May 19, 2025 - 1pm Special Board Meeting

001Okay. Hello everybody. Thank you. Um the time is now 10. We're going to go ahead and start this special meeting of the Los Angeles Unified School District Board of Education. Uh this is a budget workshop. I'm going to take role. Miss Newell. present. Dr. Rivas, I believe, is absent. Uh, Mr. Meline here. Uh, let's see, who do we have? Miss Gomez here. Miss Grigo here, Miss Ortiz Franklin is absent, and board president Schmurson present. Okay. Okay. So, the order of operations today is we're going to go directly into public comment which is in person only today and we will be doing simultaneous translation as we usually do for the folks who are here who do not speak Spanish. When there is a Spanish speaker up for a public comment, you would put on the headphones

002that we're offering to you right now and you will experience simultaneous translation. Okay. So, each public commenter gets two minutes each. I will read the name of the first public commenter and then I will relinquish the mic. So, Isabelle Gonzalez, are you here? Isabelle Gonzalez. Okay, Miss Gonzalez is going to speak in Spanish. So, while she is speaking in Spanish, please put on the headsets if you need it. And I will be using this timer right here. And once you hear the timer, your time is up. Everybody have a headset. Okay. Okay, the next speaker will be Danna Guen. Come on up, Miss Guen. You'll have two minutes to speak once you begin. Sorry about that. Your time isn't up yet. So, Miss Gian's going to speak in Spanish, so if you'd like to hear

003what she's saying in English, please put your hands up and we'll get you these translation headsets. Okay, the time is yours. So when I Thank you for your time. Maria Louisa Palma, are you here? Come on up. You have two minutes to speak. When should you begin? To the board members. When you are managing your households, do you start looking at your money when uh do you look at just what's left over in your checking account every month? That's known as living hand-tomouth. As trustees of this giant public institution, is it prudent to manage this institution that way? I say no. When you start your discussions and your focus starting from the unrestricted unassigned unappropriated balance, you are doing exactly the same thing living hand-to-mouth. So let me read to you some important information from

004the financial statements. The statement of net position, okay, reflects your assets, your liabilities and the difference between those two elements are the net position. The negative net position position is where you are now at an unrestricted 11.8 billion deficit. Okay, because of net pension liabilities unfunded and OPED unfunded liabilities. Then the statement of activities, also known as your income statement, presents the information on how the district's net position has changed during the most recent fiscal year. So this information would tell you where you were, what changed, what you did in that year. So then you'd know where you are and then you can begin to discuss where do you want to go? What do you want to do? That's not what you do here. You start at the end. So that implies to me that

005you are only beginning to pay attention when you are already in trouble. That is not prudent. It is too late. I request once again that you create a subcommittee, a board subcommittee to discuss finance, the budget and the LCAP in depth to discuss your structural problems. Otherwise, you don't know where you are. You as trustees have to drive this change. You have to show us in public during public meetings, your discussions, your deliberations on what will be included in the budget, which is just one part, one aspect of managing the entire financial statements for this district. This is what is absolutely required of this giant institution. Otherwise, LUSD is a ship without a captain. That is what you are right now. Or who is in charge if not you? Board members, thank you for your

006time. We have uh Maria Daisy Ortiz signed up to speak, but I do not see her here. Uh and then the last speaker signed up to speak is Lauren Brookke. Lauren Brookke, are you here? Oh, we have a late It's not Mr. Ortiz. So that concludes public comment and now the the time is to the board and the budget workshop. Thank you, Mr. McClean. And now I would like to welcome everyone to our uh 26 budget adoption meeting. And I would like to turn this over to our superintendent, Mr. Del Calvo. I don't know why I said that. Mr. Carvayo. Thank you very much. Uh good afternoon. My introduction will be very brief. Let me begin by uh thanking the board for agreeing to come together to have an important conversation. Uh today uh will

007consist of not only a presentation, actually two different presentations and then plenty of uh opportunity for the board to chime in, opine, ask questions. Uh the agenda will begin with um a conversation never fails. No message. Okay. Please stand by further instructions. May I have your attention? May I have your attention? We are investigating alarm 17 floor. Please stand by for further instruction. So the agenda today will include two presentations. As I said, plenty of opportunity for the board to ask questions and to engage in conversation with our financial experts. The very first presentation will be conducted by uh school services of California presented by uh Mr. John Gray uh president CEO as well as Patty Herrera, executive vice president that will detail uh whatever uh the May revised information recently released by the governor

008um will have in terms of impact to our school district and across the state. It is our hope also that this group will position Los Angeles Unified within the context of other districts of like size or smaller and the entire state of California specifically the trends that we are experiencing and observing. Secondly, we'll go into insights leading into the fiscal year 26 uh budget adoption. Obviously, those will include uh a deep dive um into um trends going back to fiscal year 20 all the way through 26. We'll look at compensation versus revenue trying to understand the structural deficit that the system is uh is experiencing expenses over revenues during that same time period and actually extending all the way to fiscal year 28. um the work we're doing uh and the impact of sustaining our

009workforce uh strategies recognizing that in the aftermath of the pandemic uh we continue to carry a lot of uh full-time positions and part-time positions occupied by individuals whose salaries were being paid with ESER funding which sunseted in September of 2024. Uh we told the board that this past year actually current fiscal year we continue to support those individuals. uh we had um in excess of 2,000 such individuals in our school district consuming in excess of $82 million. We're happy to report as you'll see in a bit that that number has gone down to about $60 million. But based on the commitment we made to the workforce, there will be no riffs this year as well as fiscal year 26. So, uh you will see a redoubling of the commitment of holding these individuals harmless. But

010with the understanding that uh solutions must be found through efficiencies uh through the end of this fiscal year as well as next fiscal year uh to avoid any possibility of layoffs. To the extent that we are not disciplined in reducing liabilities for the remainder of this year as well as next fiscal year, the possibility of reductions in force actually increase. We're not alone in this in terms of local governments. We're not alone in this in terms of school districts across the state. Uh we will look once again at end of year fund balances um specific to all funds uh going back to FY24 stretching all the way to FY28. And then we'll present considering our position our projected position specific to fiscal year 28. It is safe for occupants to return to their workplace location.

011You may use the elevators to return to your floor. I have your attention. May I have your 17th floor to return to location? So the it is a requirement as we as the board uh approves the budget going into June that the board also approve uh a plan a stabilization plan because it is forecast it is projected that we will go into deficit position in FY28. So we are providing at this point very early on uh the basic elements of what that plan uh will include with the understanding that things may change and in fact many uh many of those things will change going to next year a preparation year but also a year of efficiencies. And lastly, um you will get uh um before you um a a number of budget assumptions uh as

012a district. And last but not least, despite the fact that we are in an era of budget constraints, uh there's always an opportunity to continue to prioritize from a budget perspective um elements within this budget. We do so by reaffirming commitment in some instances actually increasing funding for programs based on equity uh elements of our budget as well as critical needs in our of our students in our schools. So with that said, let me uh turn it over to um to our next speakers uh Mr. John Gray and Patty Herrera with School Services California. I'll tell you. Well, good afternoon everyone. Uh my name is John Gray. I'm with School Services of California. I was at a previous board meeting a few months ago when we only had the governor's budget at that time. And

013since that time, the way the budget process works in the state of California in January, the governor proposes his budget based on a bunch of numbers that are a lot of estimates. And then by May by law, he's supposed to come out and revise that January budget that you've been uh looking at for the following year. And he has come out and done that. Uh with me today is Patty Herrera. Just so you know, I spend most of my time in school districts working with financial staff primarily on the operations of school districts. Patty spends most of her time in Sacramento. She's a lobbyist. She works with the Department of Finance, the LAO. She's our Prop 98 expert um and our expert on on all things operations on the state. So, uh we're going to

014keep this fairly high level. We know your staff is going to provide you with a lot of details specifically. Uh but as your superintendent said at at the beginning, um you may be the largest district in the state, but you reside in the state of California and you're reliant uh on the state for most of your funding uh the various funding formulas. So everything we're talking about uh this uh this afternoon pretty much pertains to everybody in the state. So the whole issue of declining enrollment um on Wednesday, if you don't get enough today, you can log on to our workshop. we have all thousand districts are going to come uh and we spend a lot more time and a lot more detail on these topics. We have like 200 slides. We have four this

015uh today. And so one of the topics is the continuence of declining enrollment in the state of California. We're losing citizens. We're losing students. Uh the department of finance is projecting that the decline is going to go at least until 2033. Um so we don't see uh a big change coming there. Um so in January when he the governor came out with the budget there were a lot of unknowns. One was the cost of living adjustment. He had an estimate of 2.43 that's now 2.3%. The other thing was he receives an estimate of revenues from his department of finance and at that time we had a since that time uh of the of the January budget uh we have a new president uh we have a lot of things happening at the federal level that

016are impacting the state of California and so the department of finance have updated their revenues from January to provide you the May revision and unfortunately a pretty significant downstroke in the projection of revenues at the state. Um, I think last time I was here, I talked about the personal income tax and how we're heavily reliant on our wealthiest Californians because we have a very progressive tax. And if you've been watching the stock market, uh, the end of last year, we're riding pretty high. Since that time, the announcement of tariffs, we saw the S&P 500, the Dow pretty much tank. Now, it has started to recover. uh but his department of finance is taking that into account in their projections. And so if you go into the finance pages uh on the governor's uh may revise,

017you'll get a lot of gory detail and they categorized it. We're projecting a growth recession. I had never heard of that term. I thought they made it up so I had to go look it up. It's actually an economic term and I think I got a question last time I was here about the last great recession and we talked about that a little bit. So recessions, if you recall 2008, it's two, three, four quarters and then the recession's done and then you go into a recovery. They they categorize this growth recession sort of like the recovery we had after the last great recession where we pretty much crawled out after that significant downturn. So all of those factors are impacting his proposal. And so I'm going to let Patty talk a little bit what's happening

018on the education side. Um, in general, I will say this, uh, we fare pretty well based on the circumstances. The other side of the budget is taking significant hits. And so that discussion is going to continue with the legislature. And remember, the other side of the budget serves a lot of the same populations that we're serving under Prop 98, uh, K14 education. So, that's sort of an overview, but I'm going to let Patty go into a little more detail. Thank you, John. Hi, everybody. It's good to be here with you. If we can advance to the next slide. Thank you. Um, so before I explain what this slide uh um illustrates to all of you, I just want to say that as the governor proposed his May revision for education, we saw a modest increase

019in one-time dollars, but we the picture changed pretty dramatically for the worse um from his January governor's budget. Um, I can tell you that he has a lot of proposals that um, Chris and his team can go over with you guys or we're John and I are happy to do that as well. But in our minds, the only thing that is near certain, and I would tell you I'm not even certain that it's certain yet is the the governor's u proposal to fund the 2.3% cola in 2526. And the reason why I am hesitant to say, "Yep, we're going to see that in the adopted budget is because in order to pay for that, COLA, the governor is relying on one-time resources because there's no the the Proposition 98 minimum guarantee is dropping as you

