Alameda County to Oakland Schools: Reduce Costs, or Lose Financial Independence, Again

Oakland’s school board passed a resolution on Tuesday asking district staff to propose major budget reductions over the next two years as it faces threats of new county oversight just months after regaining local financial control.

But whether the legislation can curb the district’s rapid overspending, or even lead to an implementation of funding changes, is another story.

“What is also lacking is what the Board is going to do to partner with us,” OUSD’s chief business officer, Lisa Grant-Dawson, told the board on Tuesday. “I see nowhere that the board will not accept a staff recommendation on reduction of positions, where the board will not reverse [our cuts] — because that is our reality too.”

Tuesday night’s resolution, which passed with a slim four-to-three majority, comes after Alameda County Superintendent Alysse Castro warned in a letter to OUSD last month that she would not grant the district full budget approval if it did not comply with certain cost-reducing changes by its final November deadline.

Among her conditions for approval were identifying a total dollar amount that OUSD needs to cut to re-balance its 2025-26 budget based on updated financial information and approving a resolution by Oct. 8 that outlines a timeline and plan to address that projected shortfall in 2025-26, and a future one expected in 2026-27.

The resolution, passed in the final hours before the deadline, directs staff to develop budgeting scenarios that would cut tens of millions of dollars from next year’s spending plan and propose potential mid-year program and service cuts that could reduce spending already allocated for this year.

But Grant-Dawson cautioned that in order to make actual gains in getting OUSD back in the black, the board would now have to approve, and stick to, her team’s suggestions — a feat OUSD’s board hasn’t always been able to achieve in recent years.

“If we’re going to speak truth to power and come back here Nov. 8 with [suggestions], I really need the board to be able to consider those components,” she said. “None of this [budget cutting] we want to do, right? But truly, [my team is] wanting to do this work without it being upended when you’re asking for a recommendation.”

The school district’s long track record of overspending — and reneging on spending cuts — dates back years.

In 2003, it declared bankruptcy and was bailed out by a loan from the state. Over the next two decades, it was under the state’s eye as it paid off that debt and finally regained local control this summer.

Even when it was under oversight, the district’s school board has repeatedly floated, then backed off, plans to close schools and impose personnel and service cuts, as it weathers declining enrollment and increasing operational costs.

In 2022, it approved a plan to close five schools, but reversed the plan the following year, before it took effect.

Last year, the board attempted to make major progress on its long-term budget balancing process dubbed the “three Rs” — redesigning how it operates schools, restructuring its funding and staffing models and re-envisioning how many schools it supports.

But after months of back and forth, the board took no action in December on a school merger plan — proposed as part of the re-envisioning component. It did authorize staff to implement 30 other cost-cutting solutions into its 2025–26 budget proposal, including centralizing contracts, reducing schools’ discretionary funding, potentially eliminating some positions and reducing the majority of overtime pay.

In the spring, new board leadership passed legislation adding caps to some spending categories that have historically been seen as not student-focused, like consultant fees and external contracts. The “alternative budget solutions” were designed to shift necessary spending reductions away from school sites and classroom positions.

These changes made the spending plan for 2025-2026 even tighter, though, after causing controversial after-school program cuts that were ultimately reversed.

Since the district adopted its 2025-26 budget, it’s also had to increase its special education budget and update salary and staffing costs based on bargaining agreements with its unions.

The series of moves means OUSD began the fiscal year spending about $4 million more than it makes each month, Grant-Dawson said. She said reasonably, OUSD needs to cut $20 million from this year’s spending plan, and $80 million from next year’s, to prevent draining its mandatory reserve fund.

The resolution approved Wednesday, directing Grant-Dawson and her staff to identify cuts for this year and next, asks that their proposed budget scenarios focus on cuts to administrative and centralized services and positions that “have the least impact on students in schools.” It also prohibits proposing school closures and mergers.

The resolution doesn’t make any concrete spending changes, and any that Grant-Dawson’s staff does suggest at next month’s budget study session would have to be approved by the board before taking effect.

Grant-Dawson said she would also need major clarification, and likely rewriting, of parts of the legislation to avoid proposing unintended, and potentially catastrophic, changes — like the cuts to after-school programs this spring.

The county will decide by its final budget approval deadline on Nov. 8 if Tuesday’s resolution — and any concrete plan for cutting costs that comes from it — satisfies its standards.

If it doesn’t, the county could be forced to retake control of OUSD’s finances.

“The district must take further actions, listed below, to formally obtain approval of the [Local Control and Accountability Plan] and budget,” Castro’s letter last month read.

“It is imperative that the board fully exercise its fiduciary responsibility and governance authority,” it continued.