Quick look: OCDE expects to meet all financial obligations for the next three years, even as statewide economic pressures and declining enrollment continue to shape long-term budget planning.
The Orange County Department of Education is expected to meet all of its financial obligations for the current year and the next two fiscal years, according to a budget presentation delivered Wednesday to the Orange County Board of Education.
Associate Superintendent David Giordano shared OCDE’s First Interim Budget Report, which outlines the department’s finances through Oct. 31 and projects ahead to 2027-28. The board approved a positive certification — that’s the strongest rating under state guidelines — indicating that OCDE remains on solid financial footing.
Still, Giordano emphasized that California’s broader financial picture is creating real pressure for districts, charter schools and county offices of education like OCDE.
“The state of California has been on an extended downturn now for about three years,” he said, noting slow job growth, cautious consumer spending and higher borrowing costs.
Giordano said sales tax collections have come in below average, and new tariffs have added to business expenses. At the same time, income tax revenues have surged because of stock market gains tied to artificial intelligence — a spike the nonpartisan Legislative Analyst’s Office warns may be “unsustainable.”
Two budget realities
That mix of factors has created two competing realities: State revenues for 2024-25 and 2025-26 are about $11.7 billion higher than expected, yet the state is projecting an $18 billion deficit in 2026-27 and annual shortfalls of roughly $35 billion beginning in 2027-28.
For schools, the Legislative Analyst’s Office says Proposition 98 funding next year will likely be just enough to cover the required cost-of-living adjustment, leaving little room for new investments. And with COVID-19 relief dollars now expired, Giordano noted that rising pension costs, health and welfare premiums and general inflation continue to push expenses higher.
Enrollment trends add another layer of uncertainty. Because districts, charter schools and county offices receive funding based on average daily attendance, declining numbers both locally and across the state can reduce the revenue available in future years.
The First Interim Report is part of a statewide process that requires every school district and county office of education to take stock of their finances twice a year.
The first report covers actual revenues and expenditures through Oct. 31; the second, released in March, updates the picture through January. Each agency must certify its financial position as positive, qualified or negative, depending on whether it can meet its obligations for the current year and two years after that.
Declining enrollment
As part of Wednesday’s discussion, trustees asked about ACCESS, OCDE’s alternative education program, which serves some of the county’s most vulnerable students — including youth experiencing homelessness, foster care or involvement in the juvenile justice system — as well as students whose families seek out alternative learning environments.
ACCESS operates much like a small school district within OCDE, and its funding is tied directly to student attendance. After many years of declining enrollment, the program has faced continued budget pressures.
When trustees asked about its financial position, Giordano said the program ended last year with a deficit of about $15 million but emphasized that staff have made meaningful progress this year by identifying grants, reducing certain expenditures and holding vacant positions open.
“They made really good progress,” he said, while noting that stabilizing the program will take continued work through this year and next.
Giordano and County Superintendent Dr. Stefan Bean both underscored the department’s commitment to preserving the people and services that students depend on.
“Obviously, as a superintendent, the last thing we want to do is cut staff,” Dr. Bean said.
Giordano added that any future adjustments will prioritize students’ needs and rely as much as possible on attrition and other gradual strategies.
Planning for next year
Other areas of OCDE’s budget remain stable, including the Connections program, which operates through a cost-recovery model with local districts.
The department’s overall General Fund shows a planned deficit this year, but Giordano explained that this primarily reflects the planned use of restricted categorical funds that must be spent for specific purposes. Within the department’s unrestricted operating accounts, he said, a small surplus is projected, though it still incorporates the ACCESS shortfall.
OCDE will submit its First Interim Report to the state by the Dec. 15 deadline. From there, the department will move through the usual milestones that lead up to next year’s budget.
A midyear progress update is planned for February, followed by another financial check-in this spring. Public hearings on OCDE’s priorities and its preliminary 2026-27 budget will take place in early June, with final adoption later that month once the state’s updated revenue estimates are released.