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close session. Public announcement of close session actions taken concerning item C1, case number 961540 by a vote by a vote of 6 to 0 to one. The board took action to approve of the settlement of special education litigation in accordance with the terms
of a written agreement. The announcement of close session actions is complete and the close session stands adjourned. That's adjournment of close session call to order at 520. Here
here. Board member Fredericks, will you do the pledge? Do we have any public comment on the agenda? Jonathan Gardner. Good evening, members of the board. Dr. uh Lo, my name is Jonathan Gardner,
president, United Teachers of Pasadena. I rise rise to counter the dangerous content and tone of the upcoming presentation that LEO will be delivering. This year's budget that you are apparently conditionally accepting is now the fourth year in a row that PSD has defunded the classroom. And yet, not
once has LEO even mentioned that they are depriving classrooms of the resources they deserve, but rather rubber stamped a waiver that certifies PSD can continue defunding its classrooms. Instead, after the devastating wildfires and other school site chaos, LEO representatives dane to
chide PSD for not cutting enough teachers. How dare you? Students and families have been ripped apart by your broken and failed oversight. You see nothing wrong with all the districts you oversee failing to meet their leg legal minimum on classrooms and instead threatening cajol about how in an
uncertain time PUSD must make even more cuts in the classroom. Can you not see that PSUD is overspending compared to its peers in contracted services and in central office expenses? Can you not see that PSD had two audit findings about not spending enough on students and you
rubber stamp those waiverss without even trying to encourage them to invest in stability in their classrooms? How dare you come in here and pretend to provide oversight and instead give further cover to the overbloated central office admin and outside contractors that PSUD is wasting its funding and grants on as
opposed to ensuring students receive a proper caring supportive learning experience. If PSD had properly funded its classrooms and focused on firsttime success from the start, they would not be scrambling to backfill with all the extra admin contracts and centralized
supports. The county supervisors like our own Katherine Barger should be ashamed that their oversight is allowing this sort of classroom defunding to multiply. LEO as their education representatives should not be sending in people to yell at our PSD superintendent and board for not cutting enough
teachers and school site staff. I hope that the board will target its cuts and direction following this presentation on best practices for teaching, learning, and LCAP strategies and not on the sorts of devastating cuts to teaching, learning, and school stability that have
so far come from LEO's oversight. Thank you. Do we have anything else? Nothing. Okay. So we will move on to our special presentation
H with Dr. Sergio Canal. Madame President and Dr. Blanco, I'd like to introduce to you uh from Los Angeles County Office of Education. We have our chief financial officer David Hart, the director of business advisory
service Ortavio Castello, uh financial advisory services officer, Steven Choy, and financial advisor services officer David Wilson for their presentation. Thank you Dr. Canal, members of the
board, madam superintendent, thank you very much for allowing us to be here. My name is Octavia Castello. I'm the director of business advisory services with the Los Angeles County Office of Education. My p my primary function within the county office of education out of the many is to safeguard the fiscal solveny of every school district
in the county. I'm responsible for reviewing all 79 school districts budgets um their interimm filings as well as their own actuals to see how they fare up. Um, with me is Stephen Choy, who's been directly working with Pasadena for the past several years, uh,
as a business services consultant looking at their finances. Also, we have our newest member to LEO, Mr. David Hart, who's here as our chief financial officer. I'm once again showing the urgency of why we're here. Um, also we have with us our officer, our newest officer to the department, to the
division is Mr. David Wilson, who was a former chief financial officer at a neighborhood school district. So, I just want to take this opportunity to discuss the situations that we're seeing here and implore the district to take immediate action to present I mean to prevent the fiscal insolveny of
Pasadena. So, I'm not going to read through the slides. I'm going to narrate through it. Um just have a script here for you, but if you have any questions, we'll be willing to entertain any questions. Okay. Uh good evening board members, my district leaders and community members.
Uh, thank you for the opportunity to speak on behalf of the Los Angeles County Office of Education regarding Pasadena Unified School District's fiscal condition. My name is Octavio Castello. Together with my colleagues, we've been working closely with the district to ensure that its financial management and long-term
planning remain sound and sustainable. Tonight, I will outline the urgent fiscal matters facing Pasadena Unified School District, summarize the findings that led to the conditional approval of the 2526 budget, and discuss the interventions authorized under California Education Code 42127.6,
the state's primary safeguard to protect districts from insolveny. Under the California Education Code, county superintendents have both the authority and obligation to intervene when a district may meet may not meet its financial obligations in the current or subsequent fiscal years. The law
empowers the county to investigate the district's fiscal condition. Notify the governing board of its risk if risk are found and determined and intervene if necessary to ensure that essential services to students continue uninterrupted. In practical terms, this means the
county must review budgets and interimm reports to verify that each district maintains solveny for the current and next two fiscal years. When red flags appear, such as ongoing deficit spending, declining enrollment, or unsustainable expenditure patterns, the
county is required to act. Our goal is not punitive intervention, but preventative collaboration. The aim here is to stabilize the district before the situation becomes critical. This year, Pasadena Unified received a conditional budget approval due to
several areas of fiscal concern. We're currently reviewing the plan that was submitted on October 6 to make a determination on whether or not we can uh lift the conditional approval to your budget. The district's multi-year projection shows 149.4 million cumulative decline
in its unrestricted general fund over three years. This is a serious warning signal. Even though the district has made strides in reducing the the deficit year-over-year, the overall shortfall remains alarming. The key pre key pressures to this
include the expiration of the ESTR funds, which were temporarily federal relief dollars that masked a lot of the deficit spending, the economic impact of the recent wildfires, which affected property taxes and attendance, and the persistent enrollment and ADA declines, which directly reduced state revenue.
