LAUSD running out of cash as deadline looms to fix financial mess, parents told nothing is wrong

The nation’s second-largest school district is staring down a financial disaster.

County officials have warned Los Angeles Unified School District (LAUSD) could run out of cash within two years, despite repeated assurances to parents that schools will continue operating as normal.

LAUSD has been given 45 days to overhaul its budget after the Los Angeles County Office of Education concluded the district is headed toward insolvency, with projections showing its cash balance plunging $231 million into the red by November 2027, leaving it unable to make payroll.

County Superintendent Debra Duardo issued LAUSD a rare “Lack of Going Concern” determination on July 2, warning the district may not be able to meet its financial obligations during the 2027-28 and 2028-29 school years.

“They have some serious financial concerns that they need to address,” Duardo said to the Los Angeles Times. “It’s very serious.”

The county says the crisis was driven largely by labor agreements the school board approved despite repeated warnings they were unaffordable.

On the same night it approved the contracts, the board overruled its own chief financial officer and withdrew $175 million from a retiree health benefits trust fund, a move the county said “further erodes confidence” in LAUSD’s budgeting.

The district’s finances have also been squeezed by years of declining enrollment. 

LAUSD now serves about 390,000 students, roughly half as many as it did in the early 2000s, reducing state funding while staffing levels have not kept pace, according to the county.

The district’s month-end cash balance is projected to turn negative in November 2027 and remain below zero for several months afterward, something county officials described as “the most immediate and severe indicator of insolvency.”

For now, the county has assigned fiscal expert Octavio Castelo to work with district leaders.

If LAUSD fails to correct its finances, officials could appoint a fiscal adviser with authority to block school board spending decisions.

A future state bailout would strip the elected board of its authority altogether.

Despite the warning, Superintendent Andres E. Chait sought to calm concerns.

“This determination does not change our commitment to students, families or employees,” Chait said. “Our schools will continue to operate as normal while we work closely with LACOE to strengthen our long-term financial outlook.”

School board member Tanya Ortiz Franklin, one of two members who opposed the district’s fiscal stabilization plan, said the situation never had to reach this point.

“This was preventable — not just in June, but months and years ago,” Ortiz Franklin said.

Employee unions have argued the district’s projections fail to account for expected increases in state funding, while education advocates contend California schools are owed billions more under state law.

Gov. Gavin Newsom recently signed legislation increasing K-12 special education funding by $2.4 billion, a 43% increase over the previous year, though county officials say LAUSD must still balance its books.

The district’s approved budget already includes more than 1,000 job cuts, with thousands more expected over the next three years, along with unpaid furlough days that could begin as early as this fall.