Which has a better long-term fiscal outlook: L.A.'s print newspapers or its school district?

A report released in November and recently obtained by the Weekly (which is to say, we finally got around to reading it) describes a looming financial disaster the Los Angeles Unified School District faces in, oh, about three or four years, if it doesn't severely cut costs:

If the District desires to continue as a growing concern beyond [Fiscal Year] 2019-20, capable of improving the lives of students and their families, then a combination of difficult, substantial and immediate decisions will be required. Failure to do so could lead to the insolvency of the LAUSD, and the loss of local governance authority that comes from state takeover.

Ruh roh.

The report comes from something called the “Independent Financial Review Panel,” formed at the behest of recently retired superintendent Ramon Cortines. The nine-member panel includes heavy-hitter analysts including the city of L.A.'s Chief Administrative Officer, Miguel Santana; former State Treasurer Bill Lockyer; and former state Senate President pro tempore Darrell Steinberg.

LAUSD's problem boils down to declining enrollment without proportionate spending cuts.

The nation's second-largest school district has 200,000 fewer kids than it had in 2002. LAUSD's elected board has failed to adjust to the loss of students.

School districts receive their money from the state based upon how many students they teach. According the report, declining enrollment “has caused the district to lose more than $100 million per year on an ongoing basis.”

Ruh roh; Credit: Report of the Independent Financial Review Panel

Ruh roh; Credit: Report of the Independent Financial Review Panel

“The fundamental problem is, while there were tens of thousands of students fewer coming into the system, the spending was essentially static,” Lockyer says. “They were drawing on reserves to fill the gap. It’s now time to reconcile the spending and expenditure trend.”

One of the biggest reasons LAUSD has fewer kids is that L.A. itself is having fewer kids. The city's birthrate was well ahead of both the state and the country up until about 10 years ago. Now it lags behind both.

“The number of children under the age of 10 years residing in the County has also fallen nearly 17 percent since 2000,” according to a report by the L.A. County Department of Health. “This decline is projected to continue, and is much larger than the 4 percent decrease reported for California or for the United States, where the number increased by 2 percent.”

The other main driver of the enrollment decline is the veritable exodus of kids to independent charter schools.

More than 100,000 students living within LAUSD's borders attend charter schools, making it the largest charter school program in the United States. And a new plan by billionaire Eli Broad would spend nearly $500 billion to put half of all LAUSD students in charter schools within eight years

Charter schools also get their money directly from the state for the number of children they teach — children who are no longer in the traditional LAUSD schools that once received that money. 

Students are also moving to private schools and different school districts, but that number is much less significant than the lower birthrate and loss of kids to charter schools, according to the report. 

The LAUSD school board's  focus, over the years, has been to stop the flood of student to charters. Members adopted various reforms to give local schools more independence from the district, in hopes of competing with charters for the families leaving LAUSD. But the exodus continues unabated.

Some board members have even suggested that the problem is one of marketing.

For the last few years, the mismatch between lost funding and continued spending has been masked by Proposition 30, the temporary sales-tax hike voters passed in 2012 (and which may be may be made permanent), and Gov. Jerry Brown's new funding formula, which allocates a greater share of the state's education dollars to school districts with low-income students and English-language learners. 

But the district's long-term fiscal outlook is bleak. The outside panel of experts predicts that next year, LAUSD will have a budget deficit of $333 million. In 2019, it will be $600 million.

Welcome to LAUSD. Spare some change?; Credit: Report of the Independent Financial Review Panel

Welcome to LAUSD. Spare some change?; Credit: Report of the Independent Financial Review Panel

“The district’s not in crisis at this point,” says Michael Fine, the chief administrative officer for the state's Fiscal Crisis and Management Assistance Team, who also served on the panel. “It can balance its budget for next few years.

“But if they ignore everything, crisis is a few years away.”

The panel has some clear-cut advice for how to cut its costs.

“They need to right-size their organization,” Fine says. “Right now, the district is overstaffed. It has not reduced the staff in a way that is proportionally corresponding to the loss of kids.”

In other words, too many teachers and principals – and too many senior teachers, who've been on the job for decades and therefore make a decent income — 56 percent of teachers make more than $76,000.

One of the report's recommendations is to offer some senior teachers early retirement — essentially, to buy out their contracts, a bit like what they were doing over at the Los Angeles Times

Other recommendations: increase student attendance rate, cut down on workers comp claims, save money on health care, pensions and food services. 

“The fiscal cliff is imminent if they don’t make substantial cuts in spending,” Lockyer says.

“There’s a tendency to externalize and say, 'There’s not enough money from the state. The charter schools are taking our students.' There’s sort of a tendency to place the blame elsewhere. While those factors are significant, they aren’t the ones that the school district has much control over. So they need to work through the budget challenge. And, of course, if there is additional state funding, that’s good, it’ll make problems less severe. But belt-tightening is required,” Lockyer adds.

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