These factors combined to create a structural deficit, a recurring imbalance between revenue and expenditures. Our financial analysis shows that beginning in fiscal year 23 24, expenditures began to outpace revenues and the gap has widened sharply in
recent years. The district is effectively spending more each year than it brings in, which is unsustainable without sufficient corrective action. While the fiscal stabilization plan ident identifies 83.1 million in combined reductions and revenue enhancements between fiscal year 2526
and 2728. These plans must be implemented with urgency and accountability. The county's conditional approval is contingent on Pasadena's progress towards these reductions. Without timely adjustments, the district's risk triggering the district risk triggering more shish
intervention, including the assignment of a fiscal expert, as was the case in Darde, the fiscal adviser, as was the case at Montabella Unified School District, and a more severe cases when a when a state loan is drawn down, a fiscal a fiscal adviser who serves as trustee over the
district and actually um serves over trustee over the district and has has full authority over the district. Enrollment and average daily attendance are the life lifeblood of school funding in California. Pasadena continues to
experience declining enrollment and ADA. The gap between funding ADA and actual P28A shows the stabilization has not yet been reached. This decline translates directly into reduced state revenue. Every small drop in ADA can result in millions of dollars of loss funding,
forcing difficult budget choices. Therefore, enrollment management, attendance improvement, and demographic planning must remain at the forefront of the district's fiscal solveny recovery. Addressing these challenges requires Pasadena to do business differently. The
county strongly supports the district's state stated commitment to long-term sustainability and innovation. Some examples are already in discussion. These include revenue enhancements, reassessing facility rental agreements to ensure community use is charged at fair market value, adjusting usage fees
to better recover costs without creating profit motives, and exploring partnerships or grant opportunities align with the district facilities and programs. They're also undergoing some examination of expenditure management, including evaluating staffing ratios, particularly in the context of declining
enrollment, implementing program audits to ensure spending aligns with student outcomes and and strategic goals, strengthening internal controls and data accuracy for financial reporting. And we strongly encourage you to examine the special education services as the
contributions to the unrestricted general fund have increased to over $50 million. Long-term sustainability also means developing mechanisms to anticipate risk such as declining enrollment, pension cost increases, and one-time funding cliffs and adapting proactively, not
reactively. To comply with the conditional budget approval, Pasadena must meet the following deadlines. We're asking by November 2025 to submit the proposed budget reductions to the county office for to of education for evaluation. submit the first interimm report with
the updated financials and progress on implementing reductions. By March 2026, we ask the district issue the reduction enforce notices as needed to line staffing with budget realities. And by July 2026, adopt a implement a
new budget reflecting approved reductions. Each of these milestones is required and failure to meet them could escalate the level of county intervention. I want to emphasize that county oversight is not simply about enforcement. It's also about support.
The county's fiscal oversight team is committed to helping Pasadena Unifi build capacity, strengthen its financial systems, and identify new pathways to solveny. The county provides technical assistance with budget development, training for district fiscal staff,
guidance on multi-year projections and budgets. The ultimate goal is to empower the district to make datadriven decisions that preserve local control while ensuring long-term fiscal health. To the board and the district leadership, the decision made in the
upcoming months will define Pasadena's Unified School District's future. You are being asked to make difficult but necessary choices, reductions, reorganizations, and revenue strategies that may be unpopular but are essential
to the district's survival. to our community. Please understand that these measures are not about cutting for the sake of cutting. They're about preserving educational quality for future generations. Every dollar saved or generated now helps protect classrooms, teachers, and programs down
the line. In conclusion, Pasadena Unified stands at a fiscal crossroads. The combination of declining revenue, rising costs, and post-pandemic transitions has created a fragile financial landscape. But with disciplined implementation of the fiscal stabilization plan and a spirit of
transparency and collaboration, this district can emerge stronger and more resilient. Our shared mission is clear to safeguard the financial health of Pasadena Unified School District so that every student continues to receive the education they deserve today, tomorrow,
and for years to come. Thank you. Okay. Thank you very much. Do we have any questions? questions or comments? Yes, of course. Miss Kenny, thank you for your presentation.
I had one question for you. Um, back at our second interim, we had some board members who were concerned and thought that perhaps it should have been qualified. And we felt that our understanding was that LEO
felt that positive was appropriate at second interim and so this was about two months later that we're getting a conditional approval in June. Is is do you have any comments on that? No, you want to I so we understand that uh at that point
of time uh Pasadena did make nec make cuts and notify staff and there was uh staffing plans and everything that uh was going on. The biggest concern was that we were unable to determine how
much of it was uh fully implemented and how much uh was massed by the wildfire revenues at that point of time. So from the county's perspective, uh we didn't have the detail necessary to be able to
determine if the revenues were masking uh the overall effects because of all the declining enrollment uh and the projected ADAs and the impact to the district at that point of time. Um there were so many factors that you know it
would have been difficult for us to justify providing a qualified to Pasadena uh as there were strides in moving and and adjusting to the uh the projected deficits.
Thank you. Um I wanted to add a couple comments. Um I think a lot of the figures that we're looking at today are from our adopted multi-year um projections and there's been some changes since then. Um we were
able to get I think a little bit more TK state funding which would help our unrestricted. We have a couple block grants although I realize they're restricted. Um, and then with our actuals, we now have a higher ending balance than we did adopted. And then we
seem to have gotten inc uh an increase in the amount of fire proceeds between what we thought we had had adopted and what came through at actuals. I think it was another 40 million. Um, it would certainly be helpful, I think,
to the board, perhaps to you, um, to all of us, to have an updated multi-year projections with these factors rather than waiting till December with first interim. I know we're in the midst of figuring out how much we have to cut.
