GUEST OPINION
PUSD Budget (Logo – PUSD)
At a June 12th meeting, Pasadena Unified staff presented the Board of Education with its 2025-26 budget for the fiscal year that begins July 1st.
By Walt Beckett
By county regulation, the Board must adopt an annual budget by June 30th. A formal vote is expected at its regular meeting on June 26th, 2025.
Continued large deficit spending, draining of reserves
The staff presented the board with a plan that includes an operating deficit of$36 million this coming year. This will draw down its reserves by that amount. The district also must project its budget for the following two years, 2026-27 and 2027-28. The required three-year budget is called the Multi-Year Projection (MYP). Because the district has recently been spending much more than it is receiving in revenue, the MYP projects that the reserves are projected to drop below the mandated 3% and be completely depleted during the year 2026-2027.
120 projected layoffs for 2026-27
PUSD is mandated to keep a reserve of 3%; hence, it is planning large staffing reductions for the 2026-27 school year. The Fiscal Stabilization Plan (FSP) presented at the meeting calls for 120 staff to be reduced. By law, these staff must be notified during the spring of 2026 that their positions would be eliminated. This would be the third year in a row of large numbers of layoffs.
The district-provided list of factors driving the deficit spending
In a communication sent two days before the meeting, the district pointed to these factors as the major drivers of the budget situation. Explanations of each factor listed by the district have been added below:
- Ongoing decline in enrollment
The budget uses a historical average of a 2% annual decline in enrollment which has been occurring for decades. Since the district is funded based on enrollment, this means less ongoing revenue.
- Expiration of one-time COVID relief funds
These federal funds received during the pandemic were not ongoing funds. They were one-time funds that increased PUSD’s reserves to unprecedented high levels. Despite the media coverage during this spring’s layoffs, PUSD put large amounts of this pandemic-era funding into its reserves. Thus, this PUSD-listed factor is not really a reason for the district’s fiscal situation. The receipt of these funds dramatically bolstered PUSD’s reserves and were a positive, not a negative..
- “Lower” state funding levels
This means that the state has slightly revised downward the amount of the funding increase for 2025-2026 and following years. The amount of funding the state will be providing per pupil will still be increasing each year. This cost-of-living adjustment (COLA) is based on the annual inflation rate.
- Higher cost of employee health benefits
PUSD is budgeting for an 8% increase in 2025-26 in the cost of the district’s employer funded health care, which it absorbs and does not pass on to its employees.
- Rising cost of unfunded government mandates
This likely refers to the increases in special education costs for which the government does not provide adequate funding. This must be funded from the general fund. In this written communication, PUSD does not explicitly refer to rising special education costs, but the cost of these to the general fund has been very large for decades, as previously detailed, and the lack of funding for these costs was discussed at the board meeting
The factor not listed: an uncomfortable truth
The reductions of the last two years have been heavily criticized by employees. It is likely for this reason that PUSD did not list the proximate cause of its fiscal situation, the 25% and higher raises given to staff over the 2021-22 (5% and higher), 2022-23 (10% for all) and 2023-24 (10% for all) fiscal years. Buried at the very end of its December 2023 budget presentation, the district listed the cost of the 10% 2023-24 raise as $36 million for the 2024-25 and 2025-26 years. This means that without this last 10% raise, the district would have spent $18 million less in 2024-25 and would spend $18 million less in 2025-26. The district would not go below its mandated 3% reserve in 2026-27 and therefore would not be calling for 120 layoffs to be issued next spring. There is a one-to-one correlation between the cost of the last 10% raise and the need for the layoffs.
The three consecutive years of raises added approximately $50 million to the ongoing salary costs of PUSD without any corresponding increase in ongoing revenue to fund them. This has rapidly drained the unprecedented high reserves that accumulated due to COVID relief funds. After briefly mentioning higher labor costs during its spring 2024 layoffs, PUSD has stopped including this primary reason for its fiscal situation.
