Oakland Unified School District is at a high risk of fiscal insolvency, according to a state report, despite recent budget cuts and Oakland Unified officials’ assurances of financial progress.

The Fiscal Crisis and Management Assistance Team (FCMAT), a state agency that helps California schools resolve financial and operational issues began reviewing the district’s financial health risk in August, after Alameda County Superintendent of Schools Alysse Castro expressed concerns over multiple areas of uncertainty related to the district’s finances, leadership and planning.

Castro warned Oakland Unified leaders in the spring that a tentative labor contract — estimated to cost the district nearly $40 million over the next three years — could threaten the district’s ability to balance its budget by the summer and expressed concerns that Oakland Unified was continuing “a pattern of adding new expenses before making the cuts and tradeoffs to afford them.”

The FCMAT released its fiscal health analysis of Oakland Unified last week, which through a series of interviews, data analysis and budget document reviews, determined Oakland Unified is at a high risk of fiscal insolvency — or being unable to meet financial obligations.

The report noted the district’s highest-risk areas were leadership turnover, deficit spending, insufficient reserves in case of economic instability, inconsistent budget monitoring and district-approved labor agreements that the agency noted failed to identify a way to pay for.

And, the report said, Oakland Unified leaders continue to promise vague cuts to address a $38 million budget shortfall for the 2026-27 school year, including $78 million in 2026-27 and $72 million in 2027-28, without specifics on what those cuts include.

In a statement Friday, Oakland Unified leaders argued the report failed to capture “the significant actions” the district’s board has taken since filing the budget documents the FCMAT analysis relied on. The agency analysis used the district’s budget report, completed in January, to conduct its fiscal health risk analysis, as well as the Alameda County Superintendent of Schools’ April response.

FCMAT did not immediately respond to a request for comment from this news organization about the district’s claims it used outdated data.

But FCMAT said in the report that the agency used the district’s January financial data because it was the most current financial report at the time. The agency said when feasible, it supplemented responses with subsequent financial information from district budget documents in April, May and June.

Oakland Unified officials said since that January budget report, the board has approved nearly $76 million in budget reductions, including cuts to central office operations, outside contractors and school sites, and plans to identify an additional $41 million in potential reductions in the coming months.

“These decisions have not been easy, but they are necessary. We are committed to making responsible financial decisions, strengthening accountability and ensuring that our public schools remain under local control,” board president Jennifer Brouhard said in a statement to the Oakland Unified community Friday.

The report comes as this week’s election marks Oakland’s first school board election under full local control since the district accepted a $100 million emergency state loan in 2003, which placed it under state oversight for more than two decades.

Three seats on the seven-member school board are up for grabs, with incumbents Brouhard, Mike Hutchinson and Valerie Bachelor running for re-election.

The district also said Friday Oakland Unified is “not alone” in its high risk for insolvency, pointing out that FCMAT named 11 other districts, including San Francisco, Pleasanton and Santa Rosa, as having high risks for fiscal insolvency.

“Across these districts, FCMAT found many of the same pressures: compensation growing faster than revenues, rising special education costs, declining enrollment, and budgets that count on reductions not yet named,” Oakland Unified said in a statement to the community Friday. “That pattern points to the challenge facing public schools across California. Oakland Unified intends to help lead the response.”

The district said it is “in a stronger position” than it was in January and “that progress reflects difficult choices by the Board of Education and staff.” Oakland Unified said the district is “rebuilding the reserves it needs to remain stable,” and still has challenging work ahead.

The report’s findings come as district leaders credited cost-saving measures, including a three-week spending freeze, layoffs and retirement incentives, in January to successfully halving the district’s once-projected $100 million budget deficit.

Six months later, district officials claimed a $30 million spending reduction earlier this year not only resolved the district’s operating deficit, but also produced nearly $8 million in breathing room — dependent on an additional $30 million in budget cuts this fall, however.

That marked an abrupt change in the district’s financial outlook. A year-and-a-half ago, Oakland Unified School District exited more than two decades of state oversight, amid a ballooning $100 million budget shortfall and alarming projections that the district could run out of cash as early as fall 2025.

In the last year, the district has also faced increasing turnover among key leadership positions, which the FCMAT report warned has further contributed to the district’s fiscal instability.

Oakland Unified’s school board is expected to renew a search for a new superintendent this year, after longtime leader Kyla Johnson-Trammell was ousted in the spring of 2025.

The board appointed Denise Saddler, who formerly served as the president of the teachers union, as the interim superintendent last summer and extended her contract in the spring to June 2027.

But since Johnson-Trammell’s departure, other top school officials have stepped down, including Oakland Unified’s top business official, Lisa Grant-Dawson, who resigned at the end of 2025 along with the district’s chief of staff, Dan Bellino. Grant-Dawson cited concerns over the board’s financial decisions as the reason for her departure, while Bellino alluded to “harm done” in a social media post.

The district’s subsequent chief of staff, Lynette McElhaney, resigned in June after six months on the job.

And Oakland Unified’s school board has been rife with political conflict since Johnson-Trammell’s ousting, with tense disagreements over the district’s finances, budget cuts and union contracts.

In a statement Friday, board members Brouhard and Bachelor also expressed concern that releasing the FCMAT report “just days before Election Day could present outdated financial information without the context of the Board’s more recent actions” to voters.

“Our work is not finished,” Brouhard and Bachelor said in a joint statement. “We will continue pursuing a long-term fiscal sustainability plan that reflects Oakland’s values, protects educational opportunities, and ensures that our public schools can serve future generations. Oakland families deserve both excellent public schools and responsible stewardship of public resources. We are committed to delivering both.”