OUSD Just Got Control of Its Finances Back From the State. It’s Already in Major Trouble

Updated 12:30 p.m., Saturday

The Oakland Unified School District only just regained local control this summer after a state bailout two decades ago, and already top officials are warning that it is spending past its means and quickly falling back into perilous financial territory.

In a letter to the Oakland school board last week, Alameda County Superintendent of Schools Alysse Castro warned that it will need to propose major budget revisions in the next month to avoid running out of funds during this academic year, risking insolvency for the second time in recent memory.

“Oakland Unified School District enters Fiscal Year 2025–26 under full local control for the first time in a generation; however, the same fiscal and decision-making issues that have plagued the district for many years remain,” Castro wrote in her annual report of the district’s finances.

The letter detailed a series of moves by the school board over the last year that have pushed the district toward disarray: first failing to take action on a plan to merge schools in December to save about $3 million annually, and later continuing to renege on its own service and personnel cuts meant to close a $95 million budget deficit for the 2025–26 school year.

Last week, district budget chief Lisa Grant-Dawson wrote in a separate letter to families that OUSD’s expenses have been outpacing revenue by about $4 million a month for nearly a year. The district’s budget reserve has shrunk by 53% in the last year, dwindling from $118 million to just $55.8 million, according to newly updated financial information.

Grant-Dawson said that reserve will shrink further this year.

The spending plan passed in June already violated OUSD’s policy to maintain reserves of at least 3% of its budget for unexpected expenses. Based on the updated numbers, Grant-Dawson said the district will not only spend the small $374,000 cushion it did preserve but also dip below the state’s lower 2% reserve requirement, risking financial insolvency.

Like districts across the state, Oakland is struggling with declining enrollment, rising costs for services and employees, and federal and state funding cuts. That has made it difficult for OUSD to regain its financial footing after taking a $100 million loan from the state in 2003 in exchange for control over its operations, but it was on the right track, said school board member Mike Hutchinson, who chairs the district’s finance committee.

Now, he believes new board leadership is driving the district back into financial jeopardy.

“It’s just been a series of actions and inactions that have led us to this point,” Hutchinson said. “We were always trying to thread the needle, and with this series of actions, it’s taken all of that leeway away.”

Hutchinson, who was among the board members opposed to merging schools in December, pointed to a series of 4–3 votes over the last nine months. He places much of the blame for the board’s shortcomings on President Jennifer Brouhard and Vice President Valarie Bachelor, who were elected board leaders in a 4–3 vote in January.

Since then, that same voting bloc — which is backed by the teachers union, has been aligned on several votes that have gone against district staff and affected OUSD’s financial situation.

In March, they made changes to the district’s budget balancing plan that ended up causing upheaval to after-school programs and could have cut about a third of the district’s spending on third-party services and contracts. Those union-backed “alternative budget balancing solutions,” which Brouhard said aimed to restore classroom personnel cuts, were ultimately rescinded.

The same four board members in April approved a separation agreement with Superintendent Kyla Johnson-Trammell, who was contracted to remain with OUSD until 2027.

The longtime leader had been credited with much of the district’s financial recovery since taking over in 2017, but often sparred with the teachers union. Her early departure led to questions about whether the board pushed her out.

In May, the union-backed board majority approved a $2.5 million agreement to restore teaching roles that were initially proposed to be cut this fall, narrowly avoiding a labor strike. At the time, it did not make any additional cuts to offset the expense.

Brouhard, Bachelor and board members Rachel Latta and VanCedric Williams, who approved those moves, did not respond to requests for comment.

In a separate letter last week, conditionally approving OUSD’s 2025–26 budget, Castro gave the board a deadline of Oct. 8 to direct district staff on how to make mid-year budget reductions to rebalance spending.

Hutchinson believes the necessary cuts will be at least $10 million for this year.

They would have to further cut currently planned expenses, though, to fulfill new wage demands from the Oakland Education Association.

The teachers union, whose contract expired in June, sent the district a compensation proposal in August requesting a 9% retroactive raise from July, and an additional 5% increase next year, among other costly demands.

“Until our district prioritizes stability, every year our schools will lose incredible educators to other districts with better pay and benefits,” said OEA president Kampala Taiz-Rancifer. “We know that districts that invest in their classroom staff see successful and supported students as a result, and we need to see OUSD do the same.”

Hutchinson said the district hasn’t set aside any money for increased wages and will have to make dollar-for-dollar cuts to raise them.

“If our teachers union wants a $20 million package for this year, we will have to make $20 million in spending cuts for this year in order to do that,” he told KQED.

Hutchinson said board leadership has yet to schedule a meeting to discuss the necessary cuts. If they fail to act, he said, it might be best for the county to step back in.

KQED’s Sara Hossaini contributed to this report.

Sept. 20: A previous version of this story misattributed a statement to Jessica Beard, communications organizer for the California Teachers Association. It has been corrected to attribute the statement to Kampala Taiz-Rancifer, president of the Oakland Education Association, a workforce services specialist.