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LAUSD school board to take up report warning of approaching bankruptcy

FILE - An empty classroom.
FILE: A report on Los Angeles Unified's financial future paints a bleak picture and recommends the district takes action to reduce costs and raise revenue.

The Los Angeles Unified School District board is set to hear dire news at its Tuesday meeting: a $333 million budget deficit looms in the 2017-2018 school year and the shortfall is predicted to balloon to $600 million two years later.

The predictions are included in a 75-page report authored by the Independent Financial Review Panel, a body commissioned six months ago by Superintendent Ramon Cortines.

The panel includes nine regional and state civic leaders: Maria Anguiano, Delaine Eastin, Michael Fine, Bill Lockyer, Darline Robles, Miguel Santana, Darrell Steinberg, Peter Taylor, and Kent Wong.

“This report comes at an important time, and I hope it will give the new Superintendent a starting point for the important discussions that will take place in our District,” Cortines said in a written statement.

The panel’s report details why the school district faces a bleak financial future. Among other factors, it blames declining student enrollment, expensive employee benefits, and special education services that aren’t fully reimbursed by the federal government.

In the last six years the school district’s enrollment has dropped about 100,000 students. Roughly half of that decline is due to students enrolling in charter schools, the report said. 

“It’s a scary situation. There are a lot of competing pressures hitting the school district at the same time that some of the tax revenues that we have might go away,” said Carrie Hahnel, deputy director of research, policy, and practice at The Education Trust-West.

Significantly, a 2012 state tax increase that has produced millions of dollars in additional funds for California public education will expire next year.

The report recommends a long list of actions to turn around LAUSD's finances. The panel recommends the school district develop a strategy to increase enrollment at schools to hike state funding tied to student counts and calls on administrators to renegotiate employee benefits to cut costs.

If adopted, the report’s recommendations stand to deeply affect employees. United Teachers Los Angeles, LAUSD’s largest union, did not comment on the report’s findings.

The union, which represents about 30,000 L.A. Unified cafeteria workers, custodians, and other employees, suggested after the report's release that cuts to employee benefits would hurt students because nearly half of the union’s members have children attending the district's schools.

Among the benefits that could come under review is employee health coverage.

“The reality is that LAUSD has vast purchasing power and needs to look at new and creative ways to leverage this power to ensure health care for all,” said SEIU Local 99 Executive Director Max Arias in a written statement. “This can include aligning with the City of Los Angeles to increase access to health care to more families, at a lower price.” 

Warnings of fiscal troubles ahead aren’t new. LAUSD Chief Financial Officer Megan Reilly told school leaders earlier this year that increases in salaries and benefits negotiated in a new teacher contract would stretch finances thin.

“The findings of the Independent Financial Review Panel reflect the budget realities we face and the need to create long-term financial strategies,” Reilly said in a written statement sent to KPCC.

The report comes as the school board searches for a new superintendent to lead the 650,000-student school district, the second largest in the country.

Hahnel of The Education Trust-West said the report is an example of the school district’s effort to find solutions in a transparent way.

“I’m not surprised that with all these competing demands on the district’s budget, the district thought it would be helpful to create some transparency into what its fiscal outlook is really like, what its demands are and engage in a public conversation about what it can and can’t do with its limited dollars,” she said.

You can view the full report below.

PDF: LAUSD financial report