And certainly, if we need to cut less or need to cut more, probably the sooner we know that, the better. And I I know things will keep changing, but you know, we can take that into account that this is what we know now and it could change again, but it's more updated than last
June. Um, so that's a request, I guess, from our staff to provide that to us and to you. Um, I we were able to look at our actuals at some of our numbers without the fire insurance and I I do think that's helpful to understand what
our actual operating expenses and overages are. I noticed on your sheet the revenue and expenditure trends one has the fire expenditures but it doesn't really capture the fire revenues because they came in a different way. And so,
not that it reducing a hundred over spending to 70, but it's still something, you know. So, I I want people to not be quite as alarmed by that, but it's still it's still alarming, I think. Um, so that's that's one of my um requests. And
I I would it would also be helpful to understand the cadence of spending our fire insurance proceeds because while they're in our ending balance. They're helpful to cover our 3% reserves. And I don't know with that new
money coming in exactly when that will be spent. Will we be spending it all next year? Will we'll be spending some of it next year? And you know, will it be covering us a little bit for a while? Um my concerns kind of center around I feel
like our our P2 ADA figure for 2526 it adopted might have been a little optimistic especially looking at what our actual enrollment came in now that we've started school and what our P2 was for last year and I am a little
concerned about our unduplicated percentage. So again, doing that multi-year with those kinds of updated numbers, I think would be useful. Um, I remain concerned about our special education spending and locking in higher maintenance of effort. Um, to your slide
that said we really need to be thinking differently, I guess how you said it, doing business differently. Um, this kind of gets back to a conversation we had at our last board retreat about do we need to do some revisioning or is
this more of a time to think about redesigning? I think the cuts we're looking at it's not just I think what I'm really worried about is that we are leaving every structure in place and just cutting
pieces of it and those structures are not going to work at those smaller levels. rather than really kind of redesigning. And I think some of what we've seen from staff when you guys talk about, you know, redesigning how we do athletics, I think that may be what we have to do. We can't just take a little, take a little,
take a little. And so somehow we've got to get to that kind of how are we going to do things very differently because I think just keeping that structure and kind of nibbling away at it in all these little places, it will hamper our ability to actually serve students
existing structure. Thank you. So, um I do have a question here and I'd like to welcome board trustee McKenzie here. These are the Lego people. Oh, yeah. Superintendent wants to say just want to get clarification on um
Mrs. Kenny's comments. Um so, if I can remember them correctly, you're asking us to redo the multi-year projections. So, I need to know first of all from Dr. Canel if you and your staff have the capacity to do that. what's the timeline you're looking for and then if that's a
consensus from the full board. We know that Armen and the team um have started working already for us in the uh first interim. I know there's a lot of leg work that needs to happen. So I need to discuss with the team to try to get a timeline in terms of obviously when we do something like that it just takes a
moment but um it is something that can be done. Okay. All right. Good. Can I clarify? Yes. Go ahead. So to clarify, I'm just talking about the Excel spreadsheet, not the state forms, okay? Where we just look at these big buckets and say, "Oh, that big bucket changed a little." And
and if it means adjusting some of the entries in the FickMat calculator to figure out, oh, our revenue will really be slightly different. That's what I'm talking about. Okay. So then my second question is when you would like to see that by and if there's consensus from the board from
from you know, a majority of the board to do this work or not. Okay. So, here's my I have two things. One, we were uh Miss Kenny was talking about how we do things. So, we have been talking about visioning process for the future, which is something that we are ongoing talking about. So, that's really
important. Um our sped costs obviously keep going up and we're not exactly getting money from the feds or the state on that one. Um, and I guess what my question is is if we don't approve these cuts by December, can you just take me
as briefly as you can through a step by step and the implications of those steps, what it means to this body? So, in the reason why we're looking at fix why we're fixating in December is because you will submit your first
interimm report to our office. your first interim capture captures your financial position up to October 31st. Um, so this is what he's mentioning that the staff is working on now getting the first interim that comes in the SAX forms. Those are all the legal forms that come to our office and that's what
you present and you adopt that first in um you make a decision based on your financial position whether or not you're able to meet your minimum required reserves of 3%. If you're unable to meet that without what we call a B10 plug, which is an artificial number that's included into
your forms that you must account for either through a revenue enhancement or through an expenditure reduction. Um, you have the option of filing either positive if you feel confident, qualified, which says that tells you and tells us that you may not be able to
meet your financial obligations in the subsequent outy years, or negative, which means we're in dire straits. we can't meet our financial obligations either in the subsequent years or the immediate year. It's um that's a balance. So, we get your forms, we
review your your budget, we review your interim filing, and that for us either indicates Pasadena is they didn't make the necessary cuts. Uh they're they didn't make the adjustments to their budget. That will either we can concur
with your filing if you file qualified. If you file negative, if you file positive, we're going to scrutinize it and we're going to look at your fiscal stabilization plan. Uh we're going to look at what's been implemented or not. We have the option of reversing um your certification from positive to
qualified. Qualified certification at that point will require us to label you a lack of going concern uh which allows the county superintendent to intervene. In cases such as Dardi where we did intervene, uh we put a fiscal expert in
there. The fiscal expert worked closely with the staff there at Darti. Um they were in a very dire position. They were able to work with them and their budget. They got out of that position within within several months. Uh other positions, so that's that's the least
restrictive um intervention is the fiscal expert. If we see that the board still is not taking action, that person can be elevated to a fiscal adviser. A fiscal adviser has full stare resend authority over the district's actions,
over the board's actions. Um, I served as a fiscal adviser at a school district and prior to anything going to board, I met with the superintendent when we did the agenda planning and things that I felt that weren't aligned to the district's solveny recovery, I had them pulled from the agenda uh because I did
not want you to take action. If there were any hiring of personnel that vacated position, that was pulled from the agenda because it was not to the path of fiscal recovery for the district. If you draw a loan, if it's an immediate cash insolveny issue and we
monitor your cash daily, if we see that cash is going to be a problem or cash flow, if you if you go out for an immediate um loan, immediately the superintendent loses her job. Once that draw once that loan is drawn, the board has no authority. We appoint a trustee
at that point over the district. Um that's going to come in December. December is going to make that that critical decision for us as to whether or not to label you a lack of going concern. Uh whether or not to see your dis your filing as positive, qualified
or negative. And depending on that, we will take different action um to hopefully save off any fiscal insolveny for the district. But December 15th for us when you submit your report to us, your first interim is going to be critical. That's going to drive a lot of your decisions come March. Um, and it's
it's imperative for us to see that report timely and we do an objective assessment of your of your first injury. Thank you, Dr. Velasquez. I would like to hear from the two gentlemen that haven't had the chance to speak yet.