020can see in this chart by 3.7% from where where we are uh current year in 2425. So that means that the minimum guarantee doesn't have the capacity to fully fund all of the bud uh education priorities that were included in the January budget including a 2.3% cost of living adjustment. So he is using uh uh the mechanics of uh deferrals as well as draining the education rainy day fund to pay for the 2.3% uh cost of living adjustment. But I think as John was saying, this is this is just a year. This is a a graph that shows you year-over-year change in what we call the big three uh tax revenues. It's personal income tax, sales and use tax, and corporation taxes. Combined, those taxes make up 97% of all general fund revenue, which drives

021Proposition 98 and and education um fund uh education revenues as well. And that's why you can see in the dark blue bars just on a trend line, the dark blue bars follow the long-term trends of the light blue bars, right? Which are the um the uh big three um uh taxes for California. I think the thing that I would like to really point out to all of you is that we see we're seeing in the May revision that 3.7% drop in the minimum guarantee from 2425 to 2526. That is not our assumptions. That is the governor's assumptions when he issued his May revision last Wednesday. What what the governor's May revision doesn't show is the second assumption in 2627. That's not anywhere in his pages unless you dig deep into the bowels of the revenue

022estimate section uh to find this number. And what this number shows you is that in 2627, the Proposition 98 minimum guarantee is only estimated to increase by 1.6%. So that year-over-year increase from next year that you guys are building your budgets for to the following year will not even likely be enough to be able to pay for what we would anticipate a cost of living adjustment in 2627. In fact, the governor's may revision um uh does include an estimate for the cost of living adjustment in uh 2627 and this estimated growth is not enough to pay for that cost of living adjustment. At the end of the day, what that tells me is that we're going to have really lean budgets, not just in 2526, but also in 2627 when the state of Cal when

023the governor releases his January budget uh in uh January of 2026. So, we just wanted to show show that slide to you and happy to break this down um into any if you guys have any questions about the me mechanics of Proposition 98, I'm happy to answer those questions for you. The next slide. Thank you, Chris. Um, this is a slide of again looking at the big three tax revenues. Once again, these constitute 97% of all state general fund revenues. The top light blue parts of the bar are what we call proposition and propos proposition 30 and 55 revenues. So, you guys might remember in 2012 and then again in 2016 um the California voters um approved tax increases first on sale uh an increase on sales tax across the board. Those expired in 2016

024and then it uh Proposition 55 extended the personal income tax rates for California's wealthiest earners. Right? We we decided we needed money. The state of California needed money and the way that we were going to get those monies is we were going to tax the the state's wealthiest earners. And that blue bar represents how much money Proposition 55 generates for the state of California. So you can see here in 2425 it's almost $15 billion Proposition 55 brings in. Um in 2526 it's almost 12 billion. And then it's estimated in 2627 that it's going to draw another 11 billion dollars. The line across the lower parts of that bar, that's Proposition 98. That's education funding um as it relates to the big three taxes. The reason why we're starting to show this slide is because the

025blue the light blue parts of the bars are going to go away without voter action in the in 2030. And people are starting to pay attention to this because it constitutes a pretty sizable percentage of the revenues that we all rely on, not just for the state general fund, but also for Proposition 98. Because that light blue part of that bar gets deposited into an account, a restricted account that we call the education protection account. And that goes to all of us, including all of you in in this room. And so voters don't if the voters let Proposition 55 expire in 2030, that's going to create a big hole in the state budget of, as you can see, anywhere from 10 to 12 billion a year annually is what that is. So the state's looking

026down at this at, you know, at the potential of this happening. There's a lot of us in education in on, you know, the management side as well as on the labor side really starting to pay attention to this because we know that we rely so heavily on this. And then lastly, as as John um noted in his opening slides, we talk about some risks um that we see to the state budget. If you can move to the next slide. Thank you. So the risk that we see um to the May you know the May revision is that um for particularly for education the constitution requires the state of California to fully deplete the education rainy day fund. Um it's a the the governor's may revision take takes a withdrawal of $540 million and he uses

027those dollars to buoy the local control funding formula to so that we can fully pay for the cost of the local control funding formula in 2526 as well as on the c uh the community college side their version of the local control funding formula. So bas basically what that means is if if the economy or our economic conditions or our state general fund conditions worsen we we will not have an education reserve account to dip into. So the if the state if the conditions worsen the state is going to have to consider other ways to plug a hole. We we won't have that anymore. The other thing that we noted in Governor Nuome's May revision is that as John said, while he describes that this growth recession, his May revision does not assume an economic

028downturn, it does not assume an economic um contraction. And then the governor himself highlighted the risks that are included in the assumptions that he used to build his May revision. those risks being that larger macroeconomic trends um and particularly the um uh economic conditions that are being spawned by federal changes in federal policy. Specifically, California, our lawmakers are really really worried about any changes that our federal government could make to Medicare and Medicaid. And the reason why they're worried about that is because California this year we spent $178 billion on medical alone. Let me just say that again. $178 billion on medical. Proposition 98 for comparative purposes we're at about $120 billion in education funding. So medical costs exceed Proposition 98. $178 billion expense. We get over a hundred million dollars billion dollars excuse me

029from the federal government to pay for medical. If there are any changes to federal medical Medicare and Medicaid policies that could have a trickle down effect on our state general fund in which case we are not in any budget position to absorb those changes uh made by the federal government. We all have seen in the news, I'm sure you it's unavoidable, especially here in Los Angeles with, you know, one of the nation's largest uh ports. Um the effect of uh um President Trump's um proposed trade policies and tariffs. We're seeing that have a rippling effect on the economy. We're not quite sure how this is all going to shake out and the dust is going to settle around these tariff policies. But because California is the fourth largest economy in the world, this affects these

030trade policies and these tariff policies affect California disproportionately relative to the our other 49 friends um and states um in in the nation. And finally, of course, um um federal changes to immigration policy. California's low-skilled um industries and our farming industry, which are in many ways the bedrock of our state economy. We rely so heavily on our immigrant communities and that could have an effect on our jobs market. As John noted earlier in his slide, it could cause some contraction in our job market and it really could lead to a contraction in our overall economy as we don't or were unable uh to continue to produce at the levels that we're um producing at. All in all is that we see these risks on the horizon and none of these risks are included in the

031governor's budget, the governor's may revision. So, if any of these should materialize, the question is, what condition are we in in the at the state of California to be able to absorb any economic shocks um to our system? And I I think as noted in the governor's may revision, the state budget is not in a condition to absorb shocks. And so I don't for you know as it relates to public education um we you know one we're seeing the year-over-year growth pretty flat um in Proposition 98 funding and our if the if we were to experience need a need a deep need in education the state budget is not in a condition to help us out on the education side of the budget. So, I know I I didn't I don't mean to be gloom

032and doom uh more than it is just to share with you all some of the u take the big takeaways that we see from the May revision. I'll pass it back to John for any closing remarks. And uh I would just conclude we we do applaud the governor for proposing what he did. Um uh pretty much trying to stay to his January proposal, but he had to do some financial gymnastics. And I think if there's any risk, unfortunately, it's probably downside risk. Um, and so, as I said, I spend a lot of my time in districts. And so, these meetings like this are happening all over the state of California. Um, you're very fortunate to have uh a a sound fund balance. not all of your uh not all districts are in the same position

033to than you are and so they're having to act like this year already executing uh job reductions. Unfortunately, some districts are having to close schools. That's about the hardest thing you can do. So, um, if if there's any positive message, uh, um, your past behavior and how you've management have prepared you to address what's coming better than a lot of districts that we're working with, but these conversations are statewide and these tough discussions uh, uh, are ongoing. So, we wanted to stay within our time and we're happy to take any questions you may have. So, That was very uplifting, Patty. Good job. Hi. Um, yes, very gloomy indeed, although not necessarily unexpected. Um, I was wondering if you might be able to speak to what are the impacts of the governor utilizing a tactic like

034deferrals. Does that have any um tangible impact on on school districts immediately for the immediate term? Deferrals are his way of helping to really keep uh education funding really at the local level harmless, right? Because if he were not to institute the one point, it's a total of $1.8 billion on the K12 side of deferrals. Um he would have to make those through cuts, you know, in the in the education budget. so as to recognize the devastating impact that especially cuts at this point would have on local districts. The governor is using really an old budget tool that we saw used quite frequently during the great recession um of of deferrals. What that means is we're just pushing the obligation in the outy years. They usually the state of California hopes that the Proposition 98

035minimum guarantee grows enough to actually retire the that debt. Um, and it but it could very well be just given that year-over-year growth in that chart that I was showing you, we might be living with deferrals for the next 2, three, four years. And if let's just say in 26 27 COLA is 3% and the minimum guarantee is not enough to cover the cost of that cola um they may actually increase that debt increase the amount of deferrals um so as to avoid but but um our friends at the legislative analyst office they really caution against relying on that budget tool because you're just push at at some some point in the future you're going to have to pay off that debt and um So they they could use that, but but it does absolutely

036have a a budget impact um on Proposition 98, but recognizing it's a tool that the state of California uses so as to avoid local cuts. Yeah, you will have to deal with the cash flow implications. It's not for a very long time, but your business staff are going to have to monitor cash. Um during the Great Recession, the deferrals were so huge, it would wipe out entire fund balances, and you'd have to go out in the market and borrow cash. But this is just a one-month deferral. So, but it is a cash flow issue. Thank you. Um, and then I know over the past budget cycle there have sometimes been um like not equal revenue estimates or deficit estimates from the governor's office versus what the LAO has has put out. Is it possible that

037what the governor's relying on is besides the it doesn't plan for a recession, we don't know the impacts of federal uh decision-m. Is it possible that that is a rosier picture than um other state entities are estimating in terms of the revenue? The governor's uh may revision estimates um revenue estimates are actually uh bleeer than the legislative analyst office. The legislative analyst office actually released ahead of interestingly enough I called my my buddy at the LAO and I was like you guys don't usually do this. You usually wait until the governor issues his May revision. He's like, "Yeah, but we thought it was it'd be really important because of the effect on Proposition 98. People were you guys have been reading in the news that right state revenues are outperforming governor's budget estimates, but it

038actually had a negative effect on Proposition 98." And it's this really weird technical thing called the maintenance factor, but happy to happy to dive deep in that if you would like me to. But um and so they felt that it was important and when the LAO came out with their revenue estimates on May 7th, they actually came in um more optimistic than what the governor came out with um a week later. Okay. Thank you. Um and then my lesson, sorry, I know others are maybe waiting. Um, with regard to the potential effects of the uh Medicare and Medicaid conversation at the federal level, which I know is happening in in real time, uh, when the governor released the May revise, did he speak at all about um, you know, contingency planning that the state may

