OUSD Board of Education Finishes Fiscal year by Passing 2025-26 Budget; District’s Financial Situation Remains Challenging

Monday is the end of the 2024-25 fiscal year, and it will mark the end of receivership and fiscal oversight by the Alameda County Office of Education and the State of California, as we have passed the required fiscal systems audit and have finally paid off the last of the $100 million in loans that the District was saddled with in 2003. That is great news. However, that news is tempered by the fact that the District’s financial future remains cloudy.

At this past Wednesday’s Board of Education meeting, the Directors finished their major task of passing next year’s budget. As we shared in the Third Interim Report earlier this month, the budget is looking better for the 2024-25 fiscal year than it did last fall. The 2025-26 fiscal year, however, is still in a precarious position as the District used many of its one-time strategies to balance the budget to address what was a projected $95M deficit. Without a strong action plan, we are in dangerous territory in the following years as our expenses continue to outpace our revenues.

The issues are not new. We are spending more unrestricted dollars than we’re bringing in (deficit spending). This means our reserves are being depleted and our financial health and therefore, stability, are in jeopardy. Our reserves are subject to State and Board requirements. The Board already requires the District to keep a 3% reserve, which is 1% higher than the state requirement, but the budget just adopted does not meet that requirement, retaining a 2.9% reserve at the end of the year.

Due to deficit spending of about $60 million this year, our unrestricted reserves are going down from $118 million to just over $57 million to start 2025-26. While actions taken by the Board back in December have significantly reduced the projected $95 million deficit for 2025-26, the adopted budget shows a 2025-26 projected deficit of more than $30 million. That deficit will cut the $57 million in starting reserves by more than half, resulting in reserves of just over $26 million or 2.9%.

There are also several items that were not included in the budget due to time and other constraints, so a formal budget revision will be made in August. These revisions may worsen the outlook as some will include state budget changes and reductions in revenue due to lower attendance.

In future years, the fiscal picture is even more challenging. In 2026-27, there is a projected $78 million deficit, which would bankrupt the District in the first half of the year if nothing is done to prevent it. The following year, there is a projected $72 million deficit. All this means we must restructure our operations to reduce spending because, of course, going bankrupt is not an option. The state and the county will not allow that to happen. Alameda County would take over the District with a new state loan to ensure it can pay its bills. That would mean falling back into receivership less than two years after exiting receivership.

As it stands, the District is projected to survive the 2025-26 school year intact. But the same cannot be said for the following years. There will have to be difficult decisions made in the coming year to ensure the District remains solvent. We will continue to keep you up to date on the budget as we move forward through the year. You can read more by visiting our website at www.ousd.org/budget.

In community,

Lisa Grant-Dawson
Chief Business Officer