LAUSD faces potential insolvency as officials warn district could run out of money within year

LOS ANGELES (KABC) -- The Los Angeles Unified School District could run out of money within about a year and is showing severe signs of financial distress, according to county education authorities.

The nation's second-largest school district, which serves more than half a million students, faces possible insolvency, prompting the Los Angeles County Office of Education to take action.

"I think it's something everyone was hoping would be avoided, but I don't think it's really a surprise to anyone," educational consultant Jamie Bacall said.

County officials said LAUSD is projected to be more than $230 million in the hole by November of next year. In response, the county superintendent has appointed a fiscal expert and given the school board 45 days to fix its budget.

"I think it might actually be a good thing to have a, sort of like a neutral pair of eyes on the LASD budget," said Nicolle Fefferman, co-founder of Parents Supporting Teachers.

Officials cited massive union contracts estimated to cost more than $1 billion annually, along with declining enrollment and reduced state funding, as factors contributing to a growing deficit and the possibility of state oversight.

"Worst case scenario is the state takes over and this goes under receivership under the state, and that takes a long time to get out of and it is really hard to maintain any control over curriculum, over class size," Bacall said.

New LAUSD Superintendent Andrés Chait sought to reassure families and staff, saying in a statement: "We welcome the opportunity to collaborate and remain focused on making thoughtful, responsible decisions that protect classroom instruction and student success."

Fefferman said any budget reductions should avoid affecting students and campuses as much as possible.

"We just have to make sure that the cuts are made as far away from our school sites as possible," Fefferman said.