District’s Third Interim Financial Report Has Mix of Good News and Bad

Now that we have ended the 2024-25 school year, we are nearing the end of the District’s fiscal year which is when we check on the current year’s budget and the Board of Education must pass a budget for the 2025-26 school year. This check in which shows the latest information about the budget and the outlook for the coming year is called the Third Interim Report, and it was presented to the Board last night.

After a challenging year of financial decisions in which we attempted to close a $95 million deficit projected for next year, the Third Interim shows that we are in a much better position than we were six months ago. However, we have taken a step backward in our efforts to secure the long term future of the District.

The Current Year (2024-25)

The Third Interim Report projects an Unrestricted General Fund deficit of $60 million (spending more than we are bringing in), which we knew at budget adoption. While this is a smaller deficit than projected in the Second Interim Report ($70 million), it will still cut our Unrestricted General Fund reserves by more than half (from $117 million to $57 million).

Next Year (2025-2026) and Beyond

We will begin 2025-26 with $57 million in reserves while continuing to run a deficit that is unaddressed in a multi-year fashion. That could lead to a dangerous depletion of our reserves. In 2026-27, the multi-year projection shows a $39.3 million reduction of our reserves, which would challenge our ability to meet our State required reserve of 3% (about $28 million). This continues the ill-advised practice of our district using the beginning fund balance to balance the budget.

These familiar actions are clear evidence of our risk of falling back into State receivership and losing local control. The recent letters the District has received supporting the removal of the Trustee and gain of local control speak consistently to this high probability, absent a multi-year plan. We will need to address this in some significant way during 2025-26 to prevent further State or County intervention.

The District is scheduled to share the draft LCAP and Budget on June 11 with final budget adoption set for June 25.

As always, you can read more about our budget and our finances by visiting our website at www.ousd.org/budget.

In community,

Lisa Grant-Dawson
Chief Business Officer