Lower-than-expected attendance, declining enrollment and protracted labor negotiations may lead to budgetary challenges in the future for the Long Beach Unified school district, officials said this week.

The district is currently anticipating general fund revenue of about $1.1 billion this year, Yumi Takahashi, the chief business and financial officer, told the LBUSD Board of Education on Wednesday.

But this year saw an enrollment decline of 2.65%, part of a long-term trend the district expects to continue—which takes a bite out of the district’s state funding each year. The district is also losing money due to a dip in average daily attendance rates, or ADA. The district’s usual number is between 95-96% attendance each day, but it was down to 92% in December and is currently at 87.7%.

That affects student learning, but it also has a financial implication since a chunk of state funding is determined by attendance.

“This year attendance has been particularly concerning,” said Takahashi. “87.7% is really a result of the omicron variant in January and February.”

Gov. Gavin Newsom proposed a new funding model that would use the attendance average over three years to determine funding, but decided not to continue the “hold harmless” policy from the first year of the pandemic, when attendance was not a factor.

Further chipping away at the district’s financial reserves are pending agreements with the Teachers Association of Long Beach and the California School Employees Association’s local chapter. TALB is currently at the tail end of negotiations for a contract to cover the current school year, while some CSEA workers have threatened a strike, mostly over pay.

The CSEA and the district are currently awaiting a report from state-mediated fact-finding sessions; the agreement with CSEA, when it’s reached, will be for this school year as well as the previous two.

Takahashi said that each percentage point of a raise potentially given as part of the negotiations would amount to about $6.2 million.

The LBUSD is the city’s largest employer with some 12,000 employees, including 3,000 classified staff.

The big picture features good news and bad news. The good news is that the district’s financial reserves are still strong, with a projected balance of $365 million at the end of this year. The bad news is that declining enrollment and the lower attendance numbers (as well as ongoing labor negotiations) mean that the district will have to draw on those reserves. Takahashi said they’re projecting to take $12.3 million from the reserves next year, $30 million the year after, and $70 million in 2024-25.

“We show that compounding effect continuing,” she said. “Our balance represents time—time to make thoughtful decisions to address deficit spending and bring our budget into balance. It’s constantly evolving.”

Board President Juan Benitez and boardmember Doug Otto discussed the presentation and admitted concern.

“We have been going through a boom period of a lot of one-time money from the feds and the state,” Otto said. “That’s going to go away. With the numbers that we have, I’m looking ahead in two years, three years at what that’s going to mean. I think back to other times when it looked like we were flush…relatively quickly, we were not, and we were looking at layoffs.

“I may just be getting old but I’m particularly sensitive to those kinds of things … we have to be very careful of the way we spend our money.”

Still, the storm clouds are definitively on the horizon, not overhead. The board unanimously approved certification of the interim budget report, signaling the district’s ability to pay its bills for the next two years.

Takahashi said the next budget presentation to the board will come in May after the next revision of the state budget.