In her history of the 1975 New York City debt crisis, the historian Kim Phillips-Fein describes the municipal budget as an object that “comes to life as the place where opposing views of the city’s future were contested, fought out, and finally decided.”¹ This statement is no less true when it comes to public school district budgets, especially ones the size of Los Angeles Unified. We are currently in the midst of “budget season.” That is, per the education code, LAUSD is required to adopt and submit a budget to the county for approval by July 1. Given that the District is going to be presenting a draft budget for the 2025-26 school year on June 17th, we feel that it is important to clarify what exactly a budget is, and how LAUSD budgets have shaped up historically.  

First off, it is critical to note that budgets are completely distinct from actual financials which record actual revenues and expenses at year end. LAUSD won’t submit its “Unaudited Actuals” report for the 24-25 school year until September of this year. Budgets, on the other hand, are a plan for what money might come in and how that money might be spent. In an ideal world, year-end financials would substantially match the planned budget for that year. At LAUSD, this has historically not been the case.  

As Figure 1 shows, since the 2013-14 SY the difference between how the district says its year-end fund balance will shape up in the June 30 budget and where it actually ends up at the end of the school year have been far apart. In more than half of the past budget cycles a projected deficit turned into a surplus. In all but one of the last 11 years the fiscal situation has been better than the district projected it would be. Nobody has been eaten by a wolf yet, so maybe that is not quite the correct analogy… 

It’s not just that things have been better than the district projections, it’s the amount by which they’ve been off that matters as well. As figure 2 shows, in all but two of the listed school years the district’s original budget has been over 100% different from the actual number. Accounting for the mix of under and over projections, on average, the actual year-end change in fund balance has been 450% different from the year end actual in absolute terms. If we control for the unusual influx of ESSER funding during the pandemic by removing 2020-21 from the dataset as an outlier, the average variance is 330%. 

You may ask, dear reader: isn’t coming in under budget a good thing?  

Typically, yes. But this is a public agency, providing a public good. In that case, spending so much less than budgeted is misleading the public. According to guidelines from the California Teachers’ Association, any budget projections that are more than 12% off actuals have no validity: 
 

Put another way, if a person were to routinely spend over a hundred percent of what they have the capacity to spend, it’s fair to say that might be to the detriment of their well-being. If you have the budget to afford fruits and vegetables, it’s probably wise to buy them instead of saving money by subsisting on Lunchables. In the school district’s case, students today are deprived of available resources because of a perceived need to hoard as much money as possible for possible fiscal needs tomorrow.  

High Needs Students Go Without

Unfortunately, LAUSD has a history of failing to spend money set aside for the most high-need students and schools. According to this year’s Local Control and Accountability Plan, in 2023-24 LAUSD spent only $1.7 of the near $3.0 billion, only a little over half, of the money it planned to spend on “high needs students.” Another measure of unspent money is how much sits leftover in the district’s “Student Equity Needs Index” pots. SENI is a formula created by the district to help distribute the extra money it receives from the state for having high needs students. In the wake of COVID, however, the district has apparently had a hard time spending this money due to staffing shortages: 

We know you came here to learn about Education Code Section 41372 

2023-24 is the fourth consecutive year that LAUSD has sought a waiver for failing to meet California Education Code (EC) Section 41372, which requires that unified school districts expend at least 55% of their current cost of education for classroom compensation, including benefits. This includes teachers and instructional aides. The District spent 47% of educational expenditures on classroom compensation, which is $764 million below the 55% minimum. The District is also projected to fail to meet this standard again for a fifth consecutive year in FY 2024-25 (see chart below). LAUSD sites COVID-19 related expenses as the reason for needing an exemption each year, including 2023-24. 

Just a mere $1.8 billion discrepancy  

To put all these budget pieces together, the original 2023-24 LAUSD Budget projected a $1.1 billion deficit, while actual spending in 2023-24 yielded a $670 million surplus. That surplus was accompanied by a $764 million gap between what they are required by the state to spend on classroom salaries and what they actually spent. At the same time, $407 million dollars of SENI funds could have been used to relieve overcrowded classrooms and provide elementary teachers planning time. Each year the District claims to be in a “structural deficit,” but in reality, the District is structurally underspending on students. 

LAUSD has created a sort of self-fulfilling prophecy where intense fear of future financial difficulties leads to structural, habitual underspending. The district has insisted on a “structural deficit” while creating the conditions for a structural surplus.  

Taxpayer money gets allocated to education because everyone benefits from an educated public. When taxpayer money sits in an account, who benefits?  

1. Kim Phillips-Fein, Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics, (New York: Metropolitan Books, 2017,) 5. ↩︎