California requires school districts to track the average daily attendance (ADA) of their students, which is the average number of students in class each day. School districts are required to report their ADA to the state 3 times per year. The California Department of Education (CDE) uses the reported attendance data to allocate state funding for many programs, including the Local Control Funding Formula (LCCF) and several state grants/categorical programs. For most programs, the State of California finalizes funding based upon P-2 reporting, which is the ADA for a school district from the beginning of the school year until April 15th. A decline in ADA will lead to a decline in LCFF funding as well as other programs.  

A positive budget means that a district will be able to meet its financial obligations for the current and next two fiscal years. A qualified budget means that a district may not meet its financial obligations in the current or next two fiscal years. A negative budget means that a district will not meet its financial obligations in the current or following two fiscal years. Should a district submit a qualified and/or a negative budget, the County Superintendent of Schools may require a district to submit a fiscal stabilization plan that would necessitate the balancing of budgets in question. 

Los Angeles Unified is required by law to submit a Multi-Year Projection (MYP) of the General Fund to our authorizing agency, The Los Angeles County Office of Education (LACOE), annually with our adopted budget. California Assembly Bill 1200 (Chapter 1213/1991) and Assembly Bill 2756 (Chapter 52/2004) were enacted in response to near bankruptcies of a number of school districts, an increase in requests for state emergency loans, and an increase in financial distress. As a result, school districts are required to submit a MYP of the General Fund that includes the current fiscal year and two subsequent fiscal years. 

The ending balances decline at a steep slope for the 2024-25, 2025-26, and 2026-27 fiscal years due to several factors. Los Angeles Unified, along with all school districts in California, received a large influx of state/federal dollars due to the COVID-19 pandemic in the form of COVID-19 ESSER funding. The COVID-19 ESSER funds expire on September 30, 2024, and thus billions in state/federal aid is no longer available to Los Angeles Unified. Additionally, the State of California is expecting significantly less revenue in 2024-25 than in the current year which has a negative impact on the State Cost of Living Adjustment (COLA). The negative impact on the COLA will result in less state funds which will impact Los Angeles Unified’s budget for the upcoming and subsequent fiscal years. Finally, Los Angeles Unified has experienced an annual decline in student enrollment which affects the financial projections since funding is based upon student enrollment. 

Los Angeles Unified has several reserve funds that account for the total amount of reserve reflected in the annual budget. Most reserves are restricted funds by Board of Education policy and/or state law, which means they are not allowed to be used outside of the specific purpose they have been allocated for. Additionally, California state law mandates that Los Angeles Unified have a reserve of 2% of all General Funds which cannot be used and/or reallocated within the fiscal year. 

Los Angeles Unified is complying with the State of California administrator-to-teacher ratio (California Education Code 41400-41407) in order to avoid a penalty that would result in the loss of unrestricted general funds that could otherwise be used to support students/schools. California law stipulates that all school districts must have an annual administrative-to-teacher ratio of no more than 8 administrators for every 100 teachers. Los Angeles Unified, in its efforts to ensure compliance, has adjusted/reduced/reassigned positions, inclusive of generic Assistant Principal, Assistant Principal, Elementary Instruction Specialist, and other administrator positions in order to avoid a costly monetary penalty.

When projecting a budget per California state law, school districts are required to project ending balances two school years beyond the current school year. A common phrase, “the 3rd year never comes” is in reference to the last year projected during a first Interim, second Interim, and/or an adopted budget report. Recently, the third year projections have been positive due to the influx of COVID-19 ESSER funds, which end on September 30, 2024, increases in California state revenues which results in a higher Cost of Living Adjustment (COLA), and an increase in state categorical dollars. The 2024-25 budget, as of second interim (March 2024) demonstrates a steep decline in the third year of General Fund Unrestricted ending balance and this is due to the expiration of COVID-19 ESSER funds, a dramatic decline in COLA per the California Department of Finance, and an overall decline in California state revenues. Additionally, the 2024-25 budget and the subsequent out years do not contemplate as of today any changes in employee compensation, health and welfare benefits, changes in California state revenues or any local policy changes enacted by the Los Angeles Unified Board of Education. 

The federal/state COVID-19 funds that infused billions of dollars in public education/schools will end on September 30, 2024. Los Angeles Unified has expended and/or has planned expenditures for all COVID-19 ESSER funds received. 

Prop. 28 funding is used to supplement, not supplant, art funding. Across Los Angeles Unified, the same or greater dollar amount is being spent on art funding as was spent prior to the passage of Prop. 28. However, that does not mean that every school is receiving the exact same amount of art funding as they were in previous years. Art funding to individual schools is reassessed each year based on an equity scale, so some schools may receive more or less district funding than they received in prior years. For additional information on LAUSD’s investment in Arts, please click here.

A school carryover is the amount of funds not expended in a fiscal year by a school site that are allocated to the school in addition to the earned allocation for the upcoming fiscal year.  If a Los Angeles Unified school does not expend the full amount of funds, for example unrestricted general funds, during the current year, the school is then afforded a percentage of the unspent funds during budget development of the upcoming school year in order to allow flexibility and local decision-making on how best to support students. For more information regarding school carryover funds, please visit the link below.

Carryover Memo