 7:00 AM.