039be doing in terms of how we would fill any gaps should those cuts materialize? I can't tell you what he spoke to because I was really busy when the govern the governor went on for like four hours on it during his press conference. But I can tell you included in the May revision is des somebody described his medical uh proposals as a slash and burn. So already in the May revision, the governor is instituting changes to the medical program to reduce California's risk exposure in the long term. Um part of it is um capping participation for undocumented immigrants. That's been a big a big one. Um a work provision uh related to medical um eligibility as well as other things. But the way that this person had described it to me was basically um all

040the in to their view improvements in the medical program that have been made over you know the last 12 years have been completely undone in the May revision. Thank you. Um what uh two questions. one, I guess, what happened to the um I've seen 1.3 billion, 1.7 billion, like the Prop 98 holdback um and what's going on there and there's been a change since January. And then outside of um Prop 98, one of the things we've been hearing about is ELOP money that's been swept up by districts that haven't used it and given to districts that are using it and also the Children and Youth Behavioral Health Initiative and other like nonprop 98 sources of state funding that districts like ours can tap into. And I'm just curious if you can shed light on any

041of those kind of additional sources. Okay. So, with respect to the governor's proposal to delay um appropriating um funding, Proposition 98 funding for school districts in the current year 2425. It's important to recognize that this is a 2425 Proposition 98 issue. And the governor's January budget was proposing to withhold 1.7 billion or $1.6 6 billion um from sending it out to all of all of us um here in in this room and and our th 999 colleagues across the state of California. We did see a reduction in the May revision down to a withhold of $1.3 billion. But it's important to know that that is just math. That's because the guarantee dropped by.3 bill3 $3 million or 3.3 billion $300 million. And because the Proposition 98 estimate dropped by $300 million, then the delta between

042what he's withholding and the minimum guarantee drops. Basically, let me just put it in lay terms. The governor is proposing to appropriate $17.2 billion. In January, he thought that the guarantee was going to be 119.8. In May, it's actually 1818, I don't know, $3 billion or $3 billion, right? So because of that redu the the amount that he's proposing to appropriate out hasn't changed since January. It's just the delta between what is the constitutional minimum and how much I'm going to I'm going to um send out to school districts. I will tell you we did a little bit bit of math as John mentioned. We have a a little workshop to give on on Wednesday with our 200 slides and we did a little bit of math on this and if the governor were to

043appropriate the 103 bill the 103 billion out um to K12 school districts based on their share it's about $214 per kid and that's just assuming that it would go out on equal on a per ADA basis. Um, so I mean that's a it's a sizable from a low from a state perspective withholding$ 1.3 billion dollars is pretty significant. We've never seen this before. John Gray created a term for it. He calls it psychic settleup. It's a Prop 98 joke. I'm sorry. Um, only John laughs it at at it. Um Um, we've never seen we've never seen anything like this a proposal like it. So it is significant. But even when you when you when you take what it could mean in terms of local resources, like really like operationalizing local resources at $214 million per

044ADA, I $214 per ADA, that could be pretty sizable. Oh, ELOP. So the recaptured funds of unused funds, that was part of the 2024 enacted budget agreement. So that was a that was an agreement that was you used last June and that basically the state of California enacted a policy that said if you don't spend all of your ELOP funds then you you report your unexpended funds to the California Department of Education. Uh Tony Thurman and his team um go out and they collect all the unexpended funds and then they redistribute those funds for what we call rate districts. So so they're districts unlike yours. They're districts whose unduplicated pupil percentages are below 75% of um um high need students and then it goes out to those districts on a per uh throughout out through

045their allocation formula. And that's just because they have been hearing from rate to districts that year overyear their per pupil ELOP funding has actually reduced. And so they've done nothing different. they've not cut their programs and in fact maybe they've even expanded offerings um to their students and yet on year-over-year revenue in ELOP has diminished because because here's the thing the way that the ELOP uh program works is any district above 75% up you get a guaranteed per pupil amount but the state of California only they they said here's your 10 bucks we're going to we're 10 bucks is going to fund all of California here's the tier one districts you know whatever they don't take whatever the rest of that pie is, then we'll distribute it to rate two. So that's why that that's

046why the on a dollar for-dollar basis, on a per pupil basis, that pot has been diminishing for rate two. They've heard this loud and clear. They're worried about those districts because those districts could start closing programs. They could start saying, "I can't. This is not sustainable for me." And so they made that decision last year. The governor's May revision, and I know Chris and his team um will cover this for you as well in the January budget. um and it's extended into the May revision but at a higher estimated cost because I think the um the department of finance underestimated the cost of this proposal was to expand what we call universal ELOP. You guys are a district that has to offer universal expanded learning opportunity programs right to all of your TK through sixth

047grade students. It doesn't matter if they're not lowincome, if they're not English learner, you have to offer it to them. any district below 75% they didn't have the universal requirement. They only had to offer it to their highnee students. What the governor's proposal says is now what we want to do is we want to move expand universal by um by cutting cutting off the eligibility requirement at 55% and 70 instead of 75% up. That comes at a cost of $515 million per the per the May revision. Um, and so the ELOP program would go would grow from a $4 billion program to a $4.5 billion program. But importantly, those dollars will not come to an already rate one district like yourself, right? Um th those dollars are not designed to help you expand your universal

048offerings or expand the offerings to your students. Those dollars are intended to move some districts up into the universal program. Does that make sense? Uh, it does. And just can you touch touch on the CBHI and whether that's affected at all by the proposed Trump cuts to Medicaid or any of the like the the I think it's 4 billion for the California Youth Behavioral Initiative. Unfortunately, I'm not in a position to answer that. I don't know if John, you are. We're happy to get back to you on that. Great. Thank you. Great. Well, we really appreciate you coming. Okay. All right, folks. We're just going to uh tee up the next presentation and get started. Uh there are paper copies circulating. Uh they're electronic available uh after the fact. Uh there we go. It's already

049ready to go. Uh so the budget workshop is going to Whoops. Give you a minute. Okay. We are going to focus primarily today uh on illustrating some points uh that our interim presentations don't necessarily always focus on. Uh that is going to be uh some of the reasons for our deficit, a little bit about the difference between a structural deficit, fund balances or carry forward uh as well as our net position as you see it go out in the multi-year projection. And I think we're okay to start. So, uh, the agenda for today, uh, we're going to very briefly go over, uh, the May revision. The majority of that was already done. We do have the summary in a bullet point format, uh, that that's been shared so that folks have an opportunity to see

050it in one place, although it is a busy slide. We know that uh, we're going to be looking at insights leading into our budget presentation for budget adoption. Of course, budget adoption, the hearing will be on June 17th and on the 24th will be the actual vote. Uh we will be looking at the latest multi-year projection. Now, this latest multi-year projection excludes any health care variances, which means increased costs to to providing health care in the future, as well as any bargaining unit agreements because we have not settled on any. We cannot include the costs of multi-year agreements in the multi-year projection until they're actually voted on and approved. And then there'll be time for discussion and asking questions. Uh something to keep in mind as as you're looking at all this, notice that what

051I'm saying is for the fiscal year 26 adoption, this is the first time that we've done this in this district, but today's numbers are a draft preview of what you will actually be receiving the hearing and voting on next month. So, they will change as we continue to develop the budget, but they're pretty solid. So, they may revise uh what John and Patty were just illustrating for us. Uh COLA is now down to 2.3% instead of the 2.43 that was what was uh announced in January. Uh the Prop 98 guarantee is $1.3 billion less in order to not overappropriate. It exhausts the Prop 98 reserve. There's a $1.8 8 billion deferral for our payments from June to July. That was mentioned briefly uh by both Patty and John. What does that mean? That means the

052money we get to run the school district for next June, we will not receive in June. We will not receive that money until July. So in delaying our aortionment for that month, they save themselves a little bit of money. They delay it. They still give it to us. That's when cash management becomes really important because as you'll notice from today's presentation, our cash balances will be fairly low at that time. So cash management is going to be important. Uh it reduces student support and professional uh development discretionary block grant to 1.7 billion. Increased ELOP by 515 million but you heard we are not getting any of that. 200 million one time for PD for evidence-based reading for elementary schools and 100 million one-time for stipens for student teachers, 90 million in additional ongoing funds for

053universal school meals, and a reduction of unspent school facilities funds uh from the general fund. Uh so largely what you're hearing there and what you've heard in more detail uh already is that we are not going to be getting more next year. In fact uh our revenues are going to stabilize and we're going to go be going through a very low growth period. You couple that with our declining enrollment that means less revenue per school year. This is an interesting slide. First time that we've that we've provided this. This is an interesting look that illustrates something special that was happening during COVID. This is a compensation versus revenue. By the way, this is all operating funds of the school district. Not capital funds that the money that we use to build buildings or modernize them,

054but operating funds. So, this includes things like our general fund, our early childhood education, our nutrition services fund, as well as our adult education funds. Why is this chart important? Well, the orang-ish reddish line up here is our total compensation salary and benefits by year going back to when COVID started in fiscal year 20 to present day. And these are all actual numbers. Next year is the only projected one up here and it's projected straight line based on our current compensation. Notice that as a portion of our revenues prior to COVID, 83% of all of our revenues were used on compensation. We're a people business. That's not unusual. Salary and benefits. But look what happened during COVID. Compensation goes up, but we were using the one-time money we received to increase compensation. So now this

055year when we no longer have the additional revenues, look at what that percentage of our total revenues being spent on compensation. What happened to it? It went from a previous high of 83%. To this year, and this is actuals, 91%. Next year we're going to be at 93%. It is unusual for a school district in California to exceed 85% is considered high because we still need revenues to pay the lighting bill, to pay the sewer and water bill, to pay for trash pickup, to pay for all of those supplies and materials. This is just compensation. If a district looks at its other expenses, ours are far higher and that's what we're also deficit spending. That is another way of looking at it, right? To be sustainable, we probably need to get back to as a

056percentage what we were precoid. Maybe a percentage or two off. 85% is still considered high to spend on total on compensation as a portion of your revenues, but we have to get back in that direction to be sustainable. This illustrates the deficit. So remember I said we were going to talk about the difference between fund balances and deficits. Again using the same colors, these are now all expenditures for the same years as compared to revenues. What you'll notice is that last year and that was remember the last year that we spent out federal esser money COVID money last year was the last time in the foreseeable future that our revenue exceeds expenses. This year is a normal revenue picture fiscal year 25. There is no federal COVID money in here. It had all been spent

057out. And this year you can see that indeed our expenses are far exceeding our revenues. This is what a deficit is about. Why is it structural? Because in the years that we're looking forward, notice it's not changing. So every year we are going to have to spend more than what we're taking in. And just like your household income, if you are spending more than you're getting in, at some point you're going to spend through your savings. And so I want to encourage all of you to think of as carry forward and fund balance as your savings. That is what we're using to make up this difference right now. The impact of sustaining our workforce, like you said, we're a human business, right? Every school district is uh many of us in here are teachers, still

