LAUSD’s ‘signs of fiscal distress’ trigger two new warnings, including risk of going broke within three years

LA Unified’s budget has been approved for now by its county overseers, but they gave the district a new deadline for it to address its structural deficit or face a takeover.

In a letter delivered late Thursday, the Los Angeles County Office of Education 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.”

“LAUSD continues to show signs of fiscal distress,” the county’s letter states.

The county gave LA 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 at that time choose to either send a financial expert to the district to work with it or install a fiscal adviser — someone who essentially takes over all financial decisions for the country’s second-largest school district.

The district’s reserves are being depleted so quickly that they are projected to drop 90 percent in two years — from $778 million this year to $76.5 million in 2020-21, according to the county. This year, LA Unified’s reserves are just over 10 percent, but by next year they’re projected to decline to just under 6 percent and then to 1.04 percent in 2020-21. School districts are required by the state to keep a 1 percent reserve. Falling below 1 percent is what triggers a county to take over a district’s financial decision-making.

The district is facing down the threat of a strike by its 30,000-member teachers union, which has so far rejected contract offers and is pushing for higher pay, lower class sizes and more support staff in schools like librarians, nurses and counselors. The county’s letter states that any new raises could put the district at risk. Click here to read more: