Make California Post a Preferred Source Los Angeles Unified School District is facing a staggering financial crisis that could force it to slash thousands of jobs over the next three years as California officials warn the nation’s second-largest school district is at “high” risk of insolvency.
The California Fiscal Crisis and Management Assistance Team, which provides financial oversight and assistance to school districts, issued a stark warning Tuesday about LAUSD’s fiscal health, saying the district is running out of money.
“Regardless of the FHRA risk score, the district’s lack of going concern designation elevates its overall fiscal solvency risk level to High,” the report said, noting that the district, which oversees over 350,000 students, may exhaust its unrestricted reserves as soon as the 2027–28 school year.
The district’s projected structural deficit is so severe that officials warned delaying cuts could leave LAUSD with fewer options — and force even deeper reductions later.
“The magnitude of the district’s projected structural deficit means that delays in implementing corrective actions will reduce the options available in subsequent years and may require more significant reductions over a shorter period,” the report said.
The warning comes as LAUSD prepares for potentially more than 6,000 job cuts over the next three years, according to the district’s financial projections.
The district is already facing a dramatic mismatch between its staffing levels and shrinking enrollment.
Between the 2019-20 and 2024-25 school years, enrollment at LAUSD’s noncharter schools plunged from 440,365 students to 369,830 — a roughly 16% drop.
Yet the district’s total full-time equivalent workforce actually grew from 60,344 to 64,148, an increase of about 6.3%.
That means the number of students per employee fell from 7.3 to just 5.8 during the same period.
The teachers union, United Teachers Los Angeles, one of the biggest stakeholders within the district, strongly disagreed, calling the evaluation “rigged.”
“This fake independent analysis disparages the school board for rightfully addressing the needs of working people who face some of the worst housing and child care costs in the country,” union Vice President Julie Van Winkle said
Former LAUSD Board Member, David Tokofsky, put the district on blast.
“If all this “grim reaper” prognostications come true, the board of education will lose its salary, its authority and the superintendent will be relieved of duties,” he told the Post.
“It’s not just cuts but the lazy school district must pursue revenues,” he added. “Often the district sits on its hands with 100s of employees making 200k plus annually, and waits for a solution to come out of heaven rather than”
The state financial watchdog also raised questions about whether LAUSD is adequately adjusting staffing levels as enrollment falls.
While the district uses enrollment-based formulas to adjust staffing at individual schools, officials told FCMAT that comparable enrollment-based reviews are not consistently applied to central-office departments.
And payroll is eating up an enormous chunk of the district’s budget.
Salaries and benefits accounted for 90.8% of LAUSD’s unrestricted general fund budget for 2026-27, according to the report — well above the most recent statewide average of 86% for unified school districts.
That leaves the district with little room to make cuts elsewhere.
“The increasing proportion of unrestricted expenditures committed to salaries and benefits limits the district’s options for achieving the expenditure reductions necessary to address its structural deficit,” the report said.
FCMAT also flagged the district’s recent labor agreements, noting that negotiated compensation increases exceeded the state-funded cost-of-living adjustment in each of the previous three fiscal years.
The report said LAUSD’s school board approved bargaining parameters without simultaneously identifying the ongoing funding or spending reductions needed to pay for the resulting agreements.
“Consequently, the agreements increased ongoing expenditures without corresponding actions to offset those costs,” the report said.
The district also appears to have far more classroom capacity than students to fill it.
FCMAT calculated that LAUSD has enough capacity for roughly 718,475 students, compared with just 353,065 students enrolled in 2025-26 — meaning the district was operating at only about 49.1% of its overall capacity.
Of the district’s 738 host schools, 481 were operating at or below 60% capacity, according to the report.
“Enrollment in every school district in california, all 1000 plus , is down but if you are less than 2% down you dont lose money” Tokofsky, who served on the Board of Education from 1995 to 2007 told the Post. “LAUSD is down 4% and could fix that very easily by attracting affiliated charters and that would bring loads of students. Negligence on the part of LAUSD here too.”
At the same time, special education is placing an increasingly heavy burden on the district’s unrestricted funds.
LAUSD’s contribution from its unrestricted general fund toward special education jumped from approximately $957.1 million in 2023-24 to $1.49 billion in 2025-26 — an increase of more than $500 million in just two years.
“The magnitude of the district’s projected structural deficit” means postponing corrective action could ultimately require the district to make “more significant reductions over a shorter period,” the report said.
