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LAUSD cuts positions to plug a budget hole without increasing class sizes

Esmeralda Fabián Romero | June 13, 2018

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June 20 Update: The LAUSD board approved the 2018-19 budget as expected on June 19, and pledged support for a couple new initiatives, including college savings accounts and free college admissions tests. But again, senior district officials forecast that the district was headed towards financial catastrophe in just four years, when reserves are expected to fall short. 

To plug a budget hole without increasing class sizes, LA Unified will cut or reassign nearly 500 positions. But fewer than 70 people will actually lose their jobs.

Those are highlights of the new $7.4 billion budget, which will be presented to the public next Tuesday and approved by the school board the same day. The budget is slightly lower than last year’s, which was $7.5 billion.

“The 15 percent in central office reduction has to be solid in order to keep reductions as far away as possible from school sites,” Scott Price, the district’s chief financial officer, said during a Monday briefing of the 2018-19 budget for members of the news media.

He said there will no be class size increases or cuts to programs, but the district’s central office personnel and some school site positions will have to shrink within the next six months. The majority of them, 490, will be reassigned with the same salary, while 34 will be reassigned to a lower-paid position, and 67 people will be separated or laid off.

A list of the classified positions being impacted can be found here on page 340.

The total number of district employees this year is 60,240.

This move could save nearly $86 million, said Price, who reiterated that the district continues to face a structural deficit.

The district must adopt a new budget on or before June 30. The board was supposed to conduct a hearing of it at this Tuesday’s meeting but ran out of time, eliciting complaints from parents. Now the budget has to be presented for consideration and voted on for final approval next Tuesday.

Even with an ending balance reserve of $670 million from the current fiscal year, most of that money will go to employee wage increases — both those approved this month for classified workers and an increase expected in a new teachers contract — and to cover pension and healthcare costs until 2020-21. It’s projected that the reserve will be exhausted by then, leaving a $258 million deficit, according to district budget documents.

On Tuesday, the school board approved a salary increase for the district’s largest classified workers union, SEIU Local 99, which covers cafeteria workers, bus drivers, and other school service employees. The local teachers union, United Teachers Los Angeles, is in ongoing negotiations with the district.

Part of that reserve will also be used for a one-time allocation for the schools serving a higher concentration of high-needs students as directed by the Student Equity Need Index, approved by the board in April. The one-time allocation means that once that money is spent, there’s no expectation the funds will be available in a future year. How those funds will be distributed under the index has not yet been determined, Price said.

He also said the district is not expecting to get “new money” as revenue in the next three years, as enrollment is projected to continue declining at the same rate.

“Over the last 10 years, enrollment has been declining at the rate of 2.7 to 3 percent annually,” he said. “We expect it to be about the same.”

The district is required to maintain a 1 percent reserve for each of the next three years. To meet that requirement, the district will now assign funds that it had been sending to high-needs schools under a legal settlement called Reed vs. California, which concluded this year. The lawsuit aimed to curb high teacher turnover in those schools.

The district will also get a boost from Gov. Jerry Brown’s commitment to fully fund the Local Control Funding Formula, which sends more money to high-needs students.

“Next school year will also be the first year that LCFF will be fully funded, so that would release some additional funds,” said Pedro Salcido, the district’s director of finance policy.

Price said the district is also looking into consolidating low-enrollment schools and maybe closing others to save additional money.

“Yes, we have considered that. You keep the same number of teachers and administrators but you save on custodians and use of space by having two schools in one campus. We have to look at those options,” he said.

But he rejected the idea of letting charter schools take over those campuses. “We can’t really make a profit by letting a charter take over a school. That wouldn’t be a revenue generator for us.”

With that option, “we would actually be losing money,” said Cheryl Simpson, director of the budget services and financial planning division.

Price said that while the state funding will grow under Brown’s new budget, it’s not clear yet how much of that the district will get, so that increase is not yet included in this budget.

At the end of Tuesday’s board meeting, board member George McKenna announced he is sponsoring a resolution calling for a parcel tax to go on the November ballot. The agenda for next Tuesday’s board meeting was posted Wednesday afternoon and includes the resolution, sponsored by McKenna and board member Scott Schmerelson.

It directs the superintendent to submit the parcel tax for the Los Angeles County election in November, to raise $150 million per year, “exempting fixed-income seniors and properties with a valuation of less than $750,000 from the tax formula.”

Also Wednesday, a new study released by the Reason Foundation found that rising administrative costs and pension obligations are the primary causes of LA Unified’s fiscal crisis, as opposed to losing enrollment to charter schools.

“By 2022, pension and health care costs along with special education programs will be eating up over 57 percent of LAUSD’s main operational funding before the district spends a single dollar to run a regular school program,” the study said.

“The common narrative has been to blame charter schools for the decrease and the financial crisis,” said Lisa Snell, the foundation’s director of education policy and co-author of the study. It found that only 35 percent of LA Unified’s enrollment decline over the past 15 years is due to students going to charter schools.

“This study shows that tale is false and outlines how the district’s new leadership can get LAUSD on solid financial footing,” she said. It recommends that the district implement five primary reforms to “right-size” its structure and get on a sustainable financial path.

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