Hi. Uh, Dave Wilson, financial advisory services officer with LEO. Uh, also serving in the role of oversight. I'm just here to provide any support that I can to my colleagues and to the board of education. Thank you. David Hart, CFO for LEO. I
think the reason I'm here is um we're not treating this um casually. We are concerned and uh these gentlemen have the expertise. Um my
I'm here in support. Happy to answer any questions, but I would not be here if we weren't trying to convey that the clock is ticking. We appreciate the challenges, very unique p uh challenges that Pasadena is facing,
but they are it's going to be tough for you, if not impossible, to revenue your way out of the problem. And a follow-up question. Um, how do you see the impact of the fires and what
that meant for our financial situation? I'll offer a general comment and then to the specifics, I'll turn it over to the gentleman to my left. What I understand of Pasadena um having been at LAUSD previously is it is a community that has
had uh fiscal difficulties for a period of time before the pandemic. Uh the circumstances the numbers were different but the characterization of the district uh has not changed. The various COVID relief funds and now taken with the fire
the various funds that have come in have essentially buoied or created a a rising tide that allowed the district to um avoid having to make some of the reductions or find other means by which as uh was addressed earlier to raise
revenues. But now with the CO relief funds having been fully expended, the fire funds uh essentially coming to a close while that circumstance is unique, unique is the right word. They're one-time funds and will not sustain the operations of the district such as they
are today. Just to add to that, um I think that the difficult situation that Pasadena had was essentially um over the years we had commented uh that we saw that there was deficit spending that enrollment was
declining. I know that um you know for the state of California many of the school districts had that same face that same problem. Uh but what we didn't see was that um that the leveling off of the
decline, right? So as you're uh adjusting and and and projecting out what you're going to do to make sure that the students had, you know, the best education that they could, uh however, it seemed that the kids just
were not there. And with the fire revenues for the last couple of years or the last year, it it hid some of the uh abilities for the district to see um you know how
quickly things could turn with the deficit spending. Okay. Thank you very much, Miss Fredericks. It's kind of a step back a little bit. Probably most people I don't actually this the first time Lego's come when I'm
on the board. I've seen Leo come years ago as a parent. So kind of a I think probably a lot of people are uh shocked by this. It feels like a zero to 60. So maybe
if someone can explain Maybe it's not 0 to 60 that you've been watching this uh but people out there haven't seen the signs. So, um so I would like that explanation for the
public as well as explaining your visit and is this sort of the last chance? Like what is the If things don't get better
the way you think it should, is this the final warning or is there intermediary steps? Is how fast can this go? You know, I think people need little concrete.
Um, it's not it hasn't been a zero to 60. Uh, we've notified the board on our communications. All our communications are to the board president on your fiscal standing and some of our concerns and letters dating back several years or I shouldn't say several years at least three or four years have identified that
your level of deficit spending monitor your level of deficit spending monitor declining enrollment. It was yes this was exacerbated by the fires and yes it was massed by COVID when you have all this onetime revenue. We we've spoken to staff and said you do not hire people
for money that's not sustainable. If people if people are living off this m you know people who you have to feed their families should not be hired on money that's only temporary. Uh we've
laid that down over and over again. Um, we've communicated with the board presidents on all of our communications because the board president has the fiduciary responsibility. All the board members have the the fiduciary responsibility over this the solveny of
your district over every every student in the district. AB1200, we call it assembly bill 1200, which put all these provisions in place for school districts and county county office authority, seizes as a a green light, which is go, which you've been
giving the green light. Consider this a yellow light that says you need to take intervention now. The red light would be the county stepping in and saying you're negative. We're putting a trustee in. You're taking out a loan. That is the
red light that says stop. With the conditional budget approval, you're at a yellow light. It's up to you to make those decisions as to whether or not you're going to progress to the green light again or whether or not you're going to f dig
further deeper into the red light in which the county office will intervene and put somebody in here. So, the trustee example, is that where we don't have any say anymore at that point? That's correct. Uh if you look at Inglewood Unified School District, they've been in receiverhip now with the
county administrator. Previously, it was a state administrator for over 13 years. That board is is elected by by their constituents, but they have no authority. The authority lies with the county administrator, um Dr. Jim Morris. part of his responsibility and job is to
train that governance board, the governing board to make make sure that when he leaves as a county administrator that they can govern over the district. If we put a fiscal adviser in um that fiscal adviser has stay and resend authority over any board action that's not that's in contrary to your fiscal
solveny recovery. Is the fiscal adviser before the trustee staff? Yes. Yes, that's correct. Okay. And that's where you look at our December at that point and see if we are if you're confident. Yes, if we're confident. So, um before that, we may put in a
fiscal expert. We will label you what's called a lack of going concern. At that point, it gives the county superintendent the authority to put in a fiscal expert and that fiscal expert will work with your fiscal staff, with the governing board to help develop a budget. They don't have any stay or resend authority, but they're an expert
on fiscal recovery or solveny and they'll help with the recovery of the district. So, you had said about being proactive versus reactive and one of the slides says, you know, we got to cut the 30 mil, you know, find
that 30 million, which those are people, those are salaries. Um, that feels reactive. I I will comment and I I do want to take note and acknowledge that we understand the board has been trying to be less
reactive and more pro proactive towards these decisions and trying to make sure that you have a long-term plan. But um one of the reasons that um I guess we're we're here and to stress you know the urgency of the situation is it's rare to
see um districts go from having a budget uh you know fiscal stabilization plan to not to having another uh one again right and Pasadena really has had that over the years especially in recent light right you've had a budget stabilization
plan you went off of it and then you're you're back kind of at it again, right? And I know that the goal of the board is really just to plan so that you are able to forward look and not have to do these adjustments reactively.
Thank you for that uh context. Um, one more thing is one of the recommendations were uh, you know, uh, looking at our fees, our facilities fees. I mean,
that's not going to make up 30 million and which speaks to the comment earlier about you can't revenue your way out of this. I'm connecting those dots unless you want to explain that a little more. That that's it. Okay. Thank you.
