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SACRAMENTO, Calif. (KTXL) — A report released Tuesday by the California State Auditor predicts the Sacramento City Unified School District will face insolvency and be taken over by the state by October 2021, unless something changes.

“They’ve actually been spending more than they’re receiving, and so what they’ve had to do to meet their annual obligations is to dip into their reserves,” said State Auditor Chief of Public Affairs Margarita Fernandez.

Fernandez said the financial problems have been in existence for years due to declining enrollment numbers but the situation really got bad when the district signed the current agreement with its teachers’ union in December 2017.

Fernandez said teachers’ health care costs too much through the current agreement.

“The county’s office superintendent cautioned them, warned them not to do it. They advised them that they couldn’t afford it,” said Fernandez.

Superintendent Jorge Aguilar said at the time, the district was trying to avoid a teacher strike but he also said the agreement is flawed and the district hopes to renegotiate.

“We cannot continue to afford the same type of health benefit structure that we continue to have. And since 2003, there have been six contracts negotiated and still, we have the same language in our contracts,” said Aguilar.

Sacramento City Teachers Association President David Fisher said his members are willing to move off their health care plan.

“We don’t want, by any stretch of the imagination, the district to be insolvent or to be taken over by the state,” said Fisher.

However, Fisher said he wants those savings to be used to improve student services, which is part of the contract agreement.

“But we also have given the district several ideas that we think they could use right away to start to make an immediate impact,” said Fisher.

However, the auditor’s office found those recommendations do not come anywhere close to fixing the district’s financial problems. Fernandez said some even increase the district’s costs.

Likewise, the state auditor found the district’s proposals won’t lead to a solution either.

“We said if the school district gave just a 2% reduction across the board they would achieve about a $6 million savings,” said Fernandez.

The state auditor’s office did make several recommendations including allowing the county superintendent’s office to have more oversight when the district does negotiate with the teachers’ union.