LAUSD Is Asking Voters For More Funding. Outside Experts Say They Could Be Saving Millions

FILE - Los Angeles Unified School District Superintendent Austin Beutner (right) tours the campus of Van Nuys High School on May 15, 2018. (Photo by Kyle Stokes/KPCC)

Los Angeles Unified School District officials say the deal that ended January's teachers strike isn't fully paid-for. LAUSD's regulators recently warned LAUSD officials to make more cuts and balance their three-year budget — or face serious consequences.

In other words: in LAUSD, every dollar counts right now.

But outside consultants hired by LAUSD believe a series of steps to streamline or modernize the school system could save tens of millions of dollars over the next three years, according to a document KPCC/LAist has obtained.

By 2022, the consultants from Ernst & Young said LAUSD could realize more than $236 million in annual savings by adopting their recommendations, according to a December 2018 outline of their fundings.

The consultants' findings are dotted with asterisks: The cost-saving estimates are "preliminary," only meant to be "illustrative" and assume LAUSD could start implementing them "as soon as possible" — a tall order for any large, sluggish bureaucracy. It's also not clear how much money LAUSD would have to spend up-front to realize these savings over the long-term.

But if nothing else, the findings are a tantalizing conversation-starter: the consultants found several changes they considered to be relatively straightforward that could save LAUSD at least $19 million within the next year or so — and the overall $236 million total is considered a "low-end" estimate of what the district might save.

"Everything they proposed is not necessarily actionable for us," said LAUSD Superintendent Austin Beutner. "But it's certainly a good place to start."

WHY THIS MATTERS

Last August, Beutner announced LAUSD was hiring Ernst & Young as part of a broader effort — which a newly-created philanthropy would fund — to "re-imagine" the nation's second-largest school district.

Ernst & Young's job was to find cost-savings and bureaucratic inefficiencies. As The L.A. Times and the education news site Chalkbeat previously reported, another consulting firm, Kitamba, had drawn up a related plan to decentralize the district into 32 networks. That plan appears to have been shelved.

Now, word of what the financial consulting team actually found is emerging, as LAUSD leaders prepare to ask voters to approve a parcel tax increase on the June ballot to benefit the school system.

If approved, Measure EE would generate an estimated $500 million annually for LAUSD — money LAUSD leaders say they might need to pay for the deal that ended last January's teacher strike. District leaders agreed to hire more support staff and reduce class sizes, but they say they still have to figure out how to pay for those contract items.

If the measure fails, though, LAUSD leaders could face hard choices in order to both fulfill their deal with the teachers union and satisfy the district's regulator, the L.A. County Office of Education.

LACOE — as the county office is known — has questioned the sustainability of the district's current three-year spending plan. LACOE regulators have given school district officials until July to submit a revised budget that doesn't rely on spending about $3 million out of, basically, an emergency reserve.

Beutner said LAUSD has already reduced costs. In total, he says the district has taken steps to save $15 million during the current budget year. By the next school year, those annual savings will grow to $50 million as the district cuts 289 positions from its headquarters.

In the future, Beutner has asked officials to find at least another $50 million in additional savings — but he set that target independently of the Ernst & Young report.

WHAT THE DOCUMENT SHOWS

Ernst & Young studied seven different areas of the school district's operations. Most of the estimated $236 million in potential cost-saving came from four of those areas: LAUSD's procurement, food services, facilities, and information technology operations.

LAUSD officials sent 175 pages of documents outlining the Ernst & Young team's full findings to KPCC/LAist late Monday. KPCC/LAist had previously obtained one portion of the consultant's report: nine pages summarizing their findings about information technology

Over the next three years, the consultants estimated LAUSD could save between $60 and $70 million on its ongoing IT costs.

How could the district bank these savings? The consulting team recommended 19 different changes to IT, ranking each by level of complexity.

The consultants estimated LAUSD's IT operations could save between $10 million and $12.3 million by making five changes deemed "less complex." Among them: streamline hundreds of "outdated job descriptions," cut down on the resolution times for IT help desk calls and write a more coherent policy for refreshing technology.

The most lucrative cost-saving recommendations for IT? The Ernst & Young team said the district could save between $8 million and $9 million by outsourcing some of its IT operation to outside companies.

The consultants also recommended LAUSD should start storing data "in the cloud" — meaning, stop storing it on district-owned hardware and pay for space on remote servers instead. The consultants rated this move as one of their "more complex" recommendations, but one that they estimated could net LAUSD $12 million or more in savings.

KPCC/LAist asked Beutner what it meant for the consultants to compare LAUSD to "industry best practices." Did that mean LAUSD was being compared to other school districts and similar public agencies? Or were they being compared to the private sector?

"It's both," Beutner said. "That is part of the calibration we have to work with them on: what is possible for us to do — in California, in Los Angeles, in Los Angeles Unified — versus private industry versus other school districts."

"But that range of that information is helpful to us," Beutner added, saying that private technology companies work with many public-sector agencies.

Also ambiguous: even if Ernst & Young's recommendations could result in long-term savings, would they come at a short-term cost to LAUSD?

On Tuesday, L.A. Unified School Board members are set to vote on two contracts that would begin addressing one of Ernst & Young's recommendations: moving LAUSD's data storage system to the cloud. Total cost of those contracts? $5.3 million.

Conceptually, "I think I could make compelling argument to invest $5 million to save $12 million a year on a recurring basis," Beutner said — with the stipulation that he wasn't sure those numbers were exactly correct.

"That would be a phenomenal investment," he added, "because we'd have $12 million each year to invest in our classrooms."

DID YOU TRY TURNING IT OFF AND ON AGAIN?

As arcane and byzantine as the spending habits of an organization's IT arm might seem, information technology in LAUSD has been fodder for controversy in recent years.

See: the scandal that ensued after LAUSD attempted to purchase an iPad for every student in 2013 (long story). See also: the costly effort to fix MiSiS, the district's multifunctional but deeply flawed data system, after a disastrous rollout in 2014 (another long story).

Since the iPad debacle in particular, members of LAUSD's Bond Oversight Committee, or BOC — who monitor how the district spends revenues from property tax increases earmarked for construction, building maintenance and technology projects — have taken a prime role in pushing the district to update its IT practices.

Spending bond dollars on technology improvements is technically allowed, but BOC members have balked at using this money for technology. That's in part because the district's pool of bond dollars is running dry — and also, in part, out of frustration with the district's approach to IT.

Many committee members — an independent body with appointed, volunteer members — have said LAUSD's IT operations are much-improved and that a division of the district that was in crisis five years ago has now stabilized.

Still, since 2015, BOC members have been asking district officials tough questions about their IT strategy. After an outside researcher — the Center for Educational Leadership and Technology — recommended a number of IT improvements last November, BOC members requested the district to write a work plan showing how it planned to improve.

Yet at a meeting just this month, several BOC members reported — with frustration — that LAUSD still hadn't put the requested work plan on paper.

"The last four years particularly, since 2015, have been met with delay after delay," BOC member Araceli Sandoval-Gonzalez said. "We don't see reason to think there is a clear vision for improving IT performance."

Some of the Center for Educational Leadership and Technology's findings overlap with the Ernst & Young recommendations.

At the time of this month's BOC meeting, held on April 11, Sandoval-Gonzalez said the BOC had yet to see the Ernst & Young consultants' recommendations.