LAUSD’s plan to stave off financial ruin and a potential county takeover: Cut 15 percent of central office staff and save $86 million
Laura Greanias | December 10, 2018
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Updated Dec. 11
L.A. Unified is facing a new deadline to prove to its county overseers that it will be able to stay afloat.
By Monday, Dec. 17, the district must submit a revised plan to show how it will address its structural deficit that could render L.A. Unified insolvent within three years, meaning it needs to figure out how to cut its expenses or find more income so it can keep paying its bills. If it can’t, it faces a takeover.
In the budget’s revision that will be presented at Tuesday’s school board meeting, Scott Price, L.A. Unified’s chief financial officer, states that “the district continues to deficit spend, (and) a large portion of the reserves will be consumed in 2019-20 and is expected to be depleted by 2020-21.”
That means two years from now, L.A. Unified will end its school year $4 million short, according to Price’s letter, because its reserves will be exhausted and can no longer be used to plug the estimated $500 million each year that the district says it is spending above what it takes in. L.A. Unified’s total annual budget is about $7.5 billion.
An independent financial analysis commissioned by L.A. Unified also found that the district will be insolvent by 2021-22 and warned that the district’s expenditures are expected to exceed revenues in each of the next five years.
To stave off insolvency, the district plans an ongoing 15 percent reduction of central office resources, saving $86 million over two years, according to the budget revise that will be presented Tuesday. The district also plans to save $3 million ongoing by cutting attendance incentives to the Local Districts, to save $10 million by changing how it procures uniforms and to save $5.7 million on books and supplies.
The school board will vote Tuesday on the revised budget and the cost-savings plans, which include a list of specific central office positions recommended for cutting. The positions and their expected savings — which represent the total annual cost of the position, including salary and benefits — include:
• chief of police, $317,000
• 13 police officers, saving $1.3 million
• a Korean translator, $100,000
• a coordinator of counseling, $160,000
• a deputy budget director, over $200,000
• two directors of special education, who make nearly $200,000 each
• an executive director of special education, nearly $210,000
• a television producer-director, nearly $160,000
The Los Angeles County Office of Education has said the district’s continued use of deficit spending — meaning it is eating into its savings to cover its operating costs — has led to a “drastic” drop in its financial reserves and “continues to be alarming.”
The county has given L.A. Unified until Dec. 17 to outline how it will reverse its march toward insolvency by either cutting costs or finding new revenues. If the county is not satisfied with the district’s plan, it stated that it could choose to either send in a financial expert to collaborate with the district or install a fiscal adviser — someone who essentially takes over all financial decisions for the country’s second-largest school district.
After the county receives L.A. Unified’s budget revision, it will respond within 30 days, a county spokeswoman said.
The district’s weakening financial health is central to why the district and its teachers union have not been able to come to an agreement in its protracted contract negotiations. United Teachers Los Angeles is planning to strike in January if a last-minute deal is not cut. Last week, mediation efforts ended, and after a report that is due Friday is issued from the fact-finding panel, the union is free to strike.
L.A. Unified and UTLA have painted starkly different pictures of the district’s finances: District negotiators say accepting all of UTLA’s demands, which include higher salaries and lower class sizes, would “immediately bankrupt” the district and lead to teacher layoffs. UTLA says the district is overstating its financial woes and is “sitting on” money that is desperately needed in the schools.
In related news, on Tuesday Dr. Candi Clark, the Chief Financial Officer of the Los Angeles County Office of Education, sent a written statement addressing allegations by the union that she had not written her own remarks when she addressed the school board in August.
Here is her statement:
“As Chief Financial Officer for the Los Angeles County Office of Education, I prepared my own budget comments provided at the Aug. 21 meeting of the LAUSD Board of Education.
“After sharing concerns that morning regarding LAUSD’s budget in a meeting with Supt. Beutner, I decided to stay and share my comments at the Board of Education meeting scheduled for later that day. I also decided to take my list of concerns and put them in a statement to the Board.
“In addition, my concerns about the LAUSD budget have been conveyed in letters to the district prior to and after the Aug. 21 Board meeting.
“While at the district office, I asked to use an LAUSD laptop because I had not brought my own. At my request, the completed statement was sent to my LACOE email address for my files.
“I expanded on these same concerns at the Sept. 11 meeting of the LAUSD Board, and these issues were also the focus of remarks by Nick Schweizer, Deputy Superintendent of Public Instruction, California Department of Education.
“The fiscal solvency of LAUSD remains an ongoing critical issue, and LACOE is committed to working closely with the district to address these concerns.”
• Read more:
LAUSD parents stuck ‘in the middle’ as Los Angeles braces for a likely teacher strike
LAUSD’s ‘signs of fiscal distress’ trigger two new warnings, including risk of going broke within three years
It gets worse for LAUSD: This week both the county and the state showed up to say, ‘Get your fiscal house in order or else we’re taking over’
‘LAUSD is not too big to fail’: School board members alarmed by LA County official’s dire financial projections — and warnings of the possible appointment of a ‘fiscal adviser’
This article was updated Dec. 11 with comments from the Los Angeles County Office of Education’s Chief Financial Officer, Dr. Clark.