058a teacher, principal. We operate on human resource. It's our biggest expense. That's okay. pay as long as we can pay for everything else. Our priority has been in providing enriching learning environments for our students and our workforce is integral into achieving that goal. We are proactively evaluating and implementing sustainable strategies to minimize the impact of schools. What does that mean? That means this year during our strategic budgeting in all of the departments that operate without direct participation 100% of time to schools, in other words, central offices, regional offices, we have frozen vacant positions after they've been vacant for 180 days, six months, and we've closed those positions and swept the balances. Right? So, we have central offices here. We have some buildings that are that are extensions of the central office and we have done

059that throughout the district. That has helped improve our net position while not doing any reductions at school sites. During this year's budget development, approximately 2400 employees had positions that were not funded by a school or office as they were redoing their budget for next year. That's been something of a of an issue in LA USD. We allow offices and schools to hire a person in a position one year and if they don't want that person or position or if they can't afford it the next year or if they want something different they are allowed to completely change their pattern of employment which means that we have people who have lost the funding for their position who we have hired on as permanent employees. Right? We had 2400 of them this year at the close of

060budget development. We have been able to successfully move people with the assistance of PC and HR, this is their work, into funded positions, but there's still a delta of what we have not been a folks that we have not been able to find a position for. And as of this last week, that position, that delta, that difference, we still have,00 folks who have not been funded by their schools or offices this coming year that we are uh carrying on the books into the year for stability. The maintenance of those unfunded positions is approximately $60 million right now. So now we look at fund balances. So, these are frequently confused by folks. I've also they're carry forward. They're fund balances, essentially money we've gotten in past years that we haven't completely expended. I've also heard these

061referred to as reserves. An item is not a reserve unless the board acts on making it an official reserve, right? Which is a little bit different, but these are carry forwards or fund balances. This is really important to look at. We have broken out all of the different components of the fund balances. And I'm going to start with uh the year that's most to your left, right? So in each one of these, you have all of our operating funds denoted by color and balance from year to year. So the the top little slice there that says 99, that's our child development fund. That's for early childhood development. It operates outside of the general fund. It is its own fund. So that was its fund balance. Again, encourage you to think of it as the savings

062account for that program. The yellow is the cafeteria fund only available for the cafeteria and nutrition services. When people see a fund balance, they say, "Wait a second, we can spend that." We do spend it, but it has to be spent only on nutrition services. It's restricted. Same thing for early childhood development. The 59, adult education, restricted only to adult education. Beneath that, you see a little gray bar. It says 245, and you see it going down a little bit. That is the statutory 1% reserve. School districts are required to keep a certain amount of reserve by state law. That's what statutory reserve means versus our local board reserve. It's 1%. We're the only district that gets 1%. I believe we're still the only district. Yes. Just looking for confirmation there in case something changed.

063We are the only one. Most districts it's required for two and 3%. Okay. That is not spendable. If we spend that money, we are in negative C at best or potentially lack of a going concern, which is our nice way in the state of saying bankrupt, right? Because you no longer have enough cash to be funible. The little purple band right there, whoops, purple my There we go. Assigned, right? That's general fund assigned. Those are assignments made either by resolution or policy uh in the budget by the board. The next little band red, that's the general fund restricted. That's your title programs, title one, that's ELOP, that's Prop 28. Those are all the monies that we have, but they can only be spent on exactly what's described in the language that they're provided for. And

064then we have this big green band here and that is general fund unappropriated unassigned. That's our fungeable money. That's the money that we can spend as the board wants us to. So you can see that in fiscal year 24, that's the year that we're coming to a close on. Um last year, uh there's about $7 billion in various carry forwards. Various carry forwards. These are again those individual programs savings accounts. You go into fund 20 fiscal year 25. All of these years uses the same color coding and what you can see is some of these programs have their amounts go up or down. But the important one to pay attention to, I always tell the board this right in open session when we're going through fiscal reports is this green one. Right? It's the reason

065that we usually focus on that so much because that's the one that we have control over. Look at what's happening between 24 and 25. This is what tells you that we are in a deficit position. Our fund balance is going down. And how do you tell it's real? You track it with cash. So we do cash monitoring and we actually see the cash in our accounts going down at this same rate. So last year 6.7 almost 6.8 billion. This year in 25 five almost 5.2 billion the only difference between these two years less cash. Yes. And when we reduced the assignments and the commitments to make this green bar larger one of the things that was was in there is the board's local reserve. So the only difference you see between here and here still

066less cash less less uh fund balance is the 5% local reserve which we are now including in here so everybody can track that as a part of the carry forwards or the fund balances for adopted budget. So remember these are actuals actualized at this point. We have a we have a couple weeks left for this one, but it won't change significantly. For adopted budget, like I said, first time we are giving you a preview of the adopted budget. This is what next year's fund balances look like as we adopt a budget in June to begin July 1. Notice we've been trying to protect this general fund unrestricted. It hasn't gone down as much as these others because we've been spending these others down to protect the general fund unrestricted. So the board has flexibility, but

067we are continuing to spend this green band to fund our deficit. So after next year, all that's left, after the adopted budget is under $200 million. And remember, there are no bargaining agreement costs and there are no increases in that year of any provision of health benefits. No increases. So it's flat. So that tells you that after the current year that we're going to adopt budget on, we are out of money to carry the structural deficit that we've been carrying. We saved a lot of our money. There's a lot of districts that have had to do dramatic things both last year and this year because they weren't able to save as much money. We are rapidly depleting those fund balances. So again, think of it as a savings account. The savings account is going away.

068Not for a bad reason. Not because there's anything nefarious going on, but we have chosen to spend it to maintain and stabilize our workforce for now. Knowing that unless we are budget hawks and somehow get cost down, we have fewer and fewer options going into that year. in 28 currently until we fix it here. Currently, you can see that that green sort of shaded spot that shows you the size. It's this is not the size of the deficit. It's it's fairly close, but it's not the size. This is how far we go into the hole in fiscal year 28. We are legally not permitted to do that. Right? That's lack of a going concern. But we are adopting a budget. So here's our new budget adoption from FY26 forward. We are adopting a budget current

069year plus two that for one of those years or more we cannot afford all of our expenses. So we will be adopting a budget that is qualified. Some people call it conditional because we are not going to be able to meet having enough money to pay all of our expenses. That is what results in a fiscal stabilization plan. So when we get to that point, a board of education goes into oversight with the county office of education on behalf of the state to make sure that they are having a plan that they're implementing to get back to a an even balanced budget and that that is monitored at every interim report to make sure they're making the progress that they have committed to to balance the budget within that three-year period of time. So, what

070will fiscal sustainability look like in Los Angeles Unified? The structural deficit, not the amount the fund balances go down, that's included in there. The the the structural deficit is about $1.4 billion. Again, that's better than where we were at the beginning of the year. We've improved that by cutting around the edges. There's not a lot more that we can cut around the edges, but we can be strategic and try to cut more. This does not include, I keep saying this so that everybody remembers it, it does not include any future labor agreements or negotiated salary or benefit changes or the increase in costs that we don't know about yet. Next year in the FS fiscal sustainability program, you will notice that we are leveraging next year we are spending down the rest of the district's

071general fund uncommitted balance to provide us for a planning year while the fiscal sustainability plan is in place while we are being monitored to make progress on balancing the budget. So that's what we're leveraging next year to do. So in June on the 17th you will have a budget hearing and you'll have a fiscal stabilization plan to approve and then on the 24th we'll come back and we'll adopt a qualified budget and all of it will be submitted to the county for oversight. The board can revise the fiscal stabilization plan at the first or second interim reports by providing input to myself and the team and we make the changes and then you reapprove like you do the budget at the first and second interim. So for fiscal year 25, we'll be implementing strategic budget

072for central offices. We've done that already. We've swept unspent dollars and used a hiring freeze and saved over hund00 million to improve our net position. We maximized restricted funds for another hund00 million of general fund relief and we eliminated carry forward for all central office programs. However, we will be adopting a qualified budget for 26. So in 26 we will implement the fiscal stabilization plan. We will continue maximization of restricted funds and we will identify reduction opportunities including clo closing vacancies, sweeping unspent dollars and implementing tiered equitable strategies to optimize the workforce for fiscal year 27. In 27, we will continue implementation and we will continue county oversight to make sure that the stabilization plan uh is in place and having the impact that it's anticipated. We'll assess additional vacancy closures, maintain the hiring freeze

073and enact staff reassignments and reductions enforced. We'll identify and revise cost-saving strategies for fiscal year 28. And then at that point it becomes wash, rinse, repeat. It means that we stay under the opaces of oversight with the county uh acting on behalf of the state until we reach balanced budget uh and can show that we are managing our finances without the oversight. This just tells you that the uh stabilization plan as I already explained is required. Uh we have to put it in place because of our financial obligations not being met for the next two years. uh but we do have a planning year uh built in there and we are under the oversight of the Los Angeles County of Education. So this is and we have to show for all three years to maintain

074a balanced budget. So this is the proposed fiscal stabilization plan to address the $ 1.4 billion deficit. So please note a couple of things at the bottom. Currently, currently fund 17 has 5% reserve. It's a board reserve. It's calculated every year. You'll notice that the reserve amount slowly goes down because 5% is different every year. And as our expenses go down a little bit, the reserve is a little bit less, but currently it has a balance of 532 million or 5% in fiscal year 27. The stabilization plan does not include the use of the board's reserve. If the board wants to change its reserve policy, they can by simply having a majority of the board direct me to change it and and what to do with it. But at this point, the 5% statutory or

075I'm sorry, the board reserve stays in place. There is no way to change the statutory reserve of 1%. All of the assignments and commitments are assumed to have dropped in fiscal year 27 to maintain workforce and not special initiatives or resolutions. So these lines in the fiscal stabilization plan the first line and board members have seen these in in iterative discussions before but the community has not as much. So I just want to walk through them all carefully. The first one, reassess school carry forward policies or carryover policies by need for fiscal year 27. So, Los Angeles has a long-standing practice of leaving allocations at school sites and letting school sites, meaning elementary, middle, and high school build up their own reserves instead of spending the money they're getting that year on the students that

076they have. They also have discretion over that money. It's out of line with state practice or guidelines. We've known that. But we've been able to afford it and allow folks to have far more uh authority on autonomy at their school sites. To balance for the fiscal stabilization plan, it calls for discontinuing that practice in fiscal year 27 to mitigate the number of layoffs that we would have to do or reductions we would have to do. By fiscal year 27, the estimate is 380 million of carry forward that would come back to the center to help pay for the expenses that exist annually. We anticipate this these are estimates remember that $65 million would be swept. What does that mean? And that means at the end of the school year, anything that wasn't spent of general