When making painful and heavily-criticized layoffs of staff that students and parents cherish, it is too difficult to acknowledge that the primary reason they are needed is the recently-given, dramatically higher staff compensations. The district’s senior staff and its rank-and-file employees do not have a record of accountability, of acknowledging their own roles in the district’s budget challenges. Instead, the language they typically use shifts blame elsewhere. As a result, the list of factors PUSD provides to explain its budget issues omits the primary driver behind them.
Recommendations: the need for leadership
Rather than blame external factors, PUSD should take the more transparent approach of saying, “We know that the community values teachers and other staff, and so we raised their salaries dramatically. We need the community to fund these salaries, to fund its values.”
The community has voted for trustees that are supported by employee groups during trustee elections, so the community has already shown that it values such priorities. These trustees should say we need the parcel tax that the community approved last November to be increased, so we don’t have to lay off so many staff each year. They should admit that the parcel tax was way too low to fund staff at the levels that the community wants. This would be a proactive, positive approach, rather than the demoralizing reductions in staff that the current FSP requires. Because the trustees are not leading in this way, the district is stuck in its cycle of reductions, which causes parents to lose trust in the district, and remove their children, which leads to further reductions. To break out of this cycle will require real leadership. As detailed previously, there are also many other things which can be done to reduce the deficit and therefore decrease the number of layoffs
Walt Beckett is a resident of the San Gabriel Valley.
[This article has been updated to include a paragraph that was inadvertently omitted during production.]
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In response to the teachers union president’s comment:
#1 The amount of contracted services has always been high, and it isn’t something that has changed nearly as much as the district’s salary costs did recently. Indeed the district’s own budget document shows that the cost of the 10% raise given in 2023-24, the third in the three years of significantly large raises, is $36 million over the 2024-25 and 2025-26 years, which is equal to the amount of the deficit spending by the district in 2025-26, and the total change in annual salary costs for the three years of raises is roughly $50 million, far exceeding the increase in contracted services during this time period. What changed so significantly and so recently that the district has to immediately do (unless it raises revenue or cuts costs in other ways) so many layoffs in consecutive years, layoffs at such a high level, that it wasn’t doing in the years preceding this recent period? The salary costs, which then also cause higher pension costs the district must pay by law. The rise in these are the proximate cause of the fiscal crisis.
#2 Much of these “contracted services” are for special education services. PUSD does not have control over much of these costs. By law, parents can choose certain non-public schools or non-public agencies for their children to receive such services, and PUSD has to pay those costs. This is why they are called (unfunded) mandates, something Gardner does not mention. His description of them makes them seem like they are optional. The district has no choice really, as parents will just sue and eventually prevail. The district can’t shift these costs from contracted servies to employees as he would prefer.
#3 Another reason that PUSD pays for more services, which he finds objectionable, and that Arcadia doesn’t, is that PUSD’s demographics are far different. Arcadia doesn’t have the very high low income population that PUSD has, and so it doesn’t have to pay for nearly as much services associated with poverty that PUSD pays for. Downey also has a significantly lower percentage of low income families than PUSD has.
#4 He perennially (and naturally given his position) wants more spent in the classroom. But the main reason PUSD ranks low on this is because the district has many veteran teachers union members who work outside the classroom as Teachers on Special Assignment who used to count as classroom spending. A certain board member helped get the district sanctioned for counting them as classroom spending, even though most districts counted them that way for years. The district could reduce these positions further, as they have done in recent years. There is push-back on this, though, as they tried to do that this last spring, only to restore them in response to the pleas of principals and others against reducing these positions.
The PRIMARY driver of the budget woes is PUSD’s addiction to contracted services. In addition, dozens of unforced errors around not welcoming back staff and making clear that those PUSD has decided it can afford are valuable and more than simply cogs in a machine.
PUSD’s spending on its staff is FAR below that of those around us. They spent less than HALF (45%) of their funding in the classroom last year (even rightfully subtracting out fire expenses). This violates state law and the required expenditure percentage of 55% and is out of line with the way that much more successfully run school districts (like Downey and Arcadia) focus their spending from the classroom outward.
We need a student, teacher, parent, school, community-driven budget and school district, responsive to interest-holders of students and their learning.