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EDUCATION - As far back as April, LA County officials sent increasingly dire written formal warnings addressed to Los Angeles Unified School District Board Members, senior executives, and at least fifteen finance department senior administrators. These warnings formed the basis for the July 2, 2026 update which laid down the law and required a Fiscal Expert and specific fiscal actions LAUSD must take, under warning for escalating intervention which could include stay and rescind authority.
LAUSD executives mentioned these letters by date in their reports to the board but did not make their content available publicly. Those mentions did not describe the severity of the warnings.
These letters warned of potential formal intervention from the Los Angeles County Office of Education and called out unacceptable financial conditions, unacceptable financial reporting, the increasingly negative financial impact of labor negotiations and the subsequent tentative agreements, plus the unchecked structural deficit exacerbated by enrollment declines and staffing levels out of alignment with long-term enrollment and facilities needs.
We obtained these letters from LACOE through a Public Records Act request.
LACOE’s Review of the FY 2025–26 Second Interim Report
An example of the secrecy is LACOE’s rejection of $231 million in “non-specific and unallocated expenditure adjustments”. After excluding those expenditure reductions, LACOE adjusted the Ending Unrestricted Fund Balance from a compliant 1.10% Reserve Percent level to a negative 1.13% level.
The adjustment triggered a LACOE requirement for an updated Board-approved Fiscal Stabilization Plan to replace the “unallocated reductions with identified, budget reductions by object code no later than the FY 2026–27 Adopted Budget reporting cycle”.
The June 12th letter from LACOE continued to call attention to the unresolved issue:
“The structural deficit assumes the failure to implement the District’s FY 2025–26 Fiscal Stabilization Plan (FSP), of which $231 million in expenditure adjustments remain pending, as reported in the 2025–26 Second Interim Report. We are deeply concerned that relying on unidentified, unexecuted expenditure reductions will further erode the District’s projected cash and reserve position, accelerating fiscal insolvency.”
The new FSP approved on June 16, 2026 includes an Expenditure Change labeled “Items to be Implemented from FY 2026 FSP” with a total of $90 million spread over two years, a quiet admission of pending reductions, but still without the required specificity in any of the planned reductions as demanded by LACOE.
LACOE’s Review of the Public Disclosure of Proposed Collective Bargaining Agreement — “AB 1200”
The June 12, 2026 letter cites LACOE’s review of the mandated reporting of the detailed financial effects of proposed bargaining agreements and states:
“The fiscal concerns detailed below are severe, and we strongly urge the Board to weigh them carefully prior to ratifying these agreements.”
“With the costs of these agreements incorporated, the District’s multi-year projections indicate it will be unable to meet its state-mandated minimum reserves during the term of the contracts.”
“The Unrestricted General Fund is projected to reach a negative ending balance of approximately $1.46 billion in FY 2027–28.”
“A projected negative ending balance of this magnitude is neither a sustainable operational strategy nor permissible.”
Is anyone surprised that LACOE escalated from warnings to action?
Furloughs in the Fiscal Stabilization Plan
Page six of LACOE’s July 2, 2026 letter states:
“The District’s FSP identifies furloughs to be implemented and in effect beginning with the Fall Break 2026 period. Accordingly, if the furloughs are not implemented and in effect by Fall Break 2026, the District should expect the County Superintendent to consider escalation from Fiscal Expert to Fiscal Advisor.”
Based on our review of the adopted FSP, we conclude furloughs are set to begin in FY 2027–28, although the item includes the carve-out statement, “subject to negotiation with labor partners”.
The Secrets
We directly ask LAUSD’s Board Members these unresolved, pressing questions:
Did you receive and assess these LACOE communications?
If so, why were LACOE’s significant warnings seemingly ignored?
Were you lulled into complacency by the potential additional state revenues which would wipe away the financial overspending?
Why were the LACOE letters not made public?
Were the Fall Break 2026 Furloughs approved by you? If not, how did this requirement become a requirement from LACOE? Did you or executive management undertake negotiations with LACOE on revised FSP terms behind closed doors to set an earlier date for furloughs? Is this an instance of a Brown Act violation?
Secrets and intrigue galore at LAUSD… secrets surrounding public education funds? What is the technical term for THAT?
(Maria Luisa Palma is the founder and Executive Director of Oleada, Inc., a non-profit organization which promotes parent involvement in Los Angeles public schools, and a former federal and state financial industry regulator.)
(Sonia Reiter is an engaged, informed, and invested mother of two high school students who will be the third generation of San Fernando Valley LAUSD graduates.)
This story was originally published by Oleada.