077fund, which includes SENI, we would take back to the center and we would reallocate it a new out to school sites the next year for the next year and the next year's students. This is the way that most schools in the state of California operate. It's considered best practice and so that's the proposal and it directly impacts the number of other reductions we would have to do. Number two, cap and norm positions in fiscal year 27. So related to the first one and the amount of money that's being carried forward in at school sites, we allocate a portion of the general fund as discretionary money for our schools to do their own hiring. Right? We are not suggesting that we don't allocate that money anymore. We are suggesting in the fiscal stabilization plan that we

078go back to the precoid level. So currently we've been allocating 700 million. This brings us back to five which is what we were precoid and we had more students back then. So we're going back to a five in this proposal with 400 million being normed. In other words, that we come up with a formula looking at what these schools are spending their discretionary money on for hiring and we give the schools the most frequent things that they're hiring. But then the center, the district pays for the employees, including the increases in cost year-over-year, moves the employees back to being working at the central site. This will remove the issue that we're going through now. Whereas employees are hired for one year, become a permanent employee, and then the sites choose that either they can't afford

079them or they want a different staffing pattern the next year, which then creates employees that are not funded, that we have to find homes for, or that we can't afford, which is the pattern that we're in currently. The third line, reduction of unfunded positions. Previously, we talked about the fact that even if you don't find funding, we have not done a reduction for years. That amount of money that it costs the district varies yeartoyear. I've seen it as low as $45 million. I've seen it as high as $120 million. This year, we've made those moves. It's $60 million. Whatever it is, we need to protect the workforce that is being assigned, that is being necessary. And so the third line is to reduce any positions that don't have funding for that year. The fourth line

080says to consolidate the district footprint, campuses, and programs and and evaluate academic return on investment. That means that we need a plan. This is something that strategic initiatives has been working on for a number of years as far as the ways to do this, but we need to start really looking at a plan that consolidates our footprint. We are now operating over 900 programs and campuses. Our average elementary school, less than half of them have under 300 students for the entire school, TK through six. Secondary, more than half are now under 500 students. It's not an issue that we don't want small community schools, but you start spreading the resource so thinly that people can't even fractionally get a part of an FTE or a service that would help because we're spreading the resource so

081thinly throughout the entire district. So that's the footprint. We have put in an estimate of what that would save after consolidating campuses and programs. uh that could that could be higher or lower depending upon the approach from strategic initiatives and the direction of the board. If it goes higher if we save more and that's true for all of these these are variables. If it goes up that means that other reductions will go down. Okay. Uh the next line is to reassess the effectiveness of earmarked unspent investments. This was by board request that there are special investments that have been made by resolution or by direction at some point such as tutoring uh such as Senny that they be evaluated by instruction and strategic initiatives and that if any are not showing the impact desired initially

082that they are discontinued because that means that the money is not showing the impact that was desired. So, that's something else for that that planning and study year to address. Strategic closure of vacant school positions annually in February. Uh, this one's a little misleading because it's not really closure. It's sweeping of funds. What does this mean? And that means that if I'm back in my principal role and I can't find two people classified, certificate, it doesn't really matter, that are not statutoily required, such as a special education teacher, and it comes to February and I'm recruiting and I can't still find them because we're in a deficit, we have a hole that's growing at the center that we need to fill. So every year in February, the positions will still recruit, but we will take

083the money back to fill the hole in for the whole district as it's opening. This helps us fill in the hole annually. Now, those positions reappear at the beginning of the next school year. And if you hire them between February and June, you'll still have the money, but we'll take the cash to fill in the hole that's open in the district. This actually helps so that every year we have the money centrally to fund all of the positions that we already have on the books. Second to last one here, bring students closer to their school of residents. That is largely about special education students, but also other students that we transport throughout the district long distances. So, what's the idea? The closer we can get our kiddos to their home school, the more opportunities they

084have, whether it's least restrictive environment, whether it's inclusion, but also for our students not to be spending hours on a bus driving from one side of the district to another looking for a regional program and not being a part of their local school community. Okay, not a huge savings, but it'll help. And probably more importantly, uh those students will not be on the bus for as much of their educational day as they are right now. central operations non-school-based reductions. So at this point, whatever savings we can't yield up here, we have put those savings down here. What does that mean? That's that is a reduction in central office, central program positions and FTE. 70 million was how we hit the numbers to be able to submit a plan to get to $1.4 billion of reductions.

085That equates to about 17 and a half percent reduction of all central staff. Right? If we can save more in some of these other buckets, that number can go down. If we save less, then it would have to go up. But the goal was we have to submit a number to the county that demonstrates that we are attacking our long-term deficit. Now, please note our strategic budgeting this year. We closed over 3% of all of those central vacant positions. This is on top of that. It's on top of that. So after the fiscal stabilization plan, how will this make our multi-year projection look? So planning year, so fiscal year 26, the one that we're about to adopt, does not change. We are going to spend this green bar to support all of our staff and

086our big deficit. the stabilization plan year one. If we implement, notice that the green bar grows so that we have enough time to then implement the next year. And if we implement it, we are stable for fiscal year 28. Now, I've already had people comment on this slide. Wait a minute, you're stable, but all you have left, all of your carry forwards are gone. The only thing you have left on this slide is the 1% required by the state and the 5% that's the local board. That's correct. So there's no more green money. This does imply every year you're going to have to continue that pattern. This just meets the minimum requirement of balancing the budget for this three-year period. It doesn't do more than that. So these are the assumptions for the budget adoption

087which we'll be going into detail in June. We preserve our unfunded positions because we haven't done layoffs for the last couple of years during our deficit period. We maintain the board reserve at 5%. The June adopted budget will be qualified. LEO requires that a fiscal stabilization plan be approved in tandem with the June adopted budget and it includes funding to protect against federal uncertainties pending board approval. I'll go into that a little bit more on the last slide. And so we still have budget priorities, right? Um we still have strategic investments that we want to make because we know that it's important. We've decided not to do reductions, but we have to preserve and even build on some programs. So we have increases here. Superintendent, would you like? Yeah, I'll jump on these. These are

088some of the areas that I referenced. Uh even though we are moving forward with reductions, necessary reductions in some areas, an equity based budget still advances additional investments in key areas to the extent that they address perennial historical needs in our schools. That is the case with BAP. BAP is uh has been funded initially at $und00 million. Uh I remember two years ago we increased it by 25 million and I believe it is appropriate to increase it by an additional 25 million for FY26 uh arts and schools. We we put it here because I suspect I actually anticipate with all certainty that we will uh provide a significant supplemental um allocation for arts in schools. But I'd rather for a number of reasons uh I'd rather pause for a second not declare what that number

089is that value is based on ongoing conversations with number of different entities agreeing with partners a million dollar increase for three consecutive three years in a row for a total of $3 million. Um student centers um we wish to make an additional investment of $1.2 million. We believe that this will add an additional four student centers districtwide. Uh we have previously informed the board of um already announced reductions from the federal government uh into a number of different programs to provide stability going to next year. We're proposing the establishment of a federal program reserve that would invest general fund dollars uh in what used to be funded through uh federal uh investments. Uh whether we're talking about Medicaid or other programs. Then last but not least, the workforce protection program. You heard Chris mention the

090fact that we began this fiscal year with about $80 million invested into the protection of individuals, most of whom uh had positions that were funded through ESSER. At the at the cessation at the end of ESSER in September 2024, we shifted those individuals uh mainly into general fund in some instances to other programs to continue the protection of those individuals going to next year. We're proposing the establishment of a $60 million workforce protection program uh to provide the protection for those uh individuals for next year. Obviously, beyond that point, when you look at FY2728, we're looking at efficiencies. Obviously, this is a balancing act between what we can do for the remainder of this year, which is almost over, next year. The more efficiencies we create, the less the impact will be on the workforce

091or some of some of these programs that could be targeted. I call the board's attention to FY27 and 28. What's planned to be done here is just that it is a plan. It is flexible. If we overperform in terms of what we can accomplish in FY26, obviously this will create opportunities to reduce the pain in FY27 or FY28. We're going to be spending uh you know the rest of this uh this year fiscal year all summer um in the planning process for that FY26 to lower the level of liability to ensure that to the extent we book additional reductions that don't impact the workforce sooner rather than later. It will create a positive effect in terms of the sheer volume of impact in fiscal year 27 and 28. Back to you, Chris. Great. Thank you.

092And that brings us to the end and I know that folks uh likely have questions. Uh so now is the chance that we have for discussion as well as for my team and I to listen uh to hear any other any other salient points that we need to incorporate. I appreciate that you're always willing to to break the ice. Thank you. Assuming that we're supposed to be asking questions now, I think. Okay. Um, so on slide six, well there's a it's mentioned several times the unfunded positions that we are covering the cost of uh $60 million um in the current fiscal year I believe. Can you share more about one where these positions are located? Are they exclusively at school sites? And then um the the types of positions if there is a like a

093large proportion of a certain type of employee that's included in there. Uh I don't know if I can get that level of specificity. I would I would be teeing it uh to a colleague. Um but the majority of them and when I say majority of them I would say well over 98% are at school sites. Right. Uh there are those that exist in the in the district office. So for example uh I can share that I had a uh a manager of one sort or another in one of my divisions uh that that wasn't needed anymore and so we unfunded the position hoping they would get picked up by somebody else as we shuffled the the deck. They didn't so they're just still there right but that's that's unusual. So, in my entire division, I

094have about I don't know uh 12,300 employees in all of my different units. Uh that's it's an example of one, but the vast majority are at the school sites. And they're at the school sites and most of them, I will tell you, the majority are also not full-time. So during the last five years, we hired a lot of uh part-time positions, lots of hands to help, especially during the return of COVID, but instead of making them temporary, we made them permanent. And so that's the issue that developed uh is that we have those permanent employees, but if they're not picked up, it's now been two or three years that we've restored positions. We try to find homes for everybody, but we have to find a funded position. Now, they still are put to work, right?

