Meeting highlights accounting practices, structural deficits and pressure to act

At a special meeting Thursday evening, Pasadena Unified School District officials delivered their most sobering financial report to date: without immediate corrective measures, the district could face annual operating deficits exceeding $30 million.

Chief Business Officer Saman Bravo-Karimi presented unaudited figures for 2024–25, as required by the Los Angeles County Office of Education. On paper, the district appeared to finish the fiscal year in strong shape, reporting a $38.2 million surplus and an unrestricted ending balance of $106.8 million.

But that apparent cushion, officials said, evaporates once insurance proceeds and fire-related expenses are stripped out. Without those extraordinary items, the district posted a $27.3 million operating deficit and closed the year with $41.2 million in unrestricted reserves — down sharply from prior years. The comparable deficit in 2023–24 was $7.4 million.

“It’s the latter numbers that exclude those fire revenues and expenditures that give the truest picture of our financial status,” Bravo-Karimi told the board.

Insurance Advances and Accounting Strain

The district has so far received only advances on its fire insurance claim, not final settlement funds. Bravo-Karimi said the eventual payout will depend on what costs are deemed eligible.

“These advanced funds are not necessarily tied to specific expenditures yet,” he said. “Ultimately, it will … be based on costs incurred.”

Several trustees questioned whether the insurance dollars should continue to be reported in the general fund. Board Member Kim Kenne argued that doing so inflates statutory reserve calculations, including nearly $2 million in contributions to restricted maintenance, and obscures the district’s actual operating costs.

“We can’t see what our real operating expenses are and our real operating deficit,” Kenne said, urging staff to shift the money into a separate fund.

Bravo-Karimi acknowledged the logic but warned that moving the funds would leave reserves looking even thinner. “If we don’t make the necessary reductions to bring our budget into balance and then those funds are not in the general fund — this is the worst case scenario — our reserves could go negative next school year,” he said. “School districts aren’t allowed to have negative ending balances.”

Structural Drivers of the Shortfall

District staff pointed to multiple pressures driving the red ink: long-term declining enrollment, the expiration of one-time federal pandemic relief, and rising costs for health care and special education.

Even if state lawmakers reinstate an attendance “hold harmless” policy that was excluded from this year’s budget, Bravo-Karimi said, Pasadena Unified still projects multi-year deficits of more than $30 million.

Trustees cited specific cost drivers. Kenne noted that the district’s contribution to special education has jumped from $29 million to $49 million in just five years. Federal maintenance-of-effort rules require districts to sustain that higher level of spending once it has been reached.

She urged administrators to cut back on contracted services to avoid further escalation. Officials responded that the district had hosted a summer hiring fair to bring more instructional aides in-house, reducing reliance on outside agencies.

Trustee Tina Fredericks flagged employee health benefits — pegged at $27 million — as another unsustainable burden on the budget.

Audit and Next Steps

A final audit closing the books on last year’s finances is expected by early 2026. 

Due to PUSD’s fiscal outlook, LACOE is currently requiring the submission of Fiscal Stabilizations Plans as part the 2025-26 budget.