LAUSD shrinks short-term budget deficit estimates to $72 million from $226 million

Los Angeles Unified school officials presented a rosier picture of the district’s financial health Tuesday afternoon, announcing that a one-time infusion of state funding in Gov. Jerry Brown’s budget proposal would take a big bite out of the district’s short-term budget deficit.

District officials now project L.A. Unified’s three-year budget deficit at $72.2 million, down from the $225.9 million shortfall they had estimated in December.

But long-term threats to L.A. Unified’s financial health still loom large, officials said. The district still faces falling enrollment as well as rising costs for pensions, health benefits and special education services — all of which could still drive the district’s projected deficit in 2018-19 as high as $450 million, according to a report released Tuesday.

L.A. Unified Chief Financial Officer Megan K. Reilly said for the first time in six years, the district’s budgets will be balanced in consecutive years — 2015-16 and 2016-17. The district can then carry forward the leftover cash to cancel out a large portion of the $338 million deficit projected for 2017-18.

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At Tuesday’s school board meeting, L.A. Unified Superintendent Michelle King said the district would not be sending notices of job cuts to teachers or to Student Health and Human Services employees. While expressing pleasure with the “positive outlook,” King also acknowledged the district still has big financial challenges to face.

“We have less money to do new initiatives and we will need to prioritize our investments to support the classroom and our school sites,” King said. "We need to remain diligent and cautious as we address structural challenges such as declining enrollment and increased fix costs.”

Board members’ optimism at the brighter projections was muted by their concerns about solving the district’s long-term financial challenges.

"We have to do this long-term planning where we’re constantly thinking years in the future and not just a couple years in the future," said board member Monica Ratliff. "There’s a big difference between $72 million in the hole and $450 million in the hole,” which is the projected deficit in 2018-19.

Board member Richard Vladovic added that felt it wasn’t out of the question for that projected $450 million budget deficit to be much higher.

The Los Angeles County Office of Education requires the district to file a contingency plan that outlines how the district could unilaterally cut expenditures if needed.

In their contingency plan, L.A. Unified officials propose two ways to cancel out the three-year $72.2 million deficit if no solution presents itself by 2017-18: zero out the planned $101.3 million contribution to a trust fund that pays retiree health benefits, or implement $102.8 million worth of the cuts an independent financial review panel recommended in November.