095So, I don't want you to think that if they're unfunded, we're not having an employee show up and work. They absolutely are assigned a site and they're assigned duties. And we tell them if one of your positions opens somewhere else, you may be moving to it during the school year. Uh what are those right now? Specific positions. I know there's a lot of aids, a lot of various types of campus supervisors. Uh there's a lot of uh uh IT s formerly IT or formerly esser funded IT folks that were there for support uh that we still have quite a few of um there's 1100 of them. I'm just naming a few of them off the top of my head but there's there's a lot of different positions. When you say supervisor type do you mean

096like supervision aids and campus aids? Are those the types of positions? Yeah. So imagine if you were a principal that when co when we first started coming back you hired up a bunch of them uh because you know students hadn't been with us for a while and it and things were sort of uh unpredictable and people had to get back to coming to school. So you hired up a bunch of them. Well we still have a bunch that uh as things calm down people have not chosen to add back to their staff every year by funding them and so they currently don't have a a permanent assigned position. So there's a big delta there. Okay. And I might, not that it's super important, but I might make like a slight uh aster. I don't think

097it's really choosing not to keep people. I think that schools had a greater amount of funding and now and there have been large um compensation increases for a number of our employees and so positions cost more and so uh schools are often in the position in the last two budget cycles of having to make difficult choices. You know, can I fund my campus aids or do I want to fund a class size reduction teacher? and while they might have previously been able to fund both, they currently cannot anymore. So, um just I don't I don't think that it's an issue that's attributable to lack of foresight on school sites uh part. I think it is more a challenge between increasing costs of staff. Um while the same level of necessity but not having the local

098school site budget to be able to cover all those positions. Absolutely. Yeah. It really depends. Every school is different. Uh so all those schools I mentioned we have out there, every one of those situations is different. The other big spike we saw was uh when all four-hour employees got full benefit packages. Uh we see an awful lot of 3.75 hour a day employees because the cost of a 4 hour went up so much. Uh so that also definitely impacted uh and and uh it's yeah it's it's a it's a bunch of different I think one of the key things is yes the purchasing power of schools has dropped right and and correspondently when you see increase in compensation increase in salaries and uh health and welfare benefits and other growing costs what hasn't increase are

099title one allocations title one hasn't increase right so the revenue side of the houses, you know, Chris talked about hasn't changed. So when we put forward a 20 to 30% salary increase, that didn't translate to a 20 to 30% salary increase in title one. Well, the general the general fund uh allocation also didn't besides the restricted funding sources on the general fund side. The general well while well while normed positions we do cover the increase of salary costs when it's not a normed position that the correct. So, so on the norm side we are covering those costs centrally. It is where schools are actually making choices is on the discretionary fund side which you tend to see with your TSP or your entitlement funds and there is where you have greater restrictions. So when you

100look at some of the choices that were being made by school sites those 1100 positions they tend to be with those discretionary dollars which become much more limited to the point that the board member made. supervision aids, campus aids, you see some strategies there. But we do have an interest in looking at those positions for uh possible norming going to next year, taking into account the size of the campus, you know, the square footage they have to cover, the number of students on campus, previous year uh load of incidents, for example, and coming up with a formula to ensure because right now you have some schools that have a lot of them, some schools have almost none based on budgets. It is a critical area if we care about supervision of kids, safety and security

101to provide some norming guidance that may actually protect positions that type of position going to next year. But next year there will be no substantial change. This will be for FY27. Thank you. Yeah, it would be helpful to know. It sounds like the PC is already currently looking at um the what is unfunded but we have people in those positions. what is funded but it's vacant currently but it would be that's why having the particular positions would be helpful just to have a better understanding of uh what what options exist for these folks um because I I believe what's listed here is we will not be funding these positions which would mean that these folks no longer have employment if we are not able to find another position for them and not next not in

102the FY26 budget but in the FY27 budget and and and technically we're not funding them now, right? We're we're picking them up because of we're making a choice that that's important to us right now. Um, and so it it's just coming out of fund balance. So have the money in 2017. I just think it's important to be because I think the you know the language is high level and nuanced but it's important to be clear what this means in terms of the human consequences for the individual people who are in these positions and what it would mean as contemplated in the proposed fiscal stabilization plan on slide 10 is if we are not able to find a funded vacant position you will no longer have a job. um unless we create efficiencies in other areas,

103right? But it is a it is a possible scenario. Uh that's why for next year we're creating that workforce protection fund equal to $60 million to protect those individuals out of general fund. In addition to that, we'll provide you uh with an end count of uh the types of positions that are currently those 1100 classified positions what they exactly are. Okay. Thank you. And then it says on the slide 1100 classified employees just to confirm is this exclusively classified employees are that we're talking about are there certificated employees who are in this position as well. So, so no-c because we are able to adjust the amount of recruiting we do when we look at staffing patterns because most of our classroom teachers are normed. Uh, and so uh if somebody has to go back to

104the classroom because of uh declining enrollment or to keep our R2 or whatever the factor is, uh we typically have to recruit more teachers every year and so they they tend to find a home. Now, will that be true necessarily for the whole stabilization plan? depends upon how things play out. Okay, I have a bunch more, but I'll pass it over to other. When you talk about school-based people and nonschool-based people, do we differentiate between Bodri people and local district people or are they the same group? Same group. and um all of us work for the benefit of the kids to give them a good education. So it's kind of a difficult uh decision because you know we have the people at Bodri who are doing the payroll and making sure everybody's paid every day

105just one group and and invoices in invoices out. So how do how do you deci how do we decide who stays and who doesn't stay? who's closest to the kids and who's not closest to the kids because it seems like everyone is close to the kids. And I think the general public needs to know that there are two big factors in this non-school-based people and that's Bodri and the local district regarding the carryover. You mentioned that I think one of them um where is it the carryover funds from schools? Yes. Do we have an idea of how much is carried over? How much is not spent at our school sites? Yeah. Uh so this year is a great example. That's where we're coming up with this number. So annually it's around $350 million. This is

106actually what it is this year. Uh and so this is money that we allocated for use either this year or last year. Some schools even two, three, four years ago that they're still carrying over extra dollars. Uh the interesting thing that I I want to point out, so majority of these positions are at school sites and we know that this is also the amount of carry forward we have at schools. So the idea of an unfunded position, it does sort of point to how it's the localized decisionm that sort of creates that. So there's money to fund them. Now that doesn't get rid of our deficit, right? At that point, we're we're reducing positions that people are saying they're funding because we don't have enough money to pay for them. But it's an interesting story

107right here financially to see that we have the money at sites to fund those positions, but the choices being made not to. Well, are those carry I mean that includes restricted and unrestricted, right? The carryover. Do we have a sense of what is restricted that's coming back and what is unrestricted? We do. So the majority of it is general fund either regular general fund or SENI which is also general fund that we've locally named but it's not restricted. Uh so it's those two sources. There are some sources that are restricted um that that folks get to keep at their schools because maybe we can't find enough staff yet. Um right. So there's there's uh unfilled staff positions but the majority of this is general fund. Okay. And then all the savings that we see they

108do we see do we also see them here in the we see them in the bars right in the you show. So we always when we do budgets and projections we have to have assumptions. So that's what you'll see here is that so this year and last year are done. So these are actualized. So for next year, right, there are none because it's our planning year. And so that's why the following years you have two bars. The first one is without a stabilization plan. Second one is the impact the stabilization plan would have. So in 27 you can see that your unrestricted general fund money starts returning, but you're using it to still fund the deficit because you've only done about a part of the work here. you're funding the deficit still for 28 and

109you still have to take action in 28 and you don't have any uh unrestricted uncommitted any longer. Okay. So we start to see it in the second part of fiscal year 27. That's where we'll see this amount. Actually this is this is one whole fiscal year without the stabilization plan and this is after we implement the stabilization plan. Okay. You begin to see the benefit of the implementation stabilization plan in FY27 and you reach that 1.4 billion dollar elimination of the structural deficit by FY28. zero zero movement in FY26 other than and we're not claiming it there yet but any efficiency any reduction um of budget not attached to workforce that we are able to achieve will minimize or lower the ne the necessity of impacts to carry over or any personnel yes any good

110work we do here will show up in a good way here the other thing to remember this is static because as of today we don't have any closed CBAs. So this is all with no additional costs from contract negotiations which I get from my labor relations folks um or increase in health care. I have the cost increases uh in some multi-year but I only get them a year ahead of time so I don't have them in here and those usually go up between six and 10% a year. Okay, I'll come back. Thank you. A few things, but also feel free to cut me off and I can do a second round, too. I think in one of our interim presentations, there was an assumption that in fund 17 there was a 2% decrease. And I'm

111I want to clarify, but I'm also curious why that is nowhere here. And instead we're making more dracon draconian will be my adjective but cuts when we could do a 2% decline which was previously contemplated in the fund 17 reserve. Uh yeah thank you. That's actually due to the work we did this year. So in the old interim projection so that was remember our our our current plus two was right here. It was current plus two right. So the new adoption we add on a new year because of all the strategic budgeting work we did this year. We have now gotten in the what was the old year plus two. We've gotten there not by a lot but we got there without using 60% of the of the board's reserves which is what our in

112original plan was. And that plan was put into place to achieve a positive certification to protect our credit rating and to give us time to make to make some of these changes. And so you can see that that work paid off. So if the board, as I as I said before, if the board wants to use and they want to discontinue their policy of a certain percentage, then that's their choice at that time. So, we could take the $532 million equivalent and then remove $532 million from the fiscal stabilization plan to get to the same outcome. Yes. But remember that money is one time. So once you use it the next time, next year the deficit's back. So it's a short 530s, right? Once you use it, it's gone. It's a little savings account that

113the board has to the side. um for the some of us have been asking to evaluate the efficacy of a lot of these programs for a while and so I see it here finally and maybe this is more of a programmatic question but how are we finally after years of asking evaluating things like seni and tutoring to make these decisions that are going to lead to this $65 million estimated savings so wow so This is something that since um the strategic initiative department has come under me, we've started. So this week we are formulating a plan for that and it's going to be a sort of an algorithm of um what are the the most costly programs um and uh and then an analyzing those to see what the return on investment has been. So

114it will be a multi-year process which we do hope to have some results by FY27. Um but this plan should go to the superintendent within the next few weeks and then to the board after that. But that's the process. Yeah. And the board should know that we are conducting uh at all levels not only on the business side of the house but also on the instructional side of the house impact review sessions uh with private sector providers whether we're talking about the curriculum we buy tutoring programs that are offered by different companies. We look at uh whether it's I Ready data but mainly endofear uh achievement data and confront those vendors uh with their performance um and uh make uh make difficult decisions. What you're beginning to see is is the result of that and

115I believe that will actually increase the value of those efficiencies. That's why I keep referencing in FY26 even though there are no impacts to the workforce whatsoever you will see reductions in budget lines and to the extent we maximize those then the impact on FY2728 will be reduced and then similarly you know on the maybe this is for um Pedro but on the we've been hearing a lot about different modernization attempts and efficiencies and things like it and transportation and so besides like reducing transportation options to get kids to programs that they've chosen um uh or chosen that what are the um like where are we starting to see the ROI on some of those modernizations because I still think costs per pupil. We have an incredibly expensive transportation um program and curious what like

116you know is this our only solution in the next few years is just to like reduce options for families or are we also seeing other savings? I think the intention with the modernization efforts start realizing some efficiencies in FY27 and FY28. Um we're in the process of just implementing the technology um installations on our buses and what that will do is allow us to track real time writership of students um as well as optimize routes um essentially it's an opportunity to think about do we need as many contracted routes uh to serve the universe of students that we have today and really preserving the current workforce that we have to serve serve, you know, our special ed students as well as uh students who have particular transportation needs. In order to get there, we have

117to implement the installation first. We start that actually in June with the completion date for the following year completing all buses. We will start rolling out in the early phases a set of of buses to get the routing down. Um but that's just in the transportation realm. wouldn't bank on significant, you know, savings that would uh correct the my deficit, but it's one step um and an example where we can actually operationalize some savings. Um I think when you're looking at across other programs it's part of the kind of internal reviews that we've done across uh the IT division looking at what uh projects can be done in-house versus uh some of the contracted amounts or development that we do externally. Um we have a significant amount of resources that go into uh contracted services

