Los Angeles Unified schools will continue operating, employees will continue reporting to work and the district’s elected board will remain responsible for its decision.
But the district is now subject to a more intensive level of county finance scrutiny that could escalate if it fails to produce and carry out a credible plan to stabilize its finances.
The Los Angeles County Office of Education’s July 2 “Lack of Going Concern” determination assigned a fiscal expert to LAUSD, triggered a detailed review of the district’s financial practices and required additional budget revisions and implementation plans.
The initial intervention is advisory. Under California’s progressive oversight system, however, the county could later appoint a fiscal advisor with the authority to temporarily stay or rescind board actions deemed inconsistent with restoring the district’s financial health.
The designation is relatively uncommon, but LAUSD is not alone. Michael Fine, chief executive officer of the Fiscal Crisis and Management Assistance Team, said about 10 of California’s roughly 1,000 school districts currently have a “Lack of Going Concern” designation. They include Burbank Unified in Los Angeles County, San Francisco Unified, Sacramento City Unified and several smaller districts elsewhere in the state.
Following the county’s determination, Superintendent Andrés E. Chait said schools would continue operating normally while the district worked with LACOE to strengthen its long-term financial outlook.
Here’s what changes now.
What will the fiscal expert do?
LACOE assigned Octavio Castelo, the agency’s executive director of business advisory services, to serve as the district’s fiscal expert. The county said Castelo and other LACOE representatives have been meeting with LAUSD officials since the determination was issued.
Fine described a fiscal expert as an additional set of “eyes and ears” for the county.
The expert will spend the next couple of months embedded at the district, talking with staff, reviewing financial data and assessing the district’s fiscal condition before advising the county superintendent.
The role is diagnostic and advisory. Castelo cannot make decisions for the school board or independently overturn its actions.
LACOE’s letter requires the district to provide the county and the fiscal expert with access to requested records, data, systems, meetings and employees. County officials said they will be watching whether LAUSD implements the reductions and other actions contained in its board-approved Fiscal Stabilization Plan.
What deadlines are approaching?
Under the July 2 letter, LAUSD must submit budget revisions in the coming weeks while also updating its Fiscal Stabilization Plan as part of the county’s oversight process.
The plan must identify the specific actions the district intends to take, the department responsible for carrying them out, implementation dates and measurable benchmarks. LACOE said broad or unsupported commitments would not be sufficient.
Fine said LACOE asked the district to submit its budget revisions by mid-August, so the county would have time to evaluate them before the state law’s Sept. 15 deadline to approve, conditionally approve or disapprove the district’s budget.
The July 2 letter also established several long-term milestones.
Furlough days included in the district’s stabilization plan are expected to take effect beginning with fall break in 2026. LACOE warned that failure to implement them could prompt consideration of a higher level of intervention.
By the final board meeting in January 2027, the county expects LAUSD to complete the board-approved process for staffing reductions planned for the following fiscal year. The district must also explain how it would limit disruptions to instruction and other student services.
What is the FCMAT review?
The county determination also automatically triggered a Fiscal Health Risk Analysis by Fine’s agency.
Fine said Wednesday that FCMAT received LAUSD’s request to begin the analysis earlier this week, though the agency and the district have not yet finalized the schedule for the review.
Fine said the review will examine LAUSD’s budgeting practices, internal controls and financial procedures across 20 areas of risk. His team expects to request hundreds of documents, interview key employees and compare those interviews with district records.
The resulting report will assess whether the district faces a low, moderate or high risk of insolvency and identify practices that need improvement.
Such reviews typically take six to eight weeks for an average school district. Fine said LAUSD’s size could extend the process to roughly 90 days after the review begins.
Could the county assume greater authority?
California’s oversight system is designed to intensify if a district fails to develop, adopt or implement an acceptable recovery plan.
The next major step would be the appointment of a fiscal advisor. Unlike the current expert, an advisor could be given “stay and rescind” authority, allowing the advisor to pause or reverse a board action deemed inconsistent with improving the district’s financial health.
The school board would continue to govern the district, but some financial decisions — such as approving a major unbudgeted contract or taking on additional unaffordable costs — could be blocked.
Fine said further intervention would become less likely if LAUSD adopts an acceptable stabilization plan and carries it out as planned.
What should the public watch?
For families and employees, the most important development will be the plan that follows the county’s determination.
Fine said the public should watch whether the district develops and adopts a plan, holds meetings and takes public testimony on its content, and whether the county ultimately accepts it.