Debra Duardo, M.S.W., Ed.D.
Superintendent

Los Angeles County
Board of Education
Thomas A. Saenz
President
James Cross
Vice President
Candace Bond McKeever
Douglas R. Boyd
Alex Johnson
Gregory McGinity
Monte E. Perez

January 29, 2019

Ms. Monica Garcia, Board President
Los Angeles Unified School District
333 South Beaudry Avenue, 24th Floor
Los Angeles, CA 90017-5141
Dear Ms. Garcia:
Under Assembly Bill AB 1200 (Chapter 1213/Statutes 1992), AB 2756
(Chapter 52/Statutes 2004), and Government Code (GC) Section 3547.5, I received
the Los Angeles Unified School District’s (District) “Public Disclosure of
Proposed Collective Bargaining Agreement” (Disclosure) regarding a Tentative
Agreement (Agreement) with the United Teachers Los Angeles (UTLA) on
January 28, 2019. The Agreement is for the period beginning July 1, 2017, and
ending June 30, 2022, and is scheduled for Governing Board action on
January 29, 2019. We have reviewed the District’s financial analysis and
assumptions as presented in the Disclosure, and offer our comments and concerns.
COLLECTIVE BARGAINING DISCLOSURE
The Agreement provides for a 3.0 percent on-schedule wage increase for 2017-18,
retroactive to July 1, 2017, and a 3.0 percent on-schedule wage increase for 201819, retroactive to July 1, 2018. The Agreement also provides for staffing to reduce
class sizes, and additional support personnel at school sites. This completes and
closes out all negotiations with UTLA for the 2017-18 and 2018-19 school years,
except as provided in the parties’ collective bargaining agreement.
The Disclosure projects a total ongoing increase in employee compensation costs
of $266 million in 2018-19, $255 million in 2019-20, and $319 million in 2020-21,
resulting from the negotiated Agreement. The District’s financial analysis, as
presented in the Disclosure, projects total available of reserves of 11.04 percent for
2018-19, 5.38 percent for 2019-20, and 0.96 percent for 2020-21. While the
projected reserves for 2018-19 and 2019-20 meet the 1 percent minimum
requirement level as set by the State Criteria and Standards, the projected reserve
for 2020-21 is below the minimum requirement.

 Ms. Monica Garcia, Board President
Los Angeles Unified School District
January 29, 2019
Page 2
The District based its multi-year projection in part on assumptions in the Governor’s 2019-20
Proposed Budget, which include:
 Increase in the projected cost of living adjustment (COLA)
 Decrease in the CalSTRS rate
We caution the District about relying on this projected revenue since the Governor’s 2019-20
Budget is not yet finalized. The District must ensure it monitors the State’s Adopted Budget and its
impact on this Disclosure’s financial analysis, and make immediate adjustments for any reductions
in proposed revenues.
The District’s multi-year projection also includes the following major assumptions:
Fiscal Year 2018-19:
 Revenue estimates based on the District’s First Interim Report
 Additional strike related costs of $13.5 million
 Salary savings of $70 million
 Release of assigned balances set aside for the salary increase of 3 percent in 2017-18 and 3
percent in 2018-19
 Policy change regarding mid-year school site allocations
The District must take action to release assigned balances set aside and approve policy changes, as
appropriate, to utilize these funds for this Disclosure.
Fiscal year 2019-20 and 2020-21:
 One-time redirection of unallocated Targeted Student Population (TSP) funds (also known
as supplemental and concentration funds)
 Estimated decrease of 13,985 in funded ADA, which resulted in an estimated loss of revenue
of $151.9 million in 2019-20
 Decrease of $20.7 million in Health and Welfare Contribution due to higher anticipated
reimbursement from the Employee Group Waiver Insurance Plan
Because supplemental and concentration dollars are being used to partially fund the Agreement, the
District will need to review its Local Control Accountability Plan and determine if a revision is
necessary.
This Disclosure reflects the District’s continued practice of using one-time funding to cover
ongoing expenditures. As we have previously noted, using one-time funding sources, such as
reserves, to cover ongoing salary expenditures, is a key indicator of risk for potential
insolvency.