118there. Um facilities same thing. So know that that that's exactly what we're doing division by division. Um and thank you Petra. Just a few more thoughts for now. One for the cap and norm positions. I mean one of the things this proposal does um which maybe makes sense from a fiscal perspective but it removes a lot of discretion at the school site. Um, and this was kind of what Miss Gonz was talking about earlier, but and as she articulated, one of the challenges from an equity perspective, mostly because it h it affects usually classified employees different than certificated, but the the mechanism is through norm positions, um, is uh, puts the onus of those raise those raises and benefits on the school site for non-norm positions. Now, one solution that you both discussed is norming

119those positions, but again, I'm not usually in favor of that because it removes that discretion. Um, and I think, you know, to Mr. Smarlson's point, like who best knows the kids and you know, that kind of principle of subsidiarity, like how are we making decisions closer to the school? So, I'm curious if there are ideas that you've thought about or if we can think about ways to kind of split the difference, if you will. Like if there's a $200 million proposed savings from norming, maybe you do norm some positions, but maybe you just say for the cost of raises and benefits to school sites, we have a fund of $100 million and it's like a match from the central office, which may be not well thought out or rudimentary, but the idea is like how

120do we preserve school site discretion, but remove the burden of raises and benefits such that um it's not just absorbed by the school site. and there there's then kind of bring some equity to this idea between you know which is mostly between classified and certificated positions but particularly between normed and and non-norm. So I guess my question or request is can we look at other ways to reduce the burden on schools that don't require just norming because then all of a sudden principles have no discretion in terms of their staff. I think there's an opportunity to create a position of balance. I mean when we talk about norming uh it's not it's not approached with the intent of depriving principles of the autonomy at the school site to a certain extent. Certainly my vantage point

121is so speaking about safety and security issues. I do think that there should be a minimum threshold of individuals that should be hired at the schools for the supervision of children. Beyond that point, to the extent that that is met, then principal should continue to have latitude and autonomy to do more. But as Chris uh presented earlier, 93% of all of our funds are invested into personnel. The vast majority of that is at schools and uh we didn't want to shock you with that. I mean, we are already the norm across the country is 80 maybe 85% of your budget invested in personnel. We're at 93%. You can tie that increase over time almost uniquely to two things and you mentioned them before. One, the positions that were added uh to ESSER that now are

122a function of the general of the general fund budget in addition to compensation increases. Um the vast majority of that 93% is absolutely schools. So you don't get I mean you could close all of Bodri all the regions and you don't fix the structural deficit of this. It's just the reality. But I do think I appreciate your comment and we commit to you that we will find a balanced approach. That's why we have all of you know remainder of this year the summer and then all of next year's fiscal year to address this. We're not going to jump into this. We're going to bring in principles, have consultation sessions to arrive at a balanced position that takes into account how many supervision aids campus aid should a school on the basis of its size, right,

123square footage and membership, enrollment have how many counselors I think we're already and want to let the cat out of the bag. I think we already began to make decisions in terms of what's appropriate, right? So norming some positions offer some degree of protection for the students, for the school, for the principal. Beyond that, considering our fiscal position, we need to negotiate that a bit. One of the things that I think would be helpful at a future workshop and one of my final questions is kind of what are the where to from here is looking at some um school site budgets you know maybe a typical elementary and middle and high school to look at the number of positions which are normed which are non-normed unnormed which are um and then therefore as we think

124about races and benefits which are covered centrally because that also again missed the point earlier but if if we are making decisions as a board about raises and we're going to cover the cost of those norm teachers and schools there's no disincentive for them to hire more normed teachers even though that's somewhat of a um misnomer because normed would be central but those discretionary employees the special education aids the beyond the bell what you know the out of classroom they're going to be um disincentivized to hire because they're going to have to cover the cost and So just that visualization would be helpful. Um I can do that. Uh and I guess so what is that will be my last question for now. Um where to from here knowing that this would have to be

125adopted in June and this is the first time the board and the public have seen these. What are the um next conversations and next steps to kind of Next steps will be a series of uh one-on-one conversations with board members to go into greater level of detail and analysis of what's being proposed with a full recognition that um we are talking about a plan that kicks in two years from now. So a lot could could change and a lot will change. That's why we thought it was important for you to first hear from uh from u from the two previous speakers to really analyze not only May revise but the projections going into the outer years right um the the outlook at this point is not good but as you heard from them we are

126in a significantly better position than many other districts and we have a year to plan right so immediately after this meeting we'll begin uh scheduling one-on-one uh meetings with board to continue to explain what's being proposed and make some modifications as appropriate with a recognition that we may find ourselves a year from today back in this room either celebrating the fact that efficiency or exercises and impact reviews resulted in greater efficiencies than we had projected at this point. Therefore, the plan for FY28 does not have to be as aggressive. a combination of elements. the board may decide you know what I certainly would not recommend uh you know zeroing out the fund 17 to zero because then all you have is the state required reserve uh but there is a possibility there when you come

127to a point say you know what we want to preserve some degree of autonomy at the schools so we want to reduce uh that carryover clawback and invest some of the reserves that's fine but just understand that you're only going to do that one one time once that money is gone, then you're right back where you started. But we can we can implement it in a gradual way, right? Based on the feedback that we'll get from the board. But the one thing we have that many districts don't say for the third time is we have time. We have time to continue to plan and prepare for what may be a very difficult year in FY28. Well, thank you. Um it's never a pleasant conversation, but nonetheless, when we look at um the savings that would

128come from the reduction of the 60 million, are we taking into consideration any of the retirements, those that will not be returning to the district? Where does that come into play in this? Good question. Uh so both on the certificated side as well as classified we're talking about Frank and David coordinating carefully with Kristen we're looking at prior trends of separation from duty retirement etc. We know on average what that is per year. We are banking uh on a number of those individuals who sit in those unfunded positions, the $60 million as you correctly said, migrating to positions that become open and have funding behind them. Right? That by the way is to a certain extent what happened from beginning of this year when we carried the liability of $82 million over that year period.

129A lot of people found places uh through vacancies that popped up in the school system. Therefore, the liability was reduced from 82 million now to 60 million. We anticipate that the same will occur going to next year. Will it be 20 million? Will it be 30 million? We don't know at this point, but the trend the trend tells us that for certificated personnel, we have about over 2,000 individuals that retire annually and we hire new teachers, right? So teachers if worse comes worse in doing FY26 that will happen. So you'll have an opportunity for individuals who are working outside of the classroom right going into the classroom or classified personnel as a result of retirements or separations and there's sometimes high level of turnover that will create vacancies and those individuals will repopulate those funded

130positions. That's what we will keep a keen eye on to reduce again. The worst thing we want is to put people on the street. And I think working hard through efficiencies, we're going to attempt to minimize that between now and the close of FY26. So would, as you said, you would be obviously opening the door for new hires. Would there be some type of a freeze, a window in order to see the stability that we're looking for? That is exactly what we plan to do as we enter FY26. There is already uh an ironclad freeze in non-school site positions. Um and by the way, very few get hired. Uh very few positions are actually filled going through the hiring freeze, but that is at the regional level. It's a central office at Bodri, right? We

131have not implemented a hiring freeze at schools at some point. And again, we need to see how the evolution of performance of the financial systems and hiring are working as we go into FY26. We may adopt some strategies uh depending on where we are to populate positions in schools with certificated talent, for example, that may come from regions or central office back into schools and then close the positions in central office to continue to fill the positions at school sites. You don't achieve that by allowing rampid hiring as the position comes open. We first need to scour internally for the talent we have outside of the school before we fill it with uh outside candidates. With that said, we know better, right? There will always be outliers. You're not going to find many physics teachers

132that are working currently at Bodri. You're not going to find that Mandarin teacher, right, or French teacher. There will be some very specialized positions that we need to open the door for hiring as soon as the vacancy opens. Thank you. Now, and then on here with the actions that were listed, were there additional actions that were not here that could have been here that could create another piece that we're not seeing in this fiscal stabilization plan? Uh we we can always change and add to it. remember uh were there ones that we discussed in in close session under different uh topics with all the board members that uh folks gave me pretty direct feedback? You know, we can't support that. I I I clearly wouldn't put them in there if the majority of the board

133was was saying that. So, with that being said, no. And then last with the central operation non-school-based reductions it's you said about 17% is that population of people. Uh so when we do a reduction we do it in FTE. Uh so recognizing that there are some part-time people that we then have to aggregate into an FTE. That's not as common in central office or central service units. that's more common at school sites. So, it's mostly uh FTE 17 and a half% of our workforce centrally. Got it. Um yeah, just following up on that one on the central operations reductions. Um I would assume that some folks who work in non-school-based positions have return rights to school sites. So would we assume that making a 17% reduction in central office offices including regions might then also

134trickle down to school site staff being laid off if they lack seniority. I don't think we've gotten into that level of granularity because to uh board president smearlson's comment earlier, we're just showing you the math of what it would take as an average cost to an FTE. But there isn't a specific list of folks. So, we wouldn't be able to make that determination. Would I think that that will occur? Yes, in a district our size with that level of reduction, absolutely. that I we would have to actually get into the I mean it's a certainty right that it will happen to some extent I would imagine to some extent yeah okay and I understand that this is the well you're the numerical person like it's your job to provide the fiscal details I think as

135the board considers and we'll be taking a vote on this in a few weeks that we have to consider the impacts on on schools that's that's where our work starts is at school sites in classrooms um so I think that those perhaps or unspoken and consequences have to be lifted up. Along those lines, Mr. Mount, I think you noted um it's not explicitly listed in the fiscal stabilization plan, but the cap and norm the capping and norming of positions in FY27 would include a reduction of SENI from 700 million currently to 500 million. Is that right? Yes. The uh the SENI went from 5 to 7 using er money back in 2021. And so uh the capping and norming imagines the application of 400 million of the base five going to positional cap and norming

136and the one and 100 being discretionary not for additional staff. In other words, to keep programs or special functions going at school sites. Okay. But and obviously, you know, there are um there was a long advocacy campaign to get our district to a place where we were funding our schools in a more equitable manner where our highest need schools received more resources to address the needs of their students. Um so I I think it's just important to highlight that a reduction in incents, but um our highest need schools might feel those impacts more. Um, and then there's a reference to on page 10, implementing, sorry, this is in the FY26 part of the Gant chart. Implementing tiered equitable strategies to optimize workforce in FY27. What does that mean? That means uh assessing the current uh

137staffing pattern and whatever portion that we aren't able to fund anymore, we'd have to determine as far as uh priority order uh what what we discontinue doing and how does equity factor into that decision-m effort. So uh that and the actual process isn't contemplated here just the math as you as you pointed out earlier. Yeah. Okay. Yeah. I mean, I I lift it up because well, I'm I'm concerned about the impacts on all of our schools, but particularly those in the most fragile positions. Um, a reduction in Sunny means fewer positions because schools utilize Sunny to to pay for people oftent times. So, again, I lifted up the the reduction in unfunded positions. That's what, 1100 employees currently that are in those positions right now. You talk about the reduction in sunny that means fewer

138school site positions because when we cut Sunny schools can't pay for those positions anymore. Um and and the loss of carryover I mean carryover is also another I I note uh that you note that we are an outlier in carryover but carryover is utilized by schools to to also um pay for essential person what they deem as essential personnel at school sites. Um and then with a potential of uh bumping back of employees who have seniority, we know that our highest need schools tend to employ the least senior employees. Um so this speaks to maybe disproportionate impacts that we might foresee at our highest need schools. So I wanted to point that out. I just wanted to add and thank you for making the connection across the implications as we're looking at the different considerations

139that we have here, right? Because they layer upon one another. I just wanted to clarify for for Seni, we went in one year from $283 million to a $700 million commitment where we had no identified fund source to actually sustain that. Luckily, we had esser in place and at the time the board was considering an increase from 283 to 400 million which we thought we could support. What we are doing here is trying to at least sustain a growth from that initial $400 million consideration to 500 million. Uh but the reality is is that we've been able to sustain Senny through unsustainable resources. Um, and I think that's what happens when we have kind of budgeting via reszo and there wasn't as much consideration at the time about what the implications were from a budget

140standpoint. But I think that the team is looking at it like how do you concentrate even if you have a sustained investment of 500 million, how do you sustain that in your highest need schools? How do you actually make sure that there's a proportionate benefit to the schools that were intended to be uh impacted as a result of a Seni investment? So that those are I think the broader considerations that need to have as we look a little more closely at these fund sources. And if we're going to deviate from the way you know we have funded VSSN in the past to shift to more norming then I would assume that equity is going to be included as part of any norming formula. We know that that's not typically the way that norming works, but

141I would hope that that's an expectation. I appreciate you making that comment. Look, again, no impact for FY26. FY26 is when we will make deise the mechanisms by which we're going to FY27 and regardless of a numeric value for reduction equity uh will drive part of that mechanism. the the greatest impact will be felt the least in the highest need schools. Okay, you have that commitment from us. Uh so, you know, Chris is right. I mean, he does not he's he's the numbers guy. As as much compassion as we try to embed into him, he's it's he does what he does. It's his responsibility. But trust me, the team has plenty of advocates, including myself, who are vigilant in terms of protecting uh the budget uh through a an equity lens, prioritizing a uh a

142minimizing of of impact in the most fragile schools, highest need schools, and onward down from that from that position. That will continue to be the way we approach this work. I I appreciate hearing that commitment. Um, and one last question for me is on the consolidation of the district footprint. Um, how did we get to an estimate of $20 million in savings to uh to make to make the 1.4 billion hang together? Noticed what I was pointing out earlier. We had to come up with an estimate, a dollar estimate to equal our current structural deficit, which is 1.4 billion. So to just leave it blank means that I have to put more in reductions, right? And so consider it since we have a year to do the work. It's a planning figure. Um I would

143certainly hope that we exceed that because we're a large enough district. Hope that we would exceed that because then it means less reductions on the bottom side. Right. I believe we can get to 20 million without any pain whatsoever through what we refer to that there's there's different phases of consolidation. In phase A of consolidation, the team is working on that right now is does not envision consolidation of schools, meaning going from two schools to one school or three schools to two schools. It envisions schools that have low enrollment but great utilization of facilities. And by the way, a lot of our schools were not all the buildings in school were not built at the same time. So you have newer buildings. So the consolidation is actually closing some buildings within uh the that campus

144across the district uh saving money on electricity, water, the maintenance, the cleaning of of those facilities. I believe by doing that alone, we probably can exceed $20 million annually. Uh that's phase a phase a phase b is the possibility of consolidation of schools. We're not there. We need to first exhaust phase A which is internal consolidation v efficiency which we are in dire need of doing. We have very large campuses in many instances that need to be protected, supervised, cleaned every day for a population that requires utilization probably of a fraction of the building of the footprint that they currently utilize. Okay, that's those are those are the details that are that are helpful to know because I think u most people would utilize consolidation would read consolidation as school closures and I think there's

145a large body of research on how damaging school closures can be and the fact that the savings that you get from it are are fairly limited when compared to other um potential options you might consider. Um, so perhaps again I in anticipating a vote I want to ensure that I'm uh very familiar with and comfortable with whatever I would vote for. So I would just urge for specificity of language um and clarity so that you know if we're supporting $20 million in building consolidation that's different than an estimated $20 million in school closures. So um perhaps for June we can I know this is just the first look but I would ask for that. Regarding the cap and norm positions in FY27, I think I think this will definitely impact our school sites a lot.

146And so I would urge that we gather input from not only principles but all stakeholders who are impacted at a school site. So from the educators who work there, from parents, from students in terms of what are their priorities. A principal may have a priority for whatever reasons, but the students may have a priority based on their particular needs. parents and I think that getting people's input into what they they think it's their priority at their schools is going to be very important if we want this to work. Um I also think that looking at some ways that we could still give school sites some flexibility is is also good and I know that you brought it up and and um it was supported. I think that that is also very important because school sites

147have very unique needs and um and we don't want to take all of their autonomies away. So, but I think that getting community input and but what I mean by that is the school site community input is very important to roll this out including the consolidations like having that detailed information to communities is very important and likewise with special education. I'm confused because I'm thinking if we bring our students closer to their homes that means that we are uh expanding the services at this school site and yet the a lot of services have been closed at different school sites. So I just want to know what that plan looks like for speech education because I would think that if you're going to have more inclusion that means you're going to have more staff. So how

148we save by bringing them closer just based on transportation I don't know it doesn't quite make sense. So I want to know where are we going to get the detail about of those plans. So, just a reminder, next year is a is a planning year, although these have all been discussed as far as generally. Uh, and so, yes, you'll want details, but that that the purpose of the plan is to show how we financially get to a a stable budget within the period of time that's being required. Um, if any of those variables change in the stabilization plan, then they drop down to still a savings that we need and maybe an option goes away. maybe we can't save as much from one of those items, but they the savings still has to be made.

149The obligation is still there. So, I just want to remind us of that if we take options out or we say, "Well, how are we going to do it or let's mitigate that that plan?" We still have to save the 1.4 billion with oversight from the county during that period of time. Question on the proposed um budget priorities. Now they're just here in boxes. Where do we see that uh numberswise in what you showed us projected for 26 if these are priorities? So we've included them in the multi-year projection already. So it's already there exactly what it is here. Yes. And so this we can sustain year 26 27 with what you're sharing with us now. if this FSP works. Okay. Otherwise, we would have to figure out what we would have to cut from

150here or Well, that's the that's the exercise, right? And it's more than it's coming to the point where it's more than just theoretical balancing numbers on a page. Anything that we can't So, we could add another hundred million to the budget. It just means we would need to cut another hundred million. That's that's what being in a deficit position is about. So, it's what we want to fund and what we don't feel we can fund any longer. And so, that's not a a painless experience for any school district, right? Because we feel everything and all of our people have an impact, but it comes down to determining what has the least negative impact. I think I remember a past board member referring it to me as the least bad choice, but they're all bad choices.

151Um, that's very much the position we're in in a stabilization plan. And so the priorities we have here, we don't have them ranked so that when it was if if we needed to, I don't know, cut something or dollar amount, we would have to do that. But that doesn't need to be done in order to approve for this FSP. Correct. Correct. So as as uh people have been indicating, it's a plan that we're putting in place. uh and then it's up to the board and the superintendent to make sure that the plan is pursued andor at our interim adoptions that it's changed and the county will be watching to see that the progress is made. Now the issue becomes more if we don't make that progress at some point we'll move from a qualified to

152a negative status which means they will be asking for immediate action and when they ask for immediate action they're looking for us to reduce all of our expenses immediately. Got it. Okay. Since we're on the priority pages, um just on the TK $186 million, is that additional for proposed additional um sorry the squares um the proposed June adopted FY26 budget priorities the other squares. There you go. Um the 186 million for TK. Can you uh share more? Yeah, this is this is at our full implementation. So LUSD was sort of pioneering leading the way. We did more before we had to. This is great for us. We develop our pipeline, right? Because once our students are with us, they tend to want to stay with us. Uh, however, we've been doing that at our own

153expense, meaning that we've been paying for the staff to support that expansion before it was required by law. Next year, it comes fully into place, which means the 10:1 ratio, 10 students to one adult come into place. And so, this is what it requires to make that ratio come into place. And it's the one part of the state funding uh that as you've noticed is is solid. So it will be helping us with that investment. That's one of the state increases that we benefit from is the um funding to to reduce the ratio classrooms. Okay. Thank you. I think we've run out of questions, but but let's hear from our superintendent. Um, I want to thank the board. I know this is this is very very heavy, very dense conversations and um, you know, we

154certainly hope that uh, it could be avoided, but it cannot. Uh you know I'll say for the third time today you know we are in a better position than many districts but we're not in the position that uh we we want to be in um the greatest threat to us is not reflected in this presentation. The greatest threat to us is not the deficit position. It's not the necessity of reductions. The greatest threat is the uncertainty of factors outside of the district. Um, you know, the the the speakers uh earlier today spoke about um the maneuvering, the aggressive maneuvering that the governor um and Sacramento are doing to overcome the deficit position. Some of those maneuvers are very legitimate. Some are, you know, they look good on paper, but don't necessarily produce um real solutions

155other than deferring the pain, delaying the pain. But the more you defer, the costlier the solution be becomes. Uh the real threat is this uncertainty of the economic position across the state of California compounded by still uh an exodus of school age children uh outside of the state compounded by the uh the federal instability of funding. And by the way, this used to we always used to say no one's going to cut Title One, IDA, Medicaid. It's not going to happen. Uh we're now seeing it differently that uh we already saw cuts to nutrition programs. We already saw cuts to Medicaid uh programs. Um, and we are beginning to see, as I anticipate and convey to the board a while back, that while we may not necessarily see a dollar reduction to title one uh

156programs, for example, we will see a lot of qualifiers and we will see a lot of title one investment via competition to states in vouchers and support for charter schools and all kinds of things that will diminish the impact at the local level, then that impact is the same. So, it's that compounded effect of uncertainties that really pose the greatest threat to our district. Um, with that said, I really thank the board for your time today. And, uh, as I promised, I was asked what are next steps, individual meetings with the board. Uh, we've taken note of all your comments today. We'll continue to take note of the comments you'll you'll continue to make. uh hoping to go into the June uh meeting uh with as solid a plan uh as as possible to address

157that FY28 deficit position. So, thank you very much. Thank you so much. And also to the um California school services, we appreciate it very much. Thank you. Thank you, board.