Mr. Harden and then student board member Mr. KD. Um I I appreciate the directness and I appreciate you being here and and um I do um certainly recognize the seriousness the immediate term seriousness of our situ
fiscal situation. Um I'm generally an optimistic person. This challenges that optimism obviously. Uh but I do think uh and I appreciated uh my colleague uh uh Miss Kenny uh about about your point
made doing business differently. Um I think that you know we're I I'm confident we're going to get through um this this immediate um uh crisis. We're going to give you enough confidence to let us continue to chart our own course.
But I do impre impress upon um the board and and and the superintendent to have the courage immediately thereafter to think long term uh about our district's uh structure uh how we serve our students um and re redesign reinvision
and redesign our district um for long-term uh sustainability. we can do this and we can have what we want and I actually believe we can thrive. Um, but we know there are systemic challenges. Uh, and we also know that the
environment that we're in both at the local level and at the broader state and national level is going to require that we um rethink how we serve our students. And so I'm committed to that. I think that's um the most important gift that
we can give to our students and our families and our community is to have a district that can kind of punch through the waves of uncertainty um that we face and that we're going to continue to face. So this is this is going to be a long-term problem,
Mr. Kettle. And then Miss McKenzie. All right. So um uh I remember when Miss Tina Frederick's was asking you, you said that Eagle Rock has had a trustee for 13 years now. Is that correct?
Yes. In Englewood Unified School District has had trustee Yeah. Now a county administrator, right? Okay. And then I was wondering like once you reach that trustee level, is there any way to regain autonomy? Yes, there is. But it's very extensive
because not only are are you safeguarding your finan the finances from the state loan u Fikmat also comes in the fiscal crisis management assistance team will actually come in and start assessing your district because usually it's a systemic breakdown. So we're not is it only
budget control but we're also looking at your governance because governance didn't take action. I always say inaction is an action and if you're not taking any action you're taking an action. They'll look at your HR, your labor practices, because that's that
your 85 to 90% of your expenditures are tied to human resources. Um, so if you don't have position control in place, they're going to examine what kind of processes you have for position control. There's a variety of area. They're going to look at your facilities because oftentimes you have a surplus of facilities if you're in declining
enrollment. Um, are you combining are you surplusing property accordingly? We look at your internal controls. will come in and and and look at examine the entire district. It's an arduous process and the district has to make gains. They have to come first assess your district
and see where they are and then they make they assess on whether or not you're making gains towards independence again. So you can restore that autonomy but it's rigorous and it's arduous uh but it's not impossible. Um I think within the next couple of years you'll
hear well right even right now we just had a meeting with Inglewood great things are happening there and will happen there but for you not to be able to control your district for you to have a say in what happens to your students um I know the trustee there or the
county administrator has a heart for the students of Inglewood. The one thing we want to do is keep control here with you. You were elected by your constituents. Mr. KD, you're a student. I mean, you know what's best for Pasadena.
I don't. You do. So, the treasure should be with you and that's what the ultimate goal is. Thank you. Thank you. And then, um, I just wanted to go back. You said that we would be assessed on just how we're making gains. Is that because we will
have no authority. So, They're assessing how the trustee is doing. Then we also we assess the trustee, but we also assess you're still going to have staff here. So, we're going to assess your fiscal your fiscal staff, your CFO. Um, we're going to assess and great
questions, by the way, because I love those kind of questions. U this is the stuff the stuff I deal with every day. Um, so yeah, they'll come in there, they'll assess the progress of your staff and they have indicators, they have benchmarks that you have to meet. Um they'll go in there and examine like your food services like what are the
what are the procurement processes that you're using? Um internal controls, time and attendance. How are you keeping time and attendance of all your employees? Um how are you issuing checks? Do you have safeguards in place? Because there's been a systemic there's a breakdown in that system that's allowed this to
happen. The governing board, what kind of actions are they taking? are their actions um favoring one trustee area or are they really voting on behalf of the entire district? Um so we look at governanceship, they look at a a myriad
of areas. Um but we do assess more than anything else is assessment of the staff. The county administrator is there kind of facilitating the process to safeguard the district to make sure it makes um decisions in the best interest of the students, but it's an assess it's more assessment of the staff.
Okay. Thank you. There are many school districts that are struggling financially right now. Um, not necessarily because of the fire, but because of AB218 claims that are exacerbating district's budgets. Those
are sexual assault and molestation claims that the burden is on the district to prove that we did our due diligence when oftentimes the claimants are or the person that was a perpetrator
is likely deceased. So how do you prove how do you write that burden of proof? There are many many districts that are struggling with that were not accepted from that situation. Um and because of that and because the statute of limitations is almost indefinite
um that is a strain on districts budgets in a way that no one foresaw being able to come. So my question is how many other districts in LA County out of the 80 districts are you having like conversations with because I imagine that through a myriad of other
circumstances situations we're not the only ones that you're having these kinds of meetings with. So if we're who else is having not who but like how many of the districts are you having these meetings with and what are you advising in terms of how do you recover from those kind of that are kind of outside of your control almost
if if you're referring to budget conditional approvals there we had two others in the county we met with their staff um it didn't rise to the level of occasion where it did with Pasadena but we did meet with Hassin de Laente and their staff and we also met with the
Suza Unified and they were able to rectify their budgets. Their w their their draws weren't as um significant as Pasadena's and they were able to make uh immediate adjustments to their budgets. Um but they did call they did fall below
the 3% reserve um requirement at budget. As far as AB218 cases, I agree with you. Um we're seeing districts that are saying we're going to have to pay out $30 million in claims. It's going to hit our fund balance. Uh what do we do? I know Fikmat and ourselves have have
advocated strongly for some sort of cap, some sort of ceiling. Um, we're advising districts, speak to your insurance carriers. I know oftentimes those insurance carriers are gone. Uh, because you're talking about cases back in the 1960s, 1970s. Uh, it's it's a I think
it's um a good intent behind the legislation. It's just the unintended consequences of it are are dismal and you're paying the price here. Um you shouldn't be taking money from this year's students for
