With Los Angeles public schools opening Wednesday, district leaders are downplaying fears that a looming budget crisis could lead to a county takeover, as they navigate a mandate to move forward with plans to cut thousand of jobs, pressure employees to accept unpaid furlough days and close an unspecified number of school buildings or campuses.
Those cuts are mainly backloaded — the vast majority don’t take effect this year — allowing Supt. Andrés E. Chait to pledge a turmoil-free opening of school. Meanwhile, county officials have stepped back — for now — from earlier threats to intervene and possibly force more immediate budget cuts upon the nation’s second-largest school system.
“I want to give the opening of schools the space that it deserves,” Chait said, “but of course, behind the scenes, folks are already working.”
“Our focus is on the schoolhouse,” Chait added. “Our focus is on maintaining, to the maximum extent possible, stability at the schools. We have been through challenging times before… and we made it through. We can do it again.”
After reviewing the board-approved June budget, both county and state officials confirmed that Los Angeles Unified met the technical requirements of a 45-day deadline to adjust its budget to account for new costs added by major labor agreements — giving the district some breathing room to plan its cuts.
County and state fiscal oversight agencies insist that nothing has changed in their deep and long-term concerns about whether Los Angeles Unified has the means and the will to remain solvent over the next three years.
“It is a serious situation,” said Michael Fine, chief executive of the state’s Fiscal Crisis and Management Assistance Team or FCMAT, which works with county officials to make sure that school districts do not go bankrupt.
A temporary calm, a looming deficit
The budget crisis exploded into public attention in an early July letter to L.A. Unified from the L.A. County Office of Education, a local oversight agency. The county office regularly reviews the budgets of the 80 public school systems in its jurisdiction.
County office Supt. Debra Duardo faulted L.A. Unified for approving costly labor contracts exemplifying “mismanagement of the collective bargaining process” as well as a failure to carry out earlier approved budget cuts that “erodes confidence.”
That July 2 letter set out a 45-day deadline for making necessary preliminary budget changes to account for the new labor agreements, which add $1.13 billion in annual costs this year and $1.44 billion next year. This year’s overall budget is $20.6 billion.
Union and district leaders have pushed back against the county letter, including its characterization of the labor agreements as unaffordable.
A letter Thursday — sent 44 days after the county referenced a 45-day deadline — was signed by school board President Scott Schmerelson, board Vice President Rocio Rivas and the leaders of six district employee unions.
“We are proud of the stability these labor agreements bring to the district,” the response letter stated. “We also recognize the many external factors we are facing, including declining enrollment (exacerbated by ICE raids), an unpredictable state revenue outlook that is overly dependent on economic cycles (revenues from personal and corporate income taxes, not property taxes), and the rising cost of living for both our staff and students’ families.”
The letter criticized both the tone and the analysis of the county office letter, saying it was “undermining the chance for a collaborative relationship between the district and its labor partners over the many challenges the district faces.”
When the county office sent out its warning letter, it had not yet reviewed the district’s budget materials. By July 17, the county had completed its review and concluded that the district had met the legal requirement to present a plan for a balanced budget — at least on paper.
The district plan includes ending $500 million in extra funding for schools identified as having students with the highest needs, which by itself results in 4,500 job losses; saving $30 million by closing school buildings or schools; and drawing down $175 million from a trust fund for retiree health benefits. Other cuts push the job losses to more than 6,000. The district ended the last school year with about 83,000 employees.
The district and union leaders, in their Thursday letter, pressed the case that L.A. Unified was in compliance, saying their budget provides “a detailed, board-approved plan to close its projected deficit, and we welcome a good-faith review of whether that plan is adequate,” they wrote.
“What we object to is a review that misstates the plan’s contents and reaches beyond the issues the Education Code assigns to the county, all while threatening escalation.”
Oversight concerns remain deep
The budget situation remains serious over the long term, according to oversight officials.
“It was a serious situation for the district before they went into collective bargaining, and when they came out, they added dollars to the deficit basically,” said Fine of FCMAT.
FCMAT’s job is to help educational agencies prevent and resolve financial and other problems. It will work in collaboration with L.A. Unified and the county office, which continues to monitor whether L.A. Unified will follow through with approved budget cuts to prevent a deficit that, in a worst-case scenario, could increase to a $3.5-billion deficit by June 30, 2029.
“I’m not worried right now, based on what I know, because this is a district with complete capacity to solve this problem,” Fine added.
However, he said, that means following through with thousands of job cuts over the next three years. The district plan also contains elements that have to be negotiated with employees, such as unpaid furlough days.
The district has backloaded most of the cuts toward the latter part of a three-year plan. The hope is employee attrition and improved state funding would eliminate the need to make many of the cuts. However, the trade-off is that a cut made at the beginning of a three-year cycle would have needed to be only a third as large as a cut made toward the end of the same period.
“There’s no question that the earlier you make the cuts, generally speaking, the easier it is,” Fine said.
“While the district has the capacity to solve the problem, does the board have the will to solve the problem? That will remain a question,” Fine said. “And I think that’s probably one of the county’s concerns.”
Chait said the county office wants to see progress on scheduling future furlough days, and, if unions don’t agree to furlough days, then the county will want to see alternative cuts, which could potentially add to the number of layoffs.
Chait, in a late July news briefing, called the county concerns “reasonable asks.”
If furlough days are part of the plan, “we obviously need to be able to actually implement,” Chait said. “So they need to see the proof of that. Separate and apart from that, or maybe complementarily to that, they want to see what are all our alternatives.” Without furlough days, “how would we offset that? What other reduction would we make?”
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