Update: On Nov. 23, California’s Department of Education denied the district’s appeal. Read the denial here.
The Alameda County Office of Education is escalating its oversight of Oakland Unified School District’s budget, a move that district leaders oppose and are asking State Superintendent of Public Instruction Tony Thurmond to block.
The tension stems from disputes over whether the school board is taking adequate steps to keep the district financially solvent. Alameda County Superintendent L.K. Monroe wrote in a letter to board members last week that she has major concerns about whether the board will be able to implement tens of millions of dollars in necessary cuts in the next school year’s budget and reduce reliance on one-time revenue sources that will run out in the next few years. Monroe said the county will implement harsher oversight measures, including reviewing the district’s financial controls, and bring in the Fiscal Crisis and Management Assistance Team, a state agency, to examine the district’s teacher-hiring practices.
If the district can’t provide the information the county asks for during its review process, Monroe could take the unprecedented step of withholding compensation from OUSD’s school board and superintendent. Oakland Unified Superintendent Kyla Johnson-Trammell has a base salary of $294,000 per year, while board members receive a $826 monthly stipend.
“If the OUSD board is unable to collectively agree on solutions to address and implement the $90 million in required reductions within a timely manner, the fiscal shortfall for OUSD is likely too difficult for OUSD to address in a short time frame absent county intervention,” Monroe wrote. “Because the district has yet to develop budget-balancing solutions that do not rely on one-time funding solutions, and because there is an increased level of fiscal solvency uncertainty, ACOE will now provide more intensive intervention and support to the district.”
While the county office of education reviews budgets for each of its districts, there are additional layers of oversight for Oakland Unified because of its history of financial instability. OUSD also has a county trustee assigned to the district because of its outstanding loan balance to the state. That trustee, Luz Cázares, has veto power over any financial decisions that district leaders make.
The school board and district leadership say that they are taking steps to ensure the district remains solvent, and that it’s too early in the budget development process to conclude that the district needs an intervention. The board may have to make upwards of $50 million in budget cuts for the 2022-2023 school year, along with additional cuts in subsequent years. Board members will use much of the spring to develop the next budget and identify cuts before they have to approve it at the end of June.
“The District is on track to addressing its long-term fiscal challenges,” wrote OUSD’s chief governance officer Joshua Daniels in a letter to Thurmond. “Additionally, the proposed actions that Superintendent Monroe seeks to initiate—particularly the threat of withholding compensation for the OUSD Board of Education and OUSD Superintendent Dr. Kyla Johnson-Trammell—are not connected to the concerns raised by Superintendent Monroe and are not supported by the current financial and operational reality in OUSD.”
One of the issues Monroe cited is the district’s declining enrollment while staffing levels remain the same. OUSD has 34,446 students enrolled this year, down from 37,049 in the 2017-2018 school year. From the 2020-2021 school year to the 2021-2022 year, the number of full-time employees in OUSD increased by 124, while the number of students enrolled dropped by nearly 1,000 students in the same time period. Because the district receives funding based on daily attendance figures—which are typically lower than enrollment—this means the district will have less money to pay for increased salary and benefit costs.
Monroe also pointed to the district’s reliance on one-time funds, including those from COVID relief bills, without accounting for how it will cover those expenses once those funds run out. Johnson-Trammell underscored those concerns during Wednesday’s school board meeting.
“If Oakland, like almost every other district across the state, is experiencing declining enrollment, we need to make the appropriate adjustments,” she said. “Are we making some of the tough decisions when the one-time funds expire? Because if we continue to hold on to every investment that we have, once the one-time funds run out, we will be insolvent.”
OUSD is expected to receive about $283 million in COVID relief funding from a combination of state and federal bills. Much of that funding is going toward COVID precautions like tests and stipends for campus-safety personnel, hiring custodians, tutors, and other school staff, purchasing computers and other technology, and providing mental health support and credit recovery opportunities.
Nearly 20 years ago, OUSD was declared financially insolvent and months later, a state administrator was appointed to govern the school district. The state also authorized a $100 million loan to the district to be repaid over two decades. While OUSD came out of state receivership in 2009 and an elected school board took over again at that time, the district is still under enhanced oversight until the loan is paid off and the district passes a financial audit.
OUSD puts about $6 million toward the loan annually, and was expected to have the loan paid off in June 2026. But this past June, the school board requested that district staff come up with a plan to pay off the loan three years early, by January 2023. The board will review that plan at its next meeting on Dec. 1.
In 2018, Assembly Bill 1840 created a provision to provide OUSD with millions in additional state funding if the district took specific steps to improve its finances, including developing short- and long-term financial plans, and other actions to improve its financial standing, like closing or consolidating schools.
This year, OUSD could have received an additional $10 million from the state if it had gone through with another round of school closures and consolidations, as the board had been expected to do earlier this year with the Citywide Plan. But earlier this month, the board decided against that and instead voted to cut $6 million from other areas to make up for the savings that school closures could have brought, which were estimated to be around $2 million. District leaders point to that move, which cut more than necessary to make up for the closures, as evidence that they are serious about resolving OUSD’s financial situation. The reductions will come from three areas: the district’s school maintenance budget, school site funding, and the elimination of open positions.
In an emergency meeting on Saturday, the school board voted unanimously to appeal Monroe’s notice to State Superintendent Thurmond, who will either sustain the appeal or deny it. He has until Nov. 23 to respond.