things that happened 30 40 years ago. It's not fair to these it's not fair to to students like Mr. KD. It's not fair. They they deserve the best. So we are advocating strongly on a cap. We're arguing um we're looking for various ways at the state level because it's
legislation that was passed familiar. Yeah. And is there legislative courage to make that kind of adjustment or to carry a bill to remedy the we're seeing the consequences? Well, we're seeing the effect. So, yeah, there there is courage because Mr. KD
and any other student who is in this district shouldn't have to suffer at the hands of something that happened 30 years ago. Um, yes. Horrible, horrible, you know, horrible things that occur to these students, but you know, Mr. KD and everybody else
should not have to pay the price. Um, but there is legislation. I know Fikmat is looking at something. We do have a governmental relations person in Sacramento on behalf of the county office who has been advocating. We're strongly advocating in business advisory services because we see the impact or if you don't have insurance or your
carrier's gone or something happens at that point where it comes out of their general fund or you're paying for it, it's going to have severe impacts on your solveny. Um, so we're advocating strongly for that. And when we meet with districts, we ask them, you know, what's going on with the AB28 cases? Are they impacting them? Have you gone, have you
looked at your insurance carriers? Are they still there? Are they what's that going to do to premiums in the future? premiums in your feature will go up because it's a statewide um issue. And to address clearly uh the question about the number of districts, we don't
track that information due to the nature of the cases that are being brought but we can share that a lot of districts uh are sharing that it is a concern for districts. Um I would advise you to you know just communicate if you do have uh
communications with the legislators uh on the issues that you have and maybe share some of the cases with them specifically but we don't have that information directly. So I have one more question to your
point about should a trustee be appointed and the avenue to regain um governance authority. What are the
the available tools for being able to increase revenue that a district would have available to them? Because it's not as though we have the ability to go out and just sort of like have a fundraiser. um what are we have limited options in terms of how dollars come into us and what are those pathways and what are
those recommendations? um just talking with Englewood and I'm going to give you an example just because I've worked with them for the past three five I don't know how many years now um they had a lot of surplus property they were declining enrollment
um yeah surplus property you can only use for facilities uh related if you sell a property you can only go back to facilities but doesn't mean you can't develop the land and do some employee housing um doesn't mean you can't lease the land and get some revenue in there
There's even some of the lease agreements. If you have a lease agreement with AYSO, perhaps you have a lease agreement with the city to rent out a school, rent out a hall. Um, charge fair market value. Um, you don't want to give a building you can you're charging $100,000 a year when you get
$100,000 a month. Um, it just doesn't make financial prudent. It's not financially prudent to do so. Yes, we you understand the importance of community, but at the same time, you have a responsibility to take care of your district. Even some of the things I've seen even um if with
with just cost containment is oftentimes you have partnerships with AYSO, but guess who has to clean up the field afterwards? Your your maintenance staff is there maintaining the field. You have to water, you have to maintain it. You can always assess a fee to help cover that
operational cost. So, it's looking at your agreements that you currently have in place to make sure they're financially viable for the district and making sure you're maximizing them maximizing your revenue. It's not going to get you out of the jam you have now, but it will make a difference. It will make a dent.
Thank you. So, Miss Kenny, Miss Frederick's, and then Miss Bailey, I'm sorry. I forgot to ask this earlier. You said something in your beginning um words about I thought I heard you say something about reconsidering our conditional approval. Did I hear that
correctly? Is that something happening now or Okay, can you talk a little bit about that? Um can find the date. Um actually October 6, we received a letter from a response to our conditional approval letter from your board member uh your board president outlining some of the
steps the district is taking. Um, so we're reassessing that letter right now to see whether or not these are measurable and attainable outcomes that will allow us to release the conditional approval to your budget and give you an approved budget. That does not change the position you're currently in. Now,
that just means we're going to monitor you closely again at the first interim and that you need to take action. It's either we approve your budget or we don't approve your budget. Um, considering that you're not cash insolvent at this point, you are you're going to you're going down the path of
insolveny because your deficit spending, you're not cash insolvent, which means you have enough cash right now in the reserve to sustain your payroll. That will give us some sort of flexibility to say, "Okay, we can give you a we can release the conditions on your budget and we'll reassess your budget at first
at first in see whether or not you have a positive or qualified certification." So, we're reassessing right now based on um what your president sent us and we're going to reassess that whether or not we have the condition and we've all seen that letter. Is that
true? I believe so. Okay. I just wanted to double check. So the the condition then of having a fiscal stabilization plan that is incorporated in our multi-year, you're saying that would go away or
the requirement would go away, but you would strongly suggest that it still happen. So it the condition is just to resolve the budget, the review of the budget. So we released the condition because it was conditional that we had actions that you
we wanted you to take by first interim and then we're we're basically saying your budget at adopted budget in June was approved and then we're just moving on to saying oh now we'll look at it at first interim to determine at that point in time. Okay.
And moving on to first interim. So I thought I heard you said if we say that we're positive and in your estimation it should have been qualified. I think you used not ago going concern. Is that what you said? The lack of going concern. Lack of going concern. What if we say
that we're qualified? Is that the same lack of going concern? No. If you say that you're qualified, we could either concur with your qualified status. Uh in that case, we can still lab you a lack of going concern. That just lets us know that we we can take intervention if we need to.
Okay. So, it's more optional if we say it rather than if you have to correct us. All right. And how how are you viewing the fact that our CBO position is vacant right now? That to us is a concern. Um, however, we
have been talking with uh uh Dr. Canal, with Dr. Blanco on the recruitment, but yeah, to us when any time of a vacancy is in your chief financial officer or even the director of of budgets or fiscal services, it's a concern to us. So, we're constantly willing to be as
soon as we we found out we we reached out to Dr. Blanco to find out who was filling in. We've been in constant communication with your fiscal director. So, that's always a concern. So, first we're going to have the superintendent and then Miss Bailey and then Miss Frederick's.
Just for everybody listening, um we have taken the CBO's job and divided it among the three chiefs that are here. Dr. Canel has experience and being a CBO in another school district. So, we're not without direction. I'm doing facilities.
