SAN FRANCISCO (CBS SF) — As the San Francisco Unified School District faces a $125 million deficit, San Francisco Mayor London Breed said on Friday she will move to forgive a $26.6 million loan provided to the district back in 2019.

According to city officials, the loan was made at the mayor’s direction to advance 2018’s Proposition G, the Living Wages for Educators Act parcel tax, used to increase public teachers’ salaries.

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However, because of pending litigation related to Prop. G, some $150 million generated by the tax has been withheld from the district over the last three years. As litigation continued over the years, the district paid the salary increases, in part, with the city’s $26 million loan.

With the California Supreme Court on Wednesday denying the legal challenge and upholding the proposition, the district will now be able to access the frozen parcel tax funds, city officials said.

Now, instead of collecting the initial loan, both Breed and Supervisor Hillary Ronen announced the city will forgive the loan.

“Our schools are facing an uncertain and dire fiscal future, so forgiving this loan is the right thing for the city to do to support our kids and our families,” Breed said in a statement. “Tying the forgiveness of these loans to the execution of a comprehensive plan will ensure that these critical dollars are part of a long-term effort to stabilize our district and our schools.”

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“Our public schools are chronically underfunded, right here in San Francisco and throughout the state. It is one of the great embarrassments of California,” Ronen said. “Our city government has stepped up time and time again to support our public school, students, and educators. We will continue to do so but also expect additional support from the state. We also need school district leaders to focus on its core duties, putting student wellbeing at the center of all financial decisions.”

Breed is set to introduce legislation to forgive the loan once the district comes up with multi-year plan to stabilize its finances and operations, as well as a budget for the upcoming fiscal year that utilizes the plan, according to city officials.

Earlier this month, district officials said that based on the district’s multi-year projections, the budget deficit is anticipated to deepen in the following years.

In light of the budget woes, the California Department of Education has instructed the district to come up with a budget balancing plan by Dec. 15 for review, followed by a final balanced budget due by June 2022.

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