LA’s School District Has $5 Billion in Surplus. It Should Spend It on Students and Teachers.
The Los Angeles Unified School District has billions stored away, which it refuses to spend to solve the worsening crises facing local public schools. While the district’s penny-pinching serves those at the top, students and teachers are paying the price.
On January 20, Los Angeles Unified School District (LAUSD) superintendent Alberto Carvalho took to Twitter to celebrate what he felt to be a major accomplishment. The S&P Global Ratings, which investors and brokers used to evaluate financial securities, gave LAUSD an upgrade. Carvalho triumphantly credited “the district’s prudent fiscal management and consensus behind our strategic plan.”
That same day, LAUSD educators in United Teachers Los Angeles (UTLA), the local teachers’ union, received an update from their bargaining team, who at that point had been negotiating with the district for nine months: the district had countered UTLA’s proposal for a 20 percent raise over two years with a paltry 10 percent. In a year of historic inflation, the counteroffer is essentially a cost-of-living increase, not a real raise. Additionally, in response to UTLA’s proposal to reduce class sizes in every grade by four students by 2024, the district proposed maintaining current caps — and even raising them for cash-strapped teachers in exchange for a one-time $500 bonus.
The district’s counteroffer to the teachers’ union laid bare the cost of Carvalho’s “prudent fiscal management”: run-down, overcrowded, and under-resourced schools for the children of Los Angeles, and teachers quitting left and right because they can’t afford to stay in the profession.
Los Angeles teachers have now been negotiating with the district since May 2022. Teachers have come to the table with a comprehensive vision for the future of public education. Their Beyond Recovery platform calls for fully resourced and fully staffed schools with reasonable class sizes, wraparound services that address the needs of students and their families, targeted programs to support marginalized communities, more green spaces, funding for the arts and field trips, and more. These changes are necessary for Los Angeles schools to serve their intended function of providing high-quality education to the city’s children.
LAUSD has $5 billion stored away, and it refuses to spend it. The district’s penny-pinching may garner praise from financial ratings institutions, but students and teachers are paying the price.
Why is the district so insistent on banking money rather than using it to educate the children of Los Angeles? It’s a complicated matter, but the upshot is that conceding the union’s demands for smaller class sizes and higher salaries to improve recruitment and retention would compel the superintendent to undertake a project of raising revenues in the future, something that no superintendent in the age of neoliberalism wants to do.
The task is far from impossible: LAUSD’s enormous reserves give the district several years, if not decades, of deficit spending to work out a political solution with the State of California to raise its revenues. But undertaking that task would mean reversing a career built on economizing existing revenues and banking reserves.
Increasingly, high-level administrators of our public institutions are valued for their ability to help the state implement its austerity program by refusing to spend money. Curtailing spending helps them win friends in power and advance their careers, while pushing back on union demands, has the added bonus of keeping the balance of power tipped in administrators’ favor. The result is the trend of annual budget surpluses and suboptimal public schools for the city’s working public.
The students and teachers of Los Angeles can’t afford the district’s self-imposed austerity any longer. Through UTLA, they are demanding that the superintendent spend the money the district already has and commit to fighting for more public school funding down the line when it’s necessary.
Mounting Crises, Wasted Opportunities
Just like the rest of the country, Los Angeles is experiencing a teacher recruitment and retention crisis. For years before the pandemic, education policy scholars identified a critical shortcoming of the American system of public education: it had come to rely on a constant stream of new workers, few of whom stayed in the system to make the lifelong careers that research demonstrated was the defining feature of quality teachers.
Salaries are a major reason for the crisis. University of California economist Sylvia Allegretto has shown that a worker with a bachelor’s degree makes about 20 percent less in public education than they would elsewhere. The pandemic has only exacerbated the dysfunctional employment relations in public education. Sociologist Richard Ingersoll of the University of Pennsylvania found that 44 percent of new teachers leave the profession within five years. And when they leave, they aren’t necessarily replaced: according to the Department of Labor, the number of people employed by public school districts nationally is still a hundred fifty thousand workers fewer than before the pandemic.
