What will Oakland schools have to cut to fix their $24 million deficit?

The city's schools have struggled for years to maintain a balanced budget and stave off deficits, but now a fresh hurdle approaches.

OAKLAND — The city’s schools have struggled for years to maintain a balanced budget and stave off deficits, but now a fresh hurdle approaches as federal COVID money granted to Oakland Unified School District is set to expire.

With that reality hitting in the fall, the embattled school district faces a steep structural budget deficit of nearly $23.6 million, and it’s on the hook to cover an additional $27 million in labor costs from a new three-year contract approved last year.

It is the latest chapter in a seemingly never-ending saga of financial distress for Oakland’s schools, where officials have begun preliminary discussions of where cuts could occur ahead of a final decision at the end of this month.

The predicament was largely foreseeable, given that the expiration of the federal funding Oakland Unified received during the pandemic was expected from the beginning.

Declining enrollment has also hurt the district’s finances as more students are siphoned away each year by charter schools in the region, leaving Oakland’s smaller campuses underfilled.

Alysse Castro, the schools superintendent of Alameda County, warned last June — when the district was finalizing a three-year labor deal with its teachers — that higher salaries and expanded benefits would require some hard financial decisions.

“It is possible to move forward; however, in order to afford this (labor) agreement, the Board must make significant adjustments and tradeoffs in the coming months,” Castro wrote at the time in a letter to the district.

Where will this year’s budget cuts come from? At a meeting last week, the school board directors discussed some cuts, such as roughly $3 million in total allocations to individual school sites, plus removing some positions such as language interpreters and other equity staff.

But the total saved from those projected cuts, $16 million, still would not scratch the surface of what’s effectively an over-$50-million deficit.

“We’re not in crisis yet, but we’re getting there as fast as we can,” school board Director Sam Davis said in an interview. The real point of emergency, he added, would be “needing to go to the state for another loan — that would come with a lot more serious intervention from the state and county.”

A jargon-heavy email sent out last week to Oakland’s campus community, meanwhile, broadly suggested a restructuring of how the district calculates the number of staff members it needs.

It also vaguely raised the idea of shifting the schools’ budgeting strategy to a “more centralized approach,” and curbing the spending freedom of schools that haven’t proven they can raise student achievement.

Complicating matters is that school leaders across Oakland Unified — from Superintendent Kyla Johnson-Trammell to the board’s labor-backed progressives to its more fiscally conservative directors — tend to agree that the district has already made heavy cuts for years.

Jorge Lerma, a newly elected school board director who had campaigned on the idea of a “systemic reimagining” of the district’s finances, found himself struggling to delve beyond generalities in a more recent interview about the district’s financial state.

“There are things that exist that have little if anything to do with the classroom,” Lerma said of the district’s spending, but he could not specify what those things are.

The school board has discussed merging 10 of its campuses by 2025 in an effort to save money by consolidating space.

But those mergers will remain pending until the district proves they won’t create inequities for Black students and other marginalized groups. Until that happens, school leaders said, it’s tough to even estimate how much money the mergers would save.

Oakland Unified has been under state oversight for two decades because of its financial struggles, and it currently receives $10 million in yearly bailouts from the state after nearly going bankrupt in 2017.

The bailouts had been promised by state legislators on the condition that the district would shutter several of its campuses and sell off some of its properties.

But after shuttering two elementary schools, the board canceled the remaining closures when they proved deeply unpopular in the community and earned the condemnation of the American Civil Liberties Union. The district ultimately received the bailout money anyway because of the earlier closures.

Last month, state Attorney General Rob Bonta’s office determined the 2022 closure plan presented a “statistically significant disproportionate impact on Black and low-income elementary students, based on review and analysis of publicly available data.”

Bonta’s office warned Oakland Unified that any future campus mergers or closures must be “crafted to alleviate school segregation.”