At the June 3^rd meeting of the LAUSD Board of Education, superintendent Alberto Carvalho made the surprising claim that the district had been doing the math wrong on a big piece of financial reporting for the past 20 years. The alleged miscalculations were for compliance with California Education Code Section 41372—a requirement that all unified public-school districts in California spend 55% of the “current expense of education” (essentially all operational expenditures other than for transportation, food service, or community services) on classroom compensation (salaries and benefits of teachers and instructional aides). Since the pandemic, LAUSD has failed to meet this standard. On June 3, 2025, however, Carvalho told the Board of Education and the public that those reported numbers are all wrong. According to him, LAUSD actually met the requirement over the past five years (despite reporting otherwise), but the percentages had been miscalculated for the past two decades

Each time LAUSD fails to meet this important threshold, it must apply (after the audit) for a retroactive waiver from the county office of education (LACOE). Otherwise, without a waiver, the county superintendent will designate an amount to be spent on classroom salaries in the following fiscal year to meet the standard (it would have been at least an additional $764 million for 2023-24). The district had intended to ask the Board of Education to vote to approve its application for the 2023-24 school year at the June 3^rd meeting, but after the item was taken off the consent agenda for discussion, Carvalho announced he was withdrawing the item and explained that the percentages have been incorrect for decades. 

Whoops 

At the annual budget hearing two weeks later, the staff brought the same waiver application for board approval. You might be wondering why they would need a waiver if they had miraculously discovered the percentages were higher all those years? The CFO explained that although the Board should no longer be concerned about this issue, they still needed them to approve an application for the waiver with the old (erroneous?) calculations (47%) because the audit could not be revised. The Superintendent and the CFO, in essence, requested that the Board, who are fiduciaries, knowingly vote to approve an application to the county that they were being told contained inaccurate calculations. While technically the books could be reopened and the audit could be re-done, the CFO said, doing so would “come at a great deal of time and expense to the district.”  

Copy and Paste 

As part of these applications for waivers, the district must provide an explanation as to why it did not meet the requirement for the school year in question. Since 2021, LAUSD has blamed the pandemic for this failure. In fact, the explanation that has accompanied each of the four waiver applications is largely copied-and-pasted:¹  

The District never experienced this shortfall prior to Fiscal Year 2020-21. If the District were required to allocate dollars to meet the 55% requirement while it continues to receive and expend COVID-19 relief funds, it would cause serious hardship. The rate by which the District spends one-time COVID funding dollars to cover a wide array of expenses other than classroom teacher salaries remains significantly high brought about by operational needs and District strategic investment priorities.² 

Essentially, the district is saying that COVID required them to spend money on a lot of things other than paying teachers and classroom aides. As another almost completely copied and pasted sentence in the application elaborates:  

Examples of these expenditures include COVID-19 testing, purchase of devices, connectivity, instructional software licenses, and other necessary expenditures to address learning loss such as on-demand and virtual tutoring services, academic intervention programs, professional development to support learning recovery, and academic materials and resources to accelerate student progress. 

We assume the district is not spending the same amount on COVID testing and other health measures as it was at the height of the pandemic, and yet this reason was given for SY 2023-24. We wondered, if COVID spending was as onerous as the district is claiming, what was happening in other large urban districts?

$1 Billion in Expenses Vanishes 

On the other hand, however, all this COVID discussion is almost irrelevant considering Carvalho’s discovery around the district’s miscalculations. The district now says it spent 58% of educational expense on classroom salaries in FY 24 and was spending as much as 67% in FY 19. While the district provided revised percentages to the school board (see below), it still submitted the waiver application as if the lower percentage were true. They provided no explanation of the changes in the calculations, only general statements that they were including too many things in the denominator. According to these revised percentages, over $1 billion in education costs were being assigned incorrectly to the denominator, and that is just for last year! 

It is a fact, according to the financial audit and the district’s reporting to the county, it has not met the 55% rule since 2019-20. But according to the Superintendent and (now former) CFO, the district has always met the standard. However, it is worth noting that the district does not actually perform any of these percent calculations. Expenses are assigned resource and object codes as they are made throughout the school year. Those codes determine whether the cost is part of the “current expense of education.” The SACS form CEA then spits out subtotals for the items in the numerator and denominator, any excluded costs (transportation, food services, community services), and calculates the percentage spent on classroom compensation. No such itemization has been provided for the revised percentages from the CFO. 

2,000+ Contracts 

Regardless of how they came up with the new numbers, three important facts are true: growth in consulting and contracting expenses significantly outpaced growth in salaries since 2020-21, each school year began with thousands of classroom teacher vacancies, and LAUSD was running unprecedented budget surpluses during this time. As of February 2025, LAUSD had over 2,000 contracts for services in place. Out of all the expenses included in the denominator of the 55% calculation, service contracts grew nearly four times as much as compensation for certificated employees and three times as much as classified: 

At the same time, total spending on professional and consulting services grew 112%. In all those years but one, the district overspent what it budgeted: 

The district has underspent on classroom compensation to the tune of $3 billion dollars (including estimates for 2024-25) according to the 55% rule. While the district was underspending, many classrooms were going without a full-time teacher. The 2024 school year opened with 4,467 vacant positions and as of July filled less than half of them. Of the positions filled, only about 500 of them were regular classroom teachers.  

If you find the district’s story about the calculations and the waiver application confusing, then let us assure you dear reader, you are not alone, it is indeed confusing. The UTLA research department is working on getting to the bottom of it. Stay Tuned!