At LAUSD, with almost four thousand educator vacancies in the district and a shrinking pool of new applicants to teacher credential programs, it’s unclear who will be around to teach the city’s children in the years and decades to come. According to a report conducted by the UTLA research department, 70 percent of LAUSD teachers are actively considering leaving the profession. A big issue motivating this, beyond increased challenges to teaching resulting from the pandemic, is teacher pay as it relates to the cost of living. There are no neighborhoods in Los Angeles in which a teacher on a first-year salary could afford to live without being rent burdened. Twenty-eight percent of UTLA members surveyed stated they have to have a second job.
The struggle to make ends meet is even more severe among the support staff who keep LA schools running, including teachers’ assistants, bus drivers, and food service workers. These workers, represented by SEIU 99, make an average of $20,000 a year on unstable schedules, and have been met with the same stonewalling and lowballing from the district’s bargaining team as they’ve demanded regular hours and a raise that would not even lift their members above the federal poverty line. Twenty-four percent of SEIU 99 members have reported not having enough to eat, and one in three have been homeless or at high risk of becoming homeless while working for LAUSD.
The schools, the people who staff them, and consequently the students and families who depend on them are all in crisis. The most surprising part of this? LAUSD has a staggering almost $5 billion in reserves, over $3 billion of which are unrestricted. The state of California requires LAUSD to keep just $2 billion in reserves. This means that LAUSD could spend $3 billion tomorrow on whatever they wanted to spend it on.
So why does LAUSD have all of this extra money? And given the severity of the issues facing the district, why isn’t it spending?
The large reserve at LAUSD is the product of accumulated bad habits. For every year but one since 2009, in the aftermath of the financial crisis, LAUSD has ended the school year with a surplus of hundreds of millions of dollars.
Only one factor has successfully forced the district to spend that money: pushback from the union. In 2019, when Los Angeles teachers went on strike, LAUSD’s then $2 billion reserve was a daily topic of conversation on the picket line. The 2019–20 school year, which followed the six-day strike, was the one year in the past decade when LAUSD was forced to dip into its reserves. Though the chief financial officer predicts a deficit at the beginning of every school year, it was only when forced to reduce class sizes after the strike that LAUSD actually did spend more than it brought in for a given year.
LAUSD was already accumulating annual surpluses before the coronavirus pandemic. Then the emergency stimulus measures taken by Congress and the state legislature added to the pile — again, however, without new spending at a level high enough to prevent annual surpluses. LAUSD ended the 2020–21 school year with an $800 million surplus, and the 2021–22 school year with a $500 million surplus. It is poised to end the current 2022–23 school year with an incredible $1.5 billion surplus. This steady annual accumulation has contributed to the $4.9 billion reserve that LAUSD is planning to bank at the end of the year.
A few days after Carvalho celebrated the district’s S&P rating on Twitter, the Board of Education questioned him on why he was holding onto all of these reserves. “All the indicators suggest that times more than likely will get to be difficult,” he explained, referring to the predictions of a recession. “Economic conditions are not going to improve; they are going to decay significantly over time.”
Carvalho’s remarks reflect the unfounded prediction that LAUSD is already on track to spend down its reserves through annual deficits. In fact, for every year of the past decade, LAUSD has forecast an annual deficit and used that forecast to proclaim an impending “fiscal crisis” in the near future — neither of which have ever materialized. Carvalho repeated this assumption to the Board of Education, stating, “Our multiyear projection reflects a rapid depletion of reserves.” Those multiyear projections predict a decline in LAUSD’s state revenues, a severe decline in the district’s federal revenues, and an increase in district expenditures. All told, the prediction holds that LAUSD will run annual deficits of $551 million and $439 million in the next two school years.
While the forecast of declining federal revenues is understandable, as Washington DC’s window of emergency spending has come to a close, no other aspect of the prediction stands scrutiny. LAUSD has overprojected its expenditures every year for the past decade, in part because of the recruitment problems caused by its noncompetitive salaries. And despite declining enrollment, changes to the Local Control Funding Formula to benefit low-income districts have yielded an increase in LAUSD’s state revenues, year after year, since the program was established in 2014.
