LAUSD borrows $250 million to settle sexual assault claims – up from half a billion previously

As the cost of sexual assault cases mounts, the Los Angeles school board has approved $250 million in bonds — on top of the $500 million already approved less than a year ago — to fund victim payouts.

The cost of both bond issues, including financing, is expected to be more than $1 billion, based on cost estimates provided by the district, and will be paid out of the district’s general fund for at least ten years. Paying off gradually will reduce immediate budget stress.

This week’s unanimous board action authorized management to purchase a new round of “judgment bond bonds.” This special tool is essentially a loan from investors that can be drawn down as needed to pay sexual misconduct claims as they arise.

More money is needed, says LA Schools Supt. Alberto Carvalho, because “we are depleting the funds available to us to satisfy the cases of sex and molestation brought to the district, in many cases, which show cases dating back decades, the district is not willing – unable – to successfully defend them.

“So, these multi-million dollar judgments against the county need to be satisfied, and without the judgment bond bonds, we’re going to have to use the general fund as cash to satisfy it,” he said.

Carvalho explained the need for the bonds in response to a question from Karla Griego, a new member of the seven-member elected Board of Education, who appeared puzzled by the dollars and asked why they were needed, what the district was doing to stop the financial bleeding and whether more claims could be expected.

The district is seeking legal relief, officials told him, and other requests may be filed.

Aside from Griego’s questions, there was no board comment or discussion. Last year, when the board approved the first $500 million, there was no public board discussion at all.

Fees linked to country law

Liability for sexual harassment is linked 218th Assembly Bill, was passed in 2019, which opened a three-year window, ending at the end of 2022, which allowed adults to file charges of child sexual abuse dating back to the 1940s.

In addition, further, the law sets the deadline for filing a claim related to childhood sexual abuse until the age of 40 or within five years when the victims must have realized the harm done to them – whichever is later.

Thousands of lawsuits have been filed against religious groups, private and public schools, other government agencies, sports teams and non-profit organizations. For $4 billion, Los Angeles County paid the largest sexual abuse settlement in US history to victims who were abused as children in county-run juvenile facilities and foster homes for about 11,000 cases.

State lawmakers are considering potential changes to AB 218, which critics say is driving local governments to the brink of bankruptcy.

In LA Unified, between Jan. 1, 2020, by mid-2025, approximately 370 people came forward with claims of child abuse under the provisions of AB 218, according to the school system. About 76 of those plaintiffs allege abuse from the 1940s to 1970s, while an additional 45 to 50 allege abuse in the 1980s.

A number of lawsuits against LA Unified have been settled or dismissed, according to district data. More than 275 claims have been active since the middle of last year – the latest update provided.

This problem is not found in the second largest school system in the country. Just over a year ago, the average school district debt across California reached $3 billion.

A Times investigation found that nearly 70% of school districts did not face a sexual harassment charge from 2020 to 2024, but more than 1,100 victims have come forward and pressured school districts, most of them centered in Southern California.

Sexual harassment payments “directly ‘compete’ with the same funds used to pay teachers, custodians, bus drivers, textbooks, utilities,” said Michael H. Fine, chief executive officer of the Fiscal Crisis and Management Assistance Team of California, a state agency that works to identify and solve financial, operational and data management problems related to school districts.

The liability, Fine added, “can negatively impact class size, the ability of schools to pay competitive wages and benefits, replace aging and broken equipment like playgrounds, and purchase specialized services such as mental and behavioral health interventions.”

Capital expenditure on bonds

At LA Unified, payments are large, even in installments spread over years. With an earlier bond authorization of $500 million, the annual payment could reach as high as $50 million, according to figures provided by the district in mid-2024.

The cost of initial bonds and financing together was estimated last year at more than $765 million. The cost of the bonds and new bond financing is estimated at about $383 million, according to district documents.

By comparison, the county on Tuesday also approved job cuts to protect the county’s long-term solvency — closing 657 central and county office jobs — to achieve savings of $150 million a year.

There is no individual connection between sex offender pay and layoffs or the size of a promotion. The district is facing budget pressures from multiple indicators – including the expiration of one-time COVID 19 aid and declining enrollment. But sexual harassment charges represent a real drain on resources for students and staff.

“There’s only so much money available to LAUSD,” said law professor David Levine of UC Law San Francisco. “If it has to pay more than $1 billion – including interest on the bonds – to fix the old, but it’s worth it, it means