The Los Angeles Unified School District board is scheduled to vote Tuesday, June 24, on an $18.8 billion operating budget for the next fiscal year. The vote comes as the district prepares to begin repaying hundreds of millions of dollars in bonds issued to cover legal settlements tied to decades-old sexual abuse claims, and amid growing scrutiny over how it is spending state arts education funds.

Earlier this month, the board approved using up to $500 million in judgment obligation bonds to help finance a wave of legal settlements with former students who allege they were sexually abused by district employees.

To ease the immediate financial impact, the district plans to spread the cost over 15 years. Last week, officials said they would initially sell $303.6 million in bonds to reimburse short-term loans already used to fund settlements, with total repayment potentially reaching $765 million including interest.

The district is also facing a legal challenge over its use of $76.7 million in Proposition 28 arts education funding, which is included in the new budget.

A group of students and former LAUSD Superintendent Austin Beutner alleged that LAUSD is misusing the funds by using them to backfill existing positions instead of hiring new arts educators, as the voter-approved measure requires.

The proposed spending plan for the next fiscal year includes total revenue of $15.9 billion and planned expenditures of $18.8 billion.

While the district can balance the upcoming budget using reserves, officials warned that LAUSD is on track to face a projected $2.2 billion shortfall by the 2027–28 school year. To remain compliant with state requirements, the district is preparing a fiscal stabilization plan that identifies $1.6 billion in cuts—the minimum needed to legally balance the budget in that third year.

“The total stabilization plan only accounts for $1.6 billion,” said LAUSD’s Chief Financial Officer Chris D. Mount-Benites during a budget presentation on June 17. “If you’re thinking, ‘Wait a second, if our current deficit is $2.2 billion, why does the stabilization plan only call for $1.6 (billion)?’”

He explained that the stabilization plan only identifies the minimum cuts required to meet the state’s legal requirement for a balanced budget in the final year of the district’s multi-year financial forecast.

Despite the long-term challenges, Superintendent Alberto Carvalho stressed that the 2025–2026 budget includes “no furloughs or reductions in force contemplated, advocated or recommended.”

He acknowledged the legal requirement to submit a fiscal stabilization plan, but urged the board and public to see it as a precaution—not a guarantee of future reductions.

“We are spending more money than we take in,” Carvalho said. “And for a while, that is okay because you do have reserves. But if you continue to significantly spend more than the resources that are provided to you, eventually your resources, your reserves are depleted, and then the harsh reality comes.”

Fiscal year 2026 runs from July 2025 through June 2026.