I did facilities for the year we passed the bonds when I was the interim superintendent and Mr. Udo only did fiscal. Dr. Chan Hill is doing its and so we have the CBO position covered. Now would the three of us like some additional help of course but we are
meeting with LEGO on a regular basis and um I'm competent that the job is being covered right now. Hi, good evening and thank you for being here. This has been very helpful. Um on one of the slides um you talked about
mechanisms mechanisms am I saying that right? mechanisms. There you go. Um that should be developed proactive to proactively identify the risk. And my question is
that amongst the seven of us here there are varying varying um levels of board um budget comprehension. So we we don't all understand the budget at the same
level. I thought that I heard you mention some type of training that could be provided to the board. I I thought I heard you mention that. I wasn't sure if you were referencing training the board on
understanding the budget. I've I've actually done board study sessions on budgets and how budgets are developed. Um we don't necessarily would do one for you. I that's the chief financial officer is responsibility. Um I always tell boards if you don't
understand something don't sign it. Uh because that's the fudicial responsibility falls on the board. Yeah. And so the reason and the reason why I ask is because we approve the budgets. We make those approvals.
And like you pointed out, we've been deficit spending for year after year after year after year. And I am aware of that. My concern is that when we approve the budgets, it
doesn't appear that the cuts need to be as deep as they end up needing to be or should have been. And when you're sitting where we're sitting and we're receiving the information from staff, how Do you know
that? How would we know that? What do those mechanisms look like? You know, what what should the board really be expecting? So, I mean, maybe those are CSBA questions. I don't know. But I just have a concern
that we get the presentations, we get the first interim, second interim, we approve the budget and it always seems that we are okay and then we get to these points. So this is the second time since I've been on
the board that LEO has come in and we've had to have this kind of conversation and I think it even went a little further the first time. And so I'm just concerned that Even as a board, we
continue to approve budgets that have us deficit spending. And we are told on the back end that, you know, two, three years out, this is where you're going to be. This is where you're going to be, but it seems to always be all right in the end.
So, I'm just trying to understand with all of the um the climate, you know, of of all of the things that are happening beyond our control that impact our
budget that, you know, we are now being held accountable for trying to keep our teachers and our staff in our classrooms and trying to make sure that our students have the materials and the
support that they need in the classrooms with all of this these other um things coming into play, you know, the special ed cost. I mean, how do you mitigate that? You know, how do you not
give raises when folks have worked for your organization for 10, 15, 20 years and they they've never had a raise or, you know, those are probably questions that
I mean can be answered by staff, but I just think to wait until the drop dead at last minute when a district is just really about to just the flip over Um, it's kind of stressful.
Uh, it would have been it really would have been, I think, nicer to be able to have this conversation before we got to where we're about to tip over. Um, and if you have someone
who can come in and work with the district, with the CBO or with the board to help mitigate us getting to this point, you know, why does it have to happen once we're there, you know? So, I
just I just have concerns about this process and the process this process coming from LEO. Um, I have concerns about the way that we actually do the budget.
You know, obviously our budget process is not working for our district because it hasn't gotten us to the point where we're not deficit spending and I know that we all appear to be watching the budget very closely. So, I just have
concerns about the budget process. I have concerns about this process. But um yeah, that was my question. You mentioned mechanism, so I wasn't sure what you meant by that.
I'll take a stab at this and then turn it back to the team here. Couple of things um that I would say. Um one is what you're picking up from staff is that we do not want to be prescriptive.
Uh we the language we use speaks to a solveny. It doesn't speak to how you spend your money. What we're making you aware of is that if our hand is forced and candidly inaction or inadequate
action forces our hand, that's when we when we assign somebody else to take on the responsibilities. But we're working really hard not to be in a place and we will not get to a place of being prescriptive as to how you spend your funds.
At the same time, when you ask for training, that's part of the reason we take a step back. That said, we will partner with your staff. Most definitely. We would also encourage you, as I believe, uh, Dr. Blanco has, there
are numerous um, superintendent, uh, retired CBOS, the Association of School Boards. There are numerous um avenues that exist to a board of education uh should you want training. I also know um
the district through its problems has had some very gifted CBOS CFOs. Um it's hard to your comments. It's very hard and for um you know the average board of education member is not elected
because they're fiscally uh fiscal soant. you're here for educational outcomes and you've had a very unique circumstance as staff has addressed coming through the pandemic then the fires it has uh I think the term was it has masked some of your challenges and
it in that regard these are sort of being lifted off and all of a sudden you are staring at it and feel like it's uh with no no advanced notice we I new to this role uh we will take
from this also some of the feedback that all of you have offered to us on how it is we might ensure that not only is the message received but that it's understood uh very important what what it is you're about also need to clarify that uh to
the issue of AB28 um it is a challenge and I would also encourage you I'm I'm sort of the downer in the evening the legislation if there is any legislative relief will
not come soon. The the only way the legislation happens is one of two ways. They're either going to fund some sort of pool and if you're following the state of the state's finances, uh unlikely I would suggest at this point or they're going to change the nature of
judgments and um settlements and uh that kind of reform is typically even slower to come about. It is a challenge. There is no question about that. And it does impact the current environment uh that a student
might otherwise enjoy if the current school district isn't making payments. But I have to emphasize as I did earlier, you have some very serious issues to address. It requires an immediiacy of action and that action has to meet with the
satisfaction of the board as they look I didn't mean to elevate them. Staff um as they uh evaluate the performance of Pasadena. And while it is a fair question to ask what other districts are in peril,
uh it is also the case that most school districts in our county are using fund balance to balance their budgets. And what I mean by that is current year revenues are less than current year expenses. The question is whether or not a school district is able to so to speak, create
a glide path to where they finish above or in the black. We see you as not pulling up to use this analogy and hence that is what motivates us and actually compels us to be before you at this time.
