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LAUSD's Plan To Avoid Financial Meltdown For The Next Three Years

Los Angeles Unified School District Superintendent Austin Beutner (center) delivers remarks at a press conference on June 5, 2019, at Western Avenue Elementary School in South L.A., flanked by school board members Nick Melvoin (left) and Jackie Goldberg (center, back), Mayor Eric Garcetti (right) and other supporters of a failed proposal to levy a parcel tax on property owners in LAUSD. (Kyle Stokes/KPCC)
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Los Angeles Unified School Board members will meet Tuesday to take public comments on their proposed $9.2 billion budget for the upcoming school year. One week later, board members expect to take a final vote on the spending plan.

Even if the budget is balanced for now, officials warn that LAUSD's long-term financial health is becoming more precarious. This warning has become almost an annual routine in LAUSD, and in recent years, some skeptics have stopped taking them seriously.

But something feels different about this year's budget -- if only because of the circumstances in which board members are considering it.

In the past year, Angelenos rallied behind the district's teachers, who went on strike in January to demand higher salaries, smaller class sizes and more support staff for schools. LAUSD officials agreed to pay for all these things, though they warned the gains would only be temporary unless everyone involved could find a way to pay for them.

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Just last week, Plan A to fund the agreement long-term -- a ballot measure to raise taxes for LAUSD -- failed in a special election by a wide margin.

Superintendent Austin Beutner said the budget he's submitting to the LAUSD board Tuesday will avoid a deficit over its three-year course -- even if a Plan B for generating that revenue doesn't come together during that period.

But Beutner said district officials will need to burn through almost all of the $837 million LAUSD currently has in the bank -- or, technically, stockpiled "unassigned" funds -- to avoid straying into the red toward the end of the three-year budget period.

"The first two years are pretty solid," Beutner said. "They have been before the strike, during the strike and after the strike. The third year is still quite tenuous."

Beutner, like other LAUSD leaders before him, has issued similar warnings in the past. In fact, year after year, district budgets have forecasted deficits looming just two or three years in the future. So far, trouble has not materialized.

The district's deficit warnings have generated skepticism, and that skepticism reached a peak during the teachers strike. United Teachers Los Angeles leaders argued LAUSD officials were essentially hoarding funding in reserves instead of spending the money on vital services.

The union has also documented areas in which the district has effectively over-budgeted, only to under-spend later -- the implication being that LAUSD officials are artificially inflating the deficit.

"Elected officials don't want to make cuts because it's unpopular," newly-elected LAUSD board member Jackie Goldberg said in an interview in April, before she won a special election in May to represent LAUSD Board District 5. "So rather than risk making cuts, they're willing to hold back money from the kids right now. I think that's wrong."

So how did the district develop these large surpluses to carry forward?

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District officials point to a combination of factors. Sometimes, they've conservatively projected how much ongoing funding to expect from the state budget. Other times, surprise one-time infusions of cash from Sacramento helped ease budget pressures.

But Beutner said the district has also taken active steps to prevent these dire forecasts from coming true.

"It's not magic," Beutner said, pointing to a list of "nickel-and-dime" savings LAUSD has already realized:

  • $50 million per year from consolidating more than 20,000 Medicare-eligible retirees under one health care plan. (This had the side benefit of shaving more than $3.8 billion off the district's unfunded liability for retiree benefits.)
  • More than $42 million from cuts to the district's central office. As many as 289 employees could be laid off from their current jobs by the end of August, though attrition may ultimately reduce that number.
  • $35 million per year from, district officials said, successfully lobbying for an exemption from a state requirement that LAUSD employ only 8 administrators for every 100 teachers. The savings come from permanently waiving a state penalty for violating this requirement: LAUSD currently employs 9.5 administrators per 100 teachers, but the district argues that most of them work in schools.

These and other savings, Beutner said, have helped the district stave off the scenario that has regulators at the L.A. County Office of Education so spooked: an operating deficit that forces LAUSD into spending, essentially, an emergency reserve.

"We've done a lot of hard work to make sure we have a little more time to try to keep the investments in schools," Beutner said. "You could say, 'Good work' or you could say, 'Gosh, it didn't happen like it might've happened.' But we could've sat around for the last year."

Beutner says the projections in the coming three-year budget may actually be optimistic.

For one thing, it does not include any wage increases for employees -- even though Beutner believes they are entitled to them.

"We'd expect to provide a wage increase to those who work in schools," he said. "We don't expect our health care costs to remain flat, but the way the [L.A. County Office of Education] asks us to forecast, that's how it's reflected."

On the other hand, a proposal that would change how California funds special education -- and that Beutner believes would benefit LAUSD financially -- is not reflected in this budget.

The question of how to lock in the class size reductions and staffing increases UTLA members won in their strike is also left to future budgets.

"We're in discussions about where we go next after Measure EE," Beutner said, referring to LAUSD's failed tax proposal, "locally or at the state level. We're in discussions with a lot of parties. All of that takes planning. We're in the midst of that planning now."

Whatever happens, a "fiscal expert" team of L.A. County regulators will remain on-site at LAUSD to monitor the district's financial status.

"Despite actions to immediately maintain fiscal solvency," said a statement from county superintendent Debra Duardo, "the district's own analysis shows that the structural deficit has not been fully addressed. LAUSD presents ... a reserve that is just over the legal minimum requirement in 2021-22."

But it also appears LAUSD officials have, for now, convinced county regulators not to take a more serious step: appointing a "fiscal advisor" with the power to rescind school board votes and force deep cuts. At least for this year.