OUSD Reports Some Improving Financial News After Challenges Presented by Budget Deficit

As we continue working to create joyful learning experiences for every student and educator, we are pleased to report a measure of progress from the 2nd Interim Report shared at Wednesday night's Board of Education meeting about the District’s financial health during a challenging year. The District continues to project a $70 million Unrestricted General Fund deficit for the end of this 2024-25 fiscal year. The current deficit spending of about $7 million per month, which was projected to increase next year, necessitated the Board of Education to vote to institute Budget Balancing Solutions in planning for next year to get the finances under control. Those steps included the elimination of nearly 100 jobs across the central office and school sites, and the cutting of discretionary funds for schools, among other things. While these choices are never easy, we remain focused on ensuring our students thrive in safe, supportive, and uplifting school communities.

The good news is that making these difficult decisions has put the District in a better financial position, at least for now. You may recall from this message back in December that the District gave itself a "negative certification" because of the ongoing deficit spending. Knowing our budget well, the Alameda County Office of Education supported a negative certification. While the full impact of the Budget Balancing Solutions is not yet known, based on the projections in this latest budget report, the District now has a "qualified certification," which is an improvement from "negative." It means the District is now more likely to meet its financial obligations in the coming year and beyond, whereas under the previous negative certification, the District was projected to not meet its obligations.

The reasons for this improved certification are clear. The Budget Balancing Solutions are currently projected to reduce the monthly deficit spending (how much more the District is spending than the revenues it is bringing in) from $7 million to $1.2 million. That means the projected deficit for the 2025-26 fiscal year is now about $12.5 million, compared to the previously projected $95 million deficit. If that previously projected deficit had continued unabated, it would have meant the District would have run out of money sometime next fall. While the District still has a projected deficit, it is now much more manageable with the funds the District has on hand. By taking action as we have, we continue to build a more sustainable future for our students and staff.

Impact of Projected Deficits on Reserves

($ Millions)

However, not all the news is good. As reserves decrease, as shown in green above, any deficit spending, as shown in red, is something the District needs to avoid. This means there will likely be more changes to the District’s budgeting in the coming years without increased revenue or ongoing budget adjustments that can absorb increased spending. One key detail is that $39 million of the projected savings from the Budget Balancing Solutions (over one-third) came in the form of one-time solutions, so we must remain vigilant and thoughtful as we plan for the long term.

This shows why we will need to make more changes enabling the District to complete the “3Rs” process and eliminate the seemingly annual cycle of budget reductions that we continue to experience each year. Remember also, the District is required to keep a 3% reserve, or rainy day fund. Given the size of our budget, the projected reserve amount is $28-29 million. Based on the currently projected deficit spending, the reserve will total about $47 million at the end or this year and be down to $34.5 million at the end of next year. Although challenges remain, we are committed to finding solutions that preserve the joyful learning experiences all our students deserve.

As we’ve previously shared, the ongoing 3Rs process undertaken by our Board of Education is designed to address these longer-term challenges and foster a stronger foundation financially and academically. This stronger foundation is intended to help address these known financial challenges, and prepare the District for future changes including negotiated compensation increases. As a reminder, every one percent raise for all union employees in the District adds up to about $4.6 million annually.

We are hopeful the ongoing 3Rs process will support the District’s full return to local control with the stability we need for our students, staff, and community. We recognize that our greatest strength is our dedicated staff, so our focus is on finding balanced approaches that honor their invaluable service while ensuring the fiscal health of the District.

As always, we work to be as transparent as possible about this process, and continue to search for ways to make our District operate more efficiently and economically. To partner in the 3Rs process, or present any ideas to us, you can attend our Board of Education meetings on the 2nd and 4th Wednesday evenings in the Great Room at La Escuelita. We especially would like to invite you to the Budget and Finance Committee meetings which happen on the first Thursday of each month. 

Your participation and insights are vital to creating a more sustainable and joyful future for every Oakland Unified student and family.