Los Angeles County Office of Education Superintendent Debra Duardo is once again warning LAUSD that the County may step in and take decision-making authority away from the LAUSD Board if it fails to adequately address concerns about fiscal solvency and submit a budget that maintains the required minimum reserve funds.
The sternly worded letter from LACOE is the latest in a series of warnings from the agency that oversees LAUSD’s budget, which took the unprecedented step in January of assigning a team of fiscal experts to help. The letter also arrives as voters consider whether to support a parcel tax on the June ballot to increase school funding.
LACOE gave LAUSD a "qualified certification," citing district failure to address deficit spending, which has led to a "distressed financial condition." LACOE also cited "inattention" to LAUSD's $15.2 billion unfunded retiree healthcare liabilities (the promises made to future retirees, which the district has not set aside money to pay for) and its "inability to consider long-term effects of collective bargaining agreements."
The LAUSD Board at last month’s meeting approved a Fiscal Stabilization Plan that included a 15 percent reduction in central office staff, but the budget the district submitted to the County still fell $3 million short of balancing the budget and maintaining the required 1 percent reserve fund through the 2020-21 school year.
The budget projections get even worse the following year. Unless a parcel tax passes, LAUSD is expected to have $749 million less than it’s required by law to keep in the bank by 2021-22.
LACOE is requiring LAUSD to work with its fiscal expert team to submit a new Fiscal Stabilization Plan by July 1 that shows a balanced budget with the required minimum reserves in the bank for the next three years.
“The District continues to demonstrate indicators of fiscal distress that must be addressed,” Duardo’s letter said. “Should the Governing Board fail to address all concerns identified in this letter, or fail to submit a 2019-20 Adopted Budget that meets the minimum reserve in any fiscal year, the County Superintendent is prepared to take further action that may include … assigning a Fiscal Advisor with stay and rescind authority over Governing Board actions.”
That threat means the County could take over, remove local control from the LAUSD Board and start making unilateral cuts.
Duardo also warned LAUSD not to count on the governor’s proposed pension relief to California school districts or on any new parcel tax revenue until they are approved.
Despite the public’s stated support for striking teachers in January, passage of a parcel tax is by no means certain. It requires support from two-thirds of voters to pass, and because the progressive tax – based on square footage -- places a greater burden on commercial property owners than homeowners, the business community is lining up against it.
The Los Angeles Chamber of Commerce, Los Angeles County Business Federation and Howard Jarvis Taxpayers Association are planning to spend $4 million opposing measure EE, according to EdSource. Opposition language being mailed to voters argues that LAUSD is fiscally irresponsible and garners poor results:
“LAUSD WASTES OUR MONEY,” the opposition text reads. “District bureaucrats and defenders of the failed status quo want taxpayers to bail out a school district with a history of red ink, appalling education results, declining enrollment, runaway administrative hiring and exploding retirement and health care costs. REFORMS MUST COME FIRST.”
While United Teachers Los Angeles and SEIU Local 99 support the measure, the unions insisted on striking out language that would have prevented funds from going to retiree pension and healthcare liabilities. That’s fueling skepticism among some parents that the funds will actually go to classrooms and kids.
Joining UTLA and SEIU in support of Measure EE are LAUSD, the Los Angeles City Council and the California Charter Schools Association. "This is a case where we have labor and management, CCSA and parties who have clashed in the past all coming together to pass this measure," said Yusef Robb, spokesman for Yes on EE. "The decades of under-investment in education is not a political talking point. It’s a fact.”
So far, the Yes campaign has raised $500,000 from UTLA, $300,000 from SEIU Local 99, $125,000 from United Brotherhood of Carpenters and Joiners of America and $125,000 from Southwest Regional Council of Carpenters Issue Committee in support of the measure. That’s a lot less than the $4 million the opposition intends to spend, but Robb remains optimistic. He says the opposition so far has raised only $23,000 of the $4 million.
“We’re going to raise the resources necessary to win this race,” he said. “We expect to raise substantial resources from people and organizations of all stripes.”
Speak UP also supports Measure EE because without it, painful cuts and class size increases that will harm kids are all but inevitable. However, Speak UP believes we need reforms to retiree benefits plans in order for the district to stay afloat. Those reforms could help increase public support for more revenue.