Is that all Miss Bailey? Miss Freicks. So my one of my friends is on the board of Englewood and I'm frantically texting saying he goes here um and I said how long have you been in
receiverhip? 15 years and I know I know him and I know how hard he works to get out of it. Those are good people. And even with good people that work really hard, it's still very hard to get
out of that status. Um, you all very nice people. So you uh Mr. I'm sorry I forgot your name. The first person
Castello. Yeah, Castello. Castello. Um, you said you worked as a physical adviser for districts. Uh, probably for a district. Yes, I did. For a district. Okay. Once I was placed at a district for
approximately two or three years as fiscal. Okay. Well, I was going to ask you, you must know based on your experience as a fiscal advisor, what the common challenges or common solutions
uh for districts. Um can you kind of share that? I mean I feel like you probably know the answer. You're just not saying it to the topic of being non-prescriptive
as well. But um I guess with this uh budget or plan we're going to present to you and we have to somehow convince you that you have confidence in us. Can you speak to an example of something that
another district that was in this situation they presented their plan and it turned it convinced you? C can you kind of give an example? Yeah, I I'll give you an example of one the one in which I was in. Um they
actually had filed a negative certification. So they were at the point where they weren't able to meet their fiscal obligations in the current year. Um got us really um at the county office kind of took us by surprise. Um but we
had to intervene with them. Um we first put a fis a fiscal expert in there to work with the district. Um he worked with the district and realized there's a lot of systemic issues going on here within the district. Governance was an issue. Um fiscal data because data just
drives everything. Whether it's your student data, whether it's your financial data, whether it's your facilities master plan, things weren't just structured correctly um and heightened the concern. So we put him in there, elevated him from a fiscal expert
to fiscal adviser. So now he has full stair reset authority over board action. Um I would say I mean not knowing your culture here too well because I was embedded in that district almost daily. I got an understanding of how the district operated, how the governing
board operated. Um got to look over their budgets and realize their student data wasn't too accurate. Um so we had to work on their cowpads to make sure that they were maximizing all their enrollment and all their ADA. Had to work with site presidents. I mean not site president site principles um to
make sure that they were capturing all the ADA that they could at their school sites. ADA reporting is an issue. That's a revenue enhancement. Had to go in there and examine all their contracts with their facilities people. Um some contracts we let sunset. We never um executed them or any executed any terms
of the contract because we felt staff had the capacity of doing it in house. Um that saved millions. Um we had to do reduction in force. Um, we were able to stay that off because we issued a retirement incentive and our retirement incentive was issued.
Employees took it. So, we had to study staffing. We had to put in internal controls for position control at that district. Uh, we had to examine the special ed, how they were doing special ed deliveries to revamp the delivery of special education. Um, you know, special
ed to me has a it's a dear place in my heart. Um, I also believe that children deserve what's best for them. Um, and often times what I want as a parent is not the best for my child because my child I'm going to want a one-on-one with him everywhere he goes. Uh, the more most harm I'm doing to my child is
that because they're not breeding their independence. Um, so the professional judgment, there's a lot of different avenues that you have to examine. Um, like I said, core staffing. If you have staff that retire, you don't fill those vacancies,
you know. to attition. You get a lot of savings from attrition. And if you're closing, if you know you're you're in apparel, declining enrollment and as soon as a teacher vacates or you want to hire reading specialists, your data doesn't show that reading is issue
rather than math and you're hiring people to hire, you're doing your budget a disservice, you're doing your children a disservice because you will after a certain point that expense is not going to equal the money you're coming in. Um
it it's it's a balancing act. You really you have to go in there and that's what the whole point of the expert is and the adviser. They go in there. They have a strong background in fiscal and they can examine some of your operations. But it's not just uh you know you don't have the panacea. If I did I wouldn't be here
right now. I'd be you know I'd be retired somewhere living in Fiji because I had the answer. Okay. One last question. Um, for a declining enrollment district, what is a healthy percent utilization of a facility?
I would have to I mean, you're looking at whether or not it's K12, whether or not it's high school. Uh, I wish I can give you a solid answer, but without analyzing your data, without analyzing your facilities, without looking at your facilities master plan, wouldn't be able to tell you minimum
wouldn't be able to tell you. Range would would not be able to tell you because it's complicated. I mean, what what kind of what kind of service are you providing these students? Is it, you know, is it going to be a K3, K12, K6? Um,
what's your enrollment? What's it, you know, what's your percentage of of capacity at the school, at the site? Um, there's a lot of factors that go into it. I can't just arbitrarily tell you a number without examining. And staff ratios, what kind of staff are you going to have? combo classes, an AP, a
principal. It's complicated. Just if I might follow up, he was a former bull fighter. Um um I think the I think the point we would make is it's the right question to ask. But the answer in any given year is
going to be the very illustrative answer of it depends. So I could be in a school that is at 50% utilization. If every classroom is 50% as opposed to just half of the building, we have a different point of view. I could have the other
half of the building be utilized in some other fashion and be okay with that. So just not trying to be evasive, but what it really does matter and it also matters whether you're trending up or trending down. There are too many factors and this is
um apologies to Mr. Castillo why I'm cutting them off. It just goes back to we're not going to answer the question of being directive. We we really think it requires a more careful evaluation, more intentionality by the board of education. And that's what we're looking
for when we do that analytic. It isn't just ratios. It isn't just numbers. It's the narrative that associates and puts in context the whole of your budget. Thank you. Thank you very much. In December of
2024, we got a presentation that explained exactly the imminent urgency of us taking action. And in January, I'm not going to speak for my colleagues, but we chose humanity.
That doesn't mean that we don't understand exactly where we are or that we don't understand what was going to happen. And 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. We wanted to buy some time for all of those families and for unexplicable and and for the huge
sorrow that this city went through. Thank you very much for your presentation. We are very clear now of the things in the pathway forward. We'll make decisions accordingly. Thank you so much for coming. Anybody else?
Oh, the superintendent. So, thank you for being here and the support that you've provided and also acknowledge that we have representatives from our legislation here this evening from um Mr. Harbinian's office and also
from Senator Sasha Perez's office and we thank you for being here and your support and caring about PUD. Okay, thank you very much for that. That was really helpful. And we are going to Um,