Oakland Unified Wins Budget Approval but Faces Dire Warning on Financial Future

After months of uncertainty, the Oakland Unified School District has officially received approval for its budget for the current school year.

The decision from the Alameda County Office of Education came with a stern warning, however: The district’s longtime strategy of covering costs with one-time money and reneging on budget reductions isn’t going to cut it in 2026.

“The removal of conditions and approval of OUSD’s budget should not be mistaken for a sign of fiscal health or stability,” County Superintendent Alysse Castro wrote in a letter to district leaders on Saturday. “OUSD remains on a trajectory toward insolvency and the potential loss of the very local control it worked for over 20 years to regain.”

Over the summer, OUSD paid off a state loan that bailed it out of bankruptcy in 2003, allowing it full budgetary control for the first time in two decades this fall. But the district could again face state and county oversight within months if it fails to make major spending reductions next year — a task that would be difficult for any school board, and seems almost unimaginable for Oakland’s.

“It is absolutely 100% possible, but it would require a really significant change of pattern and action,” Castro told KQED.

“OUSD’s history reveals an undeniable pattern: requesting plans, then disregarding them; rejecting staff recommendations; changing direction and directions, and, when difficult decisions are finally made, rescinding them shortly thereafter,” her letter read.

Castro said OUSD has long spread resources too thin, operating more schools than is fiscally responsible, given its enrollment and trying to provide more services at each school than it can afford.

OUSD opened 40 new campuses in the early 2000s as part of a community schools initiative, despite enrollment declines similar to those seen across California.

In 2019, it operated 87 campuses for 37,000 students, compared with nearby Fremont Unified School District, which had about half as many schools for just over 35,000 students. In San Jose Unified, about 32,000 students attended 46 schools.

The school board approved shuttering five schools in 2022, but later reversed the decision.

Since then, district staff have repeatedly told the board it must dramatically reduce spending, only for the board to reject or amend plans to do so, preventing the district from moving toward financial sustainability.

“The district is currently … spending $4 million more every month than it’s receiving in revenues,” the district’s chief business officer, Lisa Grant-Dawson, wrote in a letter to families in September. “The more we do that moving forward, the more we diminish our reserves, until eventually, we run out of money.”

For the 2025-2026 school year, OUSD has enough money to cover operating expenses and maintain a required reserve equal to 3% of its annual spending for unexpected costs, thanks in part to reserves built during COVID-19.

Districts across California saw their general fund, which is used to pay for the majority of expenses, grow during the pandemic because of state relief money. While many have also seen those balances fall, OUSD’s decline has been far steeper.

Oakland’s general fund went from a negative balance in 2019 to more than $62 million in 2023. Two years later, it sits at just $3.4 million.

To remain solvent next year, the district must find about $100 million in ongoing spending reductions.

In October, the board directed staff to provide two budget scenarios to make those cuts, but Castro said a laundry list of parameters included in the board resolution might make it an impossible task.

“One of the challenges of this new resolution is that it really does go in a dramatically different direction and places some very firm constraints on some strategies,” she told KQED. “While the staff is working to come up with scenarios that meet those conditions, it’s really an open question whether they will be able to.”

The board’s directions bar any school closures or mergers and instruct staff to make cuts that “do not directly impact students in schools.”

Last month, Grant-Dawson said parts of the plan were confusing, and that district staff would need clarifications and possible revisions.

Castro described the plan as both “vague and overly prescriptive.” She wrote that it contains complicated contingencies and, in addition to budget cuts, requests additional plans to simultaneously increase attendance and revise existing board policies.

Each of those processes, she said, is time- and resource-intensive and requires a lengthy development and adoption process during which plans could stall or be rejected. The plan also lacks broad support from a deeply divided board.

Nearly all major votes this year have been split 4-3. A four-member majority backed by the teachers union has passed controversial resolutions, including one to part with the district’s longtime superintendent and another that revised the board’s previous budget planning directions for 2025-2026 — changes that unintentionally canceled after-school programs and were later reversed.

“It’s an expensive use of central office resource to keep making new plans, which is ironic because there’s this chronic frustration on the part of the Board about the cost of running central office,” Castro said. “But it’s not just expensive in terms of current year dollars, it’s expensive in terms of exhaustion. Really high-quality staff leave OUSD because they’re frustrated with patterns that don’t change.”

She said the board could revisit multiple budget-balancing plans it directed staff to make in recent years — most of which have been rejected or amended to a point that they no longer make the necessary level of reductions after members bow to union or parent pressure.

“Being an OUSD board member is an incredibly hard job,” Castro said. But “balancing the budget and aligning resources to priorities is the key role of a school board. This is the work that this board was elected to do.”