 Ms. Monica Garcia, Board President
Los Angeles Unified School District
January 29, 2019
Page 3

DEFICIT SPENDING AND RESERVES
The District’s Disclosure is projecting structural operating deficits in its Unrestricted General Fund
of $132 million for 2018-19, $548 million for 2019-20, and $395 million for 2020-21. Due to deficit
spending, the District’s reserve is projected to decrease and is below the minimum required level
in 2020-21. The District is also projecting an operating deficit of over $500 million in 2021-22,
which has yet to be addressed.
Pursuant to Education Code Section 42142, within 45 days of a collective bargaining settlement,
the District Superintendent must send to the County Superintendent any revisions to the District’s
current budget to fulfill the agreement. AB 2756 and GC Section 3547.5(c) authorize the County
Superintendent to take specific action if a school district does not process these revisions.
CONCLUSION
The Disclosure relies heavily on one-time funding sources and projected revenues. Additionally,
the District’s financial analysis indicates it is still unable to meet its reserve requirement in 202021 indicating that the Agreement is not sustainable on an ongoing basis. We have communicated
our concerns in prior letters regarding the District’s growing structural deficit, and have yet to see
the Governing Board implement significant expenditure reductions and/or revenue enhancements
that would stabilize the District’s financial position. This Disclosure continues the District’s
practice of allowing the ending fund balance to erode, and continues to move the District toward
fiscal insolvency.
Should the Governing Board approve the Agreement as presented, the Board must take immediate
action to address the long-term impact of the settlement on the District’s escalating deficit spending
in 2019-20 and beyond. Therefore, the Governing Board will be required to develop and
submit a detailed Fiscal Stabilization Plan (FSP) that identifies the specific expenditure
reductions and/or revenue enhancements necessary to fund the ongoing costs of the salary
increase. The FSP must also restore reserves to the minimum level in all fiscal years. This
plan must be Board-approved, and incorporated into the District’s 2018-19 Second Interim
Report, which is due to our office by March 18, 2019. The plan should not include any
unallocated or contingent expenditure reductions or revenues. Should the Governing Board fail
to submit a FSP that addresses the concerns identified in this letter, I am prepared to take further
actions that may include identifying the District as a Lack of Going Concern and assigning a Fiscal
Advisor with stay and rescind authority over Governing Board actions.
The Governing Board is ultimately responsible for ensuring that all local decisions support and
promote the fiscal health of the District. The Los Angeles County Office of Education (LACOE)

 Ms. Monica Garcia, Board President
Los Angeles Unified School District
January 29, 2019
Page 4
will continue to work closely with the District Board of Education, Administration, and staff to
resolve your fiscal challenges. Our office encourages the Governing Board to continue to engage
and work closely with the Fiscal Expert team assigned to the District and use their expertise as a
resource.
If our office may be of further assistance, contact Dr. Candi Clark at (562) 922-6124 or
Keith Crafton at (562) 922-6131.
Sincerely,

Debra Duardo, M.S.W., Ed.D
Superintendent
CC/KDC/TSS
cc:

Austin Beutner, Superintendent, Los Angeles Unified School District (LAUSD)
Scott S. Price, Ph.D, Chief Financial Officer, LAUSD
Pedro Salcido, Director, Finance Policy, LAUSD
Cheryl Simpson, Director, Budget Services and Financial Planning, LAUSD
David Holmquist, Esq., General Counsel, LAUSD
José J. Cole-Gutiérrez, Director, Charter Schools Division, LAUSD
Robert Samples, Interim Director, Office of Labor Relations, LAUSD
Jose R. Cantu, Ed.D, Assistant Chief Human Resources Officer, LAUSD
Karla Gould, Personnel Director, LAUSD
V. Luis Buendia, Controller, Accounting and Disbursements Division, LAUSD
Joy Mayor, Deputy Controller, Accounting and Disbursements Division, LAUSD
Timothy Rosnick, Deputy Controller, Accounting and Disbursements Division, LAUSD
Margaret Lam, Deputy Budget Director, LAUSD
Victoria Reyes, Assistant Budget Director, LAUSD
Tony Thurmond, State Superintendent of Public Instruction
Lupita Cortez Alcalá, Chief Deputy Superintendent of Public Instruction
Caryn Moore, California Department of Education
Betty T. Yee, California State Controller
Michael H. Fine, Chief Executive Officer, Fiscal Crisis and Management Assistance Team
Erika F. Torres, Ed.D., M.S.W., Deputy Superintendent, LACOE
Candi T. Clark, Ed.D, Chief Financial Officer, LACOE
James Morris, Ed.D, Fiscal Expert Lead, LACOE
Vibiana M. Andrade, General Counsel, LACOE

 Ms. Monica Garcia, Board President
Los Angeles Unified School District
January 29, 2019
Page 5
Keith D. Crafton, LACOE
Jeff Young, LACOE
Octavio Castelo, LACOE
Teri S. Stockman, LACOE
Patricia Smith, LACOE
Tracy Minor, LACOE