Oakland Unified facing projected $95 million deficit in 2025

OAKLAND, Calif. (KGO) - Oakland Unified's financial problems began more than 20 years ago when the state approved a $100 million emergency loan, the largest school bailout in California history.

"I think we were spending too much money on everything," said former Oakland School Board member Dan Siegel.

Siegel and Oakland City Councilmember Noel Gallo served on the school board board during those tumultuous times.

In 2002, when that school board had to approve a budget, they were given a wrong set of numbers by then Superintendent Dennis Chaconas and his staff.

"These were the numbers and we voted on it, supported it and about two to three months later, the superintendent comes and says, guess what, we're $63 to $65 million short," said Gallo.

How in the world did Oakland Unified lose track of that much money?

"We did not have an accurate system to keep track of funding," said Siegel.

Oakland Unified was now at the mercy of the state.

"We had to give up local control, the board became completely powerless, obviously we lost our superintendent and the state administrator came in," said Siegel.

That state administrator then began closing schools. At the time Oakland Unified had about 55,000 students.

But parents, fed up with the district's incompetence and low test scores primarily in Oakland's low-income neighborhoods demanded educational alternatives.

That's when the district began approving public charter schools.

As a result, student enrollment continued to go down which meant less money from the state. Yet the overspending continued through the years.

A 2018 Alameda County Grand Jury report found "OUSD has been on average between $20 and $30 million in debt for the last 15 years."

Jody London was a school board member during that time.

"We were being told in 2017, 2018, 'gee, you have a deficit, what are you going to do about it?'" said London.

A year later another grand jury report found OUSD was spending LESS on things that directly affected students and teachers and MORE on central staff and consultants.

The board had already started making improvements and cutting staff but also decided it was time to consolidate and close schools.

"There was definitely a piece of it around school closures because when you have declining enrollment you can't continue to do business they way you've been doing business," said London.

Some parents were outraged.

London and three other board members did not seek reelection but left a plan for fiscal vitality with the new board.

"They actually backed off on some of it, yes, they did not follow the plan and they did not follow the plan," said London.

Despite a looming budget deficit and much to everyone's surprise, the new board decided to stop closing the remaining schools on their list, stating that "OUSD is not in financial crisis - there is a healthy fund balance and the district is projecting budget surpluses on all years of the multiyear plan."

That's because they were counting on one-time state funds which have now run out.

In a 2022 interview, former board member Shanthi Gonzales warned this would happen.

"The County Office of Education has been quiet and the state has been quite clear that we cannot continue to use one-time funds to pay for ongoing operating expenses of the district," said Gonzales who resigned during that time.

Current OUSD Board President Sam Davis explained why they stopped the school closures.

"'Wasn't my decision to do so but I think some of the new board members felt especially strong they had been through school closures or they had seen the impacts on teachers and they felt like it was just a bridge too far."

We asked him if the new board had made a bad decision. "Ah, you got me in a hard spot because as board president, I'm speaking both on my behalf but also on behalf of the board. So, as an individual, I think we can only kick that can down the road so far," said Davis.

According to the school district, kicking that can has led to a projected $95 million deficit for the next school year.

But despite years of fiscal uncertainty, the previous board and the current one also voted to increase teacher salaries putting them on par with other districts. First in 2019 and again in 2023.

Vilma Serrano is with the Oakland Teachers Union.

"In 2023, actually when we had our significant increase, the district still ended with about $123 million in their reserves," said Serrano.

Today the district says its reserves add up to $118 million and argues that using reserve funds to address a budget deficit is not a long-term solution.

"We do not have alternative resources to help offset that so we have to make these decisions," said OUSD's Chief Business Officer Lisa Grant-Dawson.

But despite this projected deficit, the superintendent's total package compensation will amount to about $600,000.