In a three year-span, the Los Angeles County Office of Education sent 10 letters to Pasadena Unified School District warning it to address ongoing deficit spending.
The letters, provided to this newspaper by LACOE, offer a glimpse into how the district ended up in a fiscal crisis that county officials is “going to be tough.”
They were sent after the agency reviewed PUSD’s annual first and second interim report and its budgets.
Each one was addressed to the Board of Education president, spanning four different presidents (Elizabeth Pomeroy, Michelle Richardson Bailey, Kimberly Kenne and Jennifer Hall Lee).
“We are concerned about the projected trend of deficit spending and its impact on the District’s ability to maintain minimum required reserves in future years,” LACOE Deputy Superintendent Maria Martinez-Poulin wrote in a letter dated Sept. 13, 2022. “Therefore, we recommend the District monitor the causes for deficit spending in order to keep it manageable and to prevent further erosion of the fund balance.”
State and county oversight bodies have been monitoring PUSD’s descent into its current predicament and point to the district not acting swiftly enough to deal with the precipitous decline in enrollment.
One of those agencies, LACOE, declined to provide additional comment or say what response it received from PUSD. The county office’s role is to provide oversight for all districts in the county, including monitoring their fiscal health.
This week, PUSD officials said its responses to LACOE’s letters came within the district’s fiscal stabilization plans.
LACOE officials referenced the letters when they presented to the PUSD Board of Education during an Oct. 9 special meeting.
They painted a grim picture of the district’s financial position and walked the board and the public through the potential consequences of not taking immediate actions.
PUSD faces a $30 to $35 million budget shortfall in 2026-27, caused by a structural deficit, rising costs, declining enrollment and uncertainty in federal funding.
The worst-case scenario is the county taking control of PUSD.
District leaders have been messaging that such a scenario remains far off, if at all.
“We’re many steps away from that. We’re many steps even away from LACOE reversing our authority.” Superintendent Elizabeth Blanco said. “They explained all those steps because the board asked the question … I would say right now they’re in a coaching, supportive role to us. They don’t want to do this to school districts.”
During the Oct. 9 meeting, Trustee Tina Fredericks said the general public may see LACOE attending a Board of Education and presenting its warnings as being a “zero to 60” in terms of the concern level heightening seemingly out of nowhere about the district’s financial position.
But LACOE Director of Business Advisory Services Octavio Castelo referenced the written warnings sent to board presidents going back three to four years and that this has not come out of nowhere.
“As I understand it, one of the key factors for PUSD is that they have not reduced staffing levels commensurate with enrollment declines.” — Michael Fine, chief executive officer with the state’s Fiscal Crisis and Management Assistance Team.
Castelo acknowledged difficult realities impacting the fiscal picture, including the pandemic in the early 2020s, and the impact of the Eaton fire. But suggested the district made mistakes reflected in its spending.
“‘Your level of deficit spending. Monitor your declining enrollment,’” Castelo said. “Yes, it was exacerbated by fires and yes it was masked by COVID when you have all this one-time revenue. We’ve spoken to staff and said you do not hire people from money that’s not sustainable.”
Trustee Yarma Velázquez said the board received a presentation late last year about the need for immediate urgency in taking action to address its financial situation.
“In January, I’m not going to speak for my colleagues, but we chose humanity,” Velázquez said. “That doesn’t mean that we don’t understand exactly where we are or that we don’t understand what is going to happen. If you go to our presentations and hear our comments you’ll see that that was very clearly reflected in our remarks that we were making a calculated decision based on basic humanity.”
Trustee Patrice Marshall McKenzie asked the LACOE representatives how many other districts were in similar dialogue with the county agency.
LACOE officials said along with PUSD, Hacienda La Puente and Azusa unified school districts received conditional budget approvals this year — an unwanted distinction tagged on the budgets of school districts facing financial troubles.
Officials also provided the example of Inglewood Unified School District, which has been in receivership since 2012 when it was forced to take a $29 million bailout to avoid insolvency.
Michael Fine, chief executive officer with Fiscal Crisis and Management Assistance Team, a statewide agency, said this week that out of 1,000 districts in the state, 18 had conditional budget approvals for financial reasons.
Fine said, according to a FCMAT report on the impact of the fires, PUSD’s enrollment went from 17,267 in 2014-15 to 13,757 in 2024-25 — a 20.3% decline. The decline was on par with L.A. County.
Current year enrollment, as of Sept. 26, 2025, showed a further decrease of 604 students, or a 4.4% decline from the prior year.
“As I understand it, one of the key factors for PUSD is that they have not reduced staffing levels commensurate with enrollment declines,” Fine said in an email. “The district is also having a hard time staffing special education services with qualified staff and has had to turn to outside contractors, which are generally more expensive than hiring staff. This lag in matching staffing levels to enrollment preceded the fires.”
In its most recent letter, dated Sept. 12, LACOE wrote that PUSD projected operating deficits in 2025-26, 2026-27 and 2027-28.
“The District must monitor the causes for deficit spending to keep it manageable and to prevent further erosion of the fund balance,” the letter read.
It went on to say that because the deficit projections, it required PUSD to submit an updated fiscal stabilization plan with its first interim report due by Dec. 6.
PUSD PTA Council President Lisa Kroese said it was unfortunate that the timeline for decision making will be so short.
“What was expressed at our meeting was a concern that reductions in programs which are grant funded and/or are popular with students (like athletics) will have an outsized impact on enrollment and average daily attendance,” Kroese said in an email. “Since the funding formulas are based on enrollment and attendance – the district has created excellent magnet, language immersion, and other programs that are attracting families both from outside of the district and even some who had been at alternative schools.”
‘A fluid process’
A major step on the truncated timeline happened Wednesday, Oct. 29, when the Superintendent’s Budget Advisory Committee held its final meeting before its recommendations are reviewed by and then ultimately voted on by the Board of Education.
The SBAC was one of eight workstreams being analyzed to address the $30-$35 million in reductions needed to be reflected in next year’s budget. They include central office reductions, contracts, grant maximization, special education, transportation, asset management and staffing to ratio/vacancies.
“The budget is a fluid process … hard for people to understand because it changes,” Blanco said. “You have two interims, then you have your unaudited actuals and then you have your budget again. There’s a lot of things that happen in between that change the numbers and I think that’s always confusing to people, but that’s the way the system is designed.
United Teachers of Pasadena President Jonathan Gardner served on the SBAC this year.
He pointed to LACOE’s management of Inglewood Unified School District and not being able to get that district out of receivership.
“They do not know how to run school districts,” Gardner said. “You literally have a test case sitting there still not fixed and you’re going to come in tell school districts how to run its stuff.”
He said LACOE hasn’t done enough to hold PUSD accountable for not spending enough to fund the classroom over the years. In addition, Gardner said compared to what he described as well-run districts like Arcadia and Downey, PUSD has more central office administrators.
“I think that those are some of the clean ups that we really need to do because it makes for a more efficient and effective organization,” Gardner said.
Other common themes contained in the letters include warnings about declining enrollment/attendance and reduced state funding. In the declining enrollment/attendance sections, LACOE recommended PUSD monitor the trends and assess staffing and facilities planning based on the projected rate of decline.
“Districts must respond to enrollment trends timely or face the consequences of deficit spending and shrinking reserves,” Fine said.