But the most startling aspect of the new superintendent’s improbable forecast is the size of the predicted deficits. LAUSD is predicting annual deficits in the next two years of half a billion dollars. In truth, LAUSD would not likely be able to achieve deficits this large even if it wanted to. The year before the UTLA strike, when LAUSD was arguing it could not afford to lower class sizes due to an impending fiscal cliff, it was then forecasting an annual deficit of $600 million for the following year. When that year actually came (the year after the UTLA strike, which, again, was the last time LAUSD spent more than it brought in), the actual deficit was $100 million. In other words, when the union forced the district to access its reserves through a strike-won contract, LAUSD still only ran an annual deficit one-sixth the size of the deficit it had publicly predicted.
At the current level of reserves, LAUSD could afford to run $500 million deficits for eight years before getting into trouble. Surely that is enough time to work with the public and elected leaders to work out a revenue program for something as vital and essential to community life as public education. The fact that the superintendent is prophesying fiscal doom, rather than using the historic opportunity of an unprecedented large reserve to work out a political solution to raise long-term revenues, shows just how disingenuous his justification for his bad-faith bargaining is. Across the bargaining table, district officials have been heard to refer to the doomsday projections as “that third year which never comes.”
Carvalho’s self-imposed austerity program is emblematic of what’s happening in the public sector nationwide. As the superintendent of LAUSD, Carvalho is a highly paid manager of a public firm, in this case the Los Angeles Unified School District. People like Carvalho often trumpet their ability to pinch pennies as if they were operating a private, for-profit business. But if public programs do not exist to generate revenue but instead to provide essential services, why do those who lead them act as if saving money were the goal of a public service?
One important factor is that the political and business elite are the ones who grant these managers their positions of power, and they smile upon those who curb spending, keeping the budgets balanced (or in this case, skewed $5 billion in the direction of frugality). This favorable attitude from business owners and the politicians who serve them allows career-oriented managers to continue to advance their reputations as business-minded administrators.
But Carvalho’s behavior cannot solely be explained by his personal ambitions. Whatever his individual motivations — he’s speculated openly about running for Congress in the past — the superintendent is ultimately compelled to enforce austerity in LAUSD because it conforms to the agenda of those above him in the hierarchy of power.
Another major force at play is opposition to union power among people calling the shots. As superintendent, Carvalho is tasked with maintaining the power relationship between workers and managers in LAUSD — a balance that is under threat by the militancy and power of UTLA, as demonstrated by the 2019 strike. There is a perception among political and economic elites that unions are already too powerful, especially teachers unions. In order to maintain the status quo of managers and bosses as the ultimate decision-makers in the district, the superintendent must put the teachers, support staff, and their unions in their place. In addition to the hollow performance of fiscal responsibility, that’s partly what LAUSD is attempting to do by refusing to seriously consider UTLA and SEIU 99’s proposals and bargain in good faith. LAUSD is willing to sacrifice the functionality of the school system to maintain control over its workforce.
There is a kernel of rationality in the argument that saving money is a smart practice in times of unpredictable economic fluctuations, but this argument only holds up if we take for granted that the amount of money that’s available for education spending is finite. Theoretically, if the district were to fully spend down its reserves and no longer had enough money to fulfill its contracts, it would either have to respond by eliminating contracts (layoffs, class size increases, other cuts) or by asking the state for more money. In California, the richest state in the richest country in the history of the world, the money is there. It only seems impossible to imagine fighting to secure it because it would cost Carvalho and the top administrators of LAUSD friends in high places. They can’t conceive of pushing for an expansion in school funding from the state, because the same ruling elite that guarantee their positions of power are the ones the state would have to tax in order to raise more funds for education and other public services.
What will it take to get the administration of LAUSD to show teachers and students the money? This administration has demonstrated that it will not bargain in good faith under the current conditions. If workers in LAUSD want more, they are going to have to crank up the pressure. Teachers, support staff, students, and families are going to have to come together to demand that the district make real investments in LA schools and the workers who run them.
To get the goods, workers will most likely need to force a disruption in business as usual by withholding their labor, just as they did in 2019. Teachers and support staff make schools run; without their willing participation every day, the gears of the system grind to a halt. To fix public education in Los Angeles, workers will need to make Carvalho understand that the crisis caused by their nonparticipation is worse for his ambitions than acceding to the reasonable and just demands of SEIU 99 and UTLA.