Pasadena School District Faces $110 Million Budget Crisis Over Next Three Years

The Pasadena Unified School District is confronting a severe financial crisis with projected operating deficits totaling more than $110 million over the next three years, threatening the district’s fiscal sustainability and likely triggering a downgrade in its financial status.

“This is a very serious fiscal situation,” Superintendent Dr. Elizabeth Blanco wrote in an email letter sent to the community Tuesday.

“We want to be clear: without significant changes, without additional reductions even larger than those recently implemented, our financial trajectory is unsustainable.”

Dr. Blanco said District projections show operating deficits of $37.9 million in 2025-26, $36.7 million in 2026-27, and $36.1 million in 2027-28, with a projected negative ending balance of $78 million by the 2027-28 fiscal year.

The district will present its first budget overview at Thursday’s Board of Education meeting, with final budget adoption scheduled for June 26.

The Los Angeles County Office of Education is expected to issue a letter of concern, and while the district “may not be officially assigned a certification at budget adoption,” its fiscal status “will likely shift from Positive to Qualified by the First Interim in the fall 2025,” Dr. Blanco said.

Multiple factors are driving the financial crisis, including ongoing enrollment decline, the expiration of one-time COVID relief funds, lower state funding levels, rising employee health benefit costs, and increased unfunded government mandates, according to Dr. Blanco.

The district received nearly $100 million in fire-related revenue this year, with nearly that full amount expected to be spent over the next two years on rebuilding and recovery efforts. However, Blanco noted that “while this funding is essential for rebuilding and recovery, it will not offset our general fund operating deficits.”

Previous spring projections showed the district ending the 2026-27 fiscal year with a negative balance of $28 million. The current financial forecast “already reflected the impact of difficult budget reductions made for the upcoming 2025-26 school year,” but the updated Multi-Year Projection extending through 2027-28 reveals an even more dire financial picture.

Dr. Blanco acknowledged that “these reductions were not sufficient to close the shortfall, but they were what the school system could prudently implement after the fire.”

“We are committed to a transparent, inclusive process as we address these challenges,” Dr. Blanco wrote. “We will need to come together as a community to weigh all options and determine how best to preserve our students’ educational experiences while restoring fiscal balance.”

The superintendent said more information will be shared following Thursday’s board meeting as the district continues community engagement efforts to address the financial challenges ahead.