As OUSD Gets Closer to Controlling Its Finances, New Budget Challenges Loom

As the Oakland School Unified District celebrates its projected departure from state oversight this summer, the district’s chief budget officer has warned that the district could be at risk of slipping back into receivership if it doesn’t make major spending changes.

Lisa Grant-Dawson told the school board on Wednesday that the district could dip below its state-mandated reserve funding by 2027 as it looks to spend more than it brings in this year, and over the next two.

The announcement comes after five years of OUSD building up that rainy day fund, and as the district prepares to make its final loan payment to the state, more than 20 years after declaring bankruptcy this month.

“We have taken a step backward in our efforts to secure the long-term future of the district,” Grant-Dawson wrote in a letter to the district on Thursday. “We will begin 2025–26 with $57 million in reserves while continuing to run a deficit that is unaddressed in a multi-year fashion … This continues the ill-advised practice of our district using the beginning fund balance to balance the budget.”

This week, during the final financial report of the school year, Grant-Dawson told the board that the district’s projected budget deficit for the current school year had shrunk from $95 million to $60 million — a “much better position” than six months ago, but not good enough to avoid spending a significant portion of its $117 million reserve fund on the shortfall.

Over the next two years, OUSD could spend nearly $40 million more than it brings in, without factoring in cuts to federal funding, which Grant-Dawson said are coming. That would leave the district with less than $18 million in its reserve, well below the state-mandated 3% fund.

At that level, “there’s no way we can pay one month’s payroll with the reserve,” Grant-Dawson told the board.

She said that the district needs to reconsider its approach to its adult education program, which is running a $300,000 deficit this year, and put school consolidations back on the table. After opening 40 campuses in the early 2000s during the small school movement, OUSD has nearly doubled the number of campuses in similarly sized districts.

In the past, plans to merge or close schools have generally been unsuccessful and generated significant pushback from the community, leading to protests and even a hunger strike.

Whether the board is willing to make big cost reductions that Grant-Dawson said are necessary to keep OUSD in the black will begin to come to light next week, when she presents a draft budget for next year.

That spending plan will likely reflect a list of significant cuts, including reductions of school site substitute teaching positions and campus discretionary funding, and centralizing contracts, both with service manufacturers — like those that provide copiers — and community agencies.

The school board gave budget staff permission to make those changes in December, but they could still face challenges after multiple members — and the teachers’ union, which has the support of the board majority —have raised concerns about some of the potential cuts.

Earlier this spring, a majority passed an additional budget bill proposed by Board President Jennifer Brouhard and Vice President Valarie Bachelor that put caps on outside contracts, travel costs and other spending with the intention to use any savings to restore some of the student services that could be axed.

Those budget amendments were rescinded after accidentally reducing grant-funded after-school programs, which rely on outside contracts, but Brouhard has still vowed to pass a budget that keeps cuts away from kids.

“I fully intend to keep developing a student-centered budget and will actively engage with staff, students, labor partners, families, and community members to accomplish this,” she said in a statement in May.

The board has to approve a spending plan for the 2025–26 school year by July 1.