The Los Angeles Unified School District was given 45 days to prove it can responsibly manage its own finances or risk losing significant control over its budget to outside fiscal overseers.
For the second-largest school district in the U.S., that is an extraordinary humiliation. It is also entirely deserved.
The Los Angeles County Office of Education has concluded that LAUSD shows "severe" signs of insolvency and could be US$ 231 million in the red, unable to make payroll, by November 2027. A fiscal expert is already working with the district.
If LAUSD fails to satisfy county officials, the next step could be a fiscal adviser with authority to block school board spending decisions. A state bailout could eventually strip the elected board of much of its power.
The warning signs were there for everyone to see.
In April, after tentative labor agreements were announced, I wrote that LAUSD was buying labor peace with money it did not have.
In June, before the school board formally approved those agreements, county officials warned they were too expensive. The board approved them anyway.
Less than a month later, the county's warning became a formal finding.
The contracts add roughly US$ 1.13 billion in costs this school year, climbing to US$ 1.44 billion in 2027-28. They include a 24 percent increase over three years for SEIU support staff, nearly 14percent over two years for teachers and almost 12 percent over two years for administrators.
At the same time, the district failed to carry out planned cuts. The board instead overruled its own chief financial officer and pulled US$ 175 million from a retiree health trust fund to make the budget work on paper.
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