Tustin Unified projects growing multi-year deficits but certifies first interim as 'positive'

TUSTIN, Calif. — The Tustin Unified School District Board of Education on Tuesday received its first interim budget report for 2025–26, which showed an increased ending fund balance driven largely by one-time and restricted dollars but projected growing deficit spending over the next three fiscal years.

David Yang, senior director of business services, told the board the district's updated projections reflect actual activity through Oct. 31 and a series of revised assumptions since the June budget adoption. He said the unrestricted general fund showed an overall projected ending fund balance increase of $12.6 million, driven in part by a $9.2 million increase in beginning fund balance and $4.1 million in additional revenues. "Although this is a positive change, keep in mind that we're still projected to deficit spend in the current fiscal year as well as the next two fiscal years," Yang said. "Deficit spending will continue to increase from $13,500,000 in the current fiscal year to $15,400,000 in fiscal '27 and $21,100,000 in fiscal year '28."

Yang attributed the projected deficits to several structural factors, including lower average daily attendance (ADA) and ongoing operating cost pressures amid a low COLA environment. On the combined general fund side, he noted $14.1 million in beginning fund balance changes, with about $4.9 million attributed to restricted funds and line items including lottery, special education (SPED), Title programs and CTIG carryovers.

The board also considered and approved two related resolutions connected to the interim report: Resolution No. 12-34-25, which received the annual and five-year developer fee reports for fiscal 2024–25, and Resolution No. 12-35-25, which allocates the committed fund balance described in the first interim. After brief discussion about the need for ongoing monitoring and possible adjustments, the board voted to certify the 2025–26 first interim report as "positive," acknowledging the district's fiduciary responsibility and directing staff to implement necessary budget adjustments to maintain solvency.

Board members emphasized that the classification of the interim as "positive" reflects the current information and does not eliminate the district's projected multi-year deficits. The board voted on the certification by voice and the motion carried.

What happens next: Staff said it will continue monitoring revenues and expenditures, present updates as new information becomes available, and bring any required corrective actions back to the board in subsequent reporting periods.