Pasadena School District Faces Very Tough Choices to Cope With Budget Shortfall

The Pasadena Unified School District faces a dire financial crisis that threatens to result in drastic cuts to staff and programs, with officials projecting a staggering $78 million deficit by the 2027-28 fiscal year.

Superintendent Dr. Elizabeth Blanco delivered the stark assessment to the Board of Education on Thursday, June 12, warning that the District’s current spending trajectory cannot continue without significant intervention.

“This is a very serious fiscal situation,” Dr. Blanco wrote in her latest message to the community the day before the Board meeting. “We want to be clear: without significant changes, without additional reductions even larger than those recently implemented, our financial trajectory is unsustainable.”

The District projects operating deficits of $37.9 million, $36.7 million and $36.1 million over the next three fiscal years, respectively, according to Dr. Blanco. The projected negative ending balance of $78 million in the 2027-28 fiscal year includes approximately $11 million needed to meet the District’s minimum 3% reserve requirement.

Financial Pressures Had Mounted Before Eaton Fire Damage

Even before the devastating Eaton Fire displaced hundreds of teachers and families while destroying multiple campuses, Pasadena Unified struggled with a combination of declining enrollment, the expiration of COVID-19 relief funding, and rising operational costs that had already created a deficit exceeding $30 million.

Chief Business Officer Saman Bravo-Karimi walked Board members through the factors affecting the budget process during Thursday’s meeting, along with the fiscal stabilization plan required due to the District’s precarious financial position.

The current year’s ending balances are expected to reach approximately $22 million, representing a $4 million increase from projections made several months earlier. This improvement carries forward to future fiscal years, but still leaves the District facing enormous challenges ahead.

With projected parcel tax revenues included, District officials expect to reach roughly break-even status by the end of the next school year (2025-26). However, the situation deteriorates rapidly thereafter, with projections showing the District $29 million in the red by the end of 2026-27 and negative $71 million by the end of 2027-28.

State Budget Factors Create Mixed Outlook

Bravo-Karimi highlighted both positive and negative developments from the state’s May budget revision. Positive factors include discretionary block grant one-time funds, additional learning recovery funding, increased transitional kindergarten funding, and a hold harmless provision for Pasadena Unified for the 2025-26 school year.

However, these gains are offset by a reduced Cost of Living Adjustment of 2.3% for the next school year, down from the previously projected 2.43%.

The District also faces a substantial 8% increase in health and welfare costs for 2025-26, with the full impact borne by the District due to fixed employee contributions.

Contingent revenues, including the discretionary block grant and learning recovery funding, are not yet reflected in the current budget presentation because they are not part of the state’s enacted budget. These will be included at the first interim report if approved, Bravo-Karimi explained.

The District has also made changes since the second interim report, including adding transitional kindergarten aides for 2025-26 and beyond. This shifts the adult-to-student ratio for transitional kindergarten from 12:1 to 10:1, creating three adults per classroom—one teacher and two aides—for an effective 8:1 adult-to-student ratio.

Major Staff Reductions Anticipated

The fiscal stabilization plan outlines substantial reductions over the next three fiscal years, with the most significant being an ongoing reduction of 120 full-time employees starting in the 2026-27 fiscal year.

“Because the vast majority of any school District’s resources are spent on people,” Bravo-Karimi said. “And when Districts are facing the size of challenge, fiscal challenges that we are facing (and many are), it’s very difficult to bring it into balance without impacting staffing levels.”

The District had already attempted to address its financial problems in February, when the Board voted to approve cuts to 151 full-time positions. Despite protests from students and District staff members, District leadership maintained that the cuts alone would not solve the larger fiscal crisis and that additional measures would be necessary. By the end of the school year, many of the layoffs had been rescinded through a process governed by state law and collective bargaining.

Additional Cost-Cutting Measures Proposed

Beyond the planned staff reductions, the fiscal stabilization plan includes additional central office reductions, revenues from asset management, reductions in the District’s special education contribution, cuts to supplies and contracted services, maximizing restricted grants, reducing transportation costs through efficiency measures, cutting additional contributions toward retiree health benefits, and implementing energy efficiency savings.

Bravo-Karimi noted rising costs from unfunded mandates, particularly for special education, which requires contributions from the unrestricted general fund to the restricted general fund. Nearly all received fire insurance funds are projected to be spent over the three-year planning period.

The plan includes proactive steps such as continuing the superintendent budget advisory committee process, receiving support from the Fiscal Crisis and Management Assistance Team (FCMAT) to identify target areas for reductions, conducting a systematic review of filling vacancies, implementing a comprehensive review of contracted services, and reviewing District-wide staffing levels and special education expenditures.

Board Members Call for Sacrifice and Advocacy

Trustee Yarma Velázquez committed to cutting her own expenditures, including eliminating conference travel, and urged her colleagues to follow suit. She acknowledged that while transitional kindergarten initiatives offer long-term enrollment benefits, they create immediate financial losses for every TK classroom added due to increased staffing ratios.

“But I think that we need to start modeling by example and really try to show how everybody is willing to contribute to the sacrifices that we’re asking of the community,” Velázquez said.

Board President Jennifer Hall Lee and Trustee Scott Harden viewed the financial crisis as an opportunity for local leaders and the community to advocate at state and federal levels for improved special education funding.

Harden emphasized that the financial picture underscores the need for renewed advocacy to elected leaders for proper funding of areas like special education, which currently faces an “unconscionable” gap between funding and District needs.

Hall Lee asked how full federal funding of special education—such as 40% funding under the Individuals with Disabilities Education Act—would impact the District’s ongoing $54 million annual contribution to special education. Bravo-Karimi replied that such funding would “change it radically” and free up “substantial more resources to benefit all students”

“Well, for me, it goes to this point where there are forces in the country politically that don’t want all educated in public education,” Hall Lee said, “That’s the root of it”

Maintaining Student Achievement Amid Cuts

Hall Lee referenced a presentation from earlier in the meeting that highlighted accomplishments of schools and students during the past school year, emphasizing that maintaining growth and achievement should remain a priority despite looming reductions.

“There have been many Districts who operate successfully for students and continue to make gains for students with the types of resources that we’ll have moving forward … It is possible to serve kids well even with the limited funds that we project to have in the future,” Bravo-Karimi said.

“So this assumes that action is taken by the District, and of course, as you know, action must be taken to avoid this outcome,” Bravo-Karimi said regarding the projected financial trajectory.

According to Dr. Blanco, the Board must adopt the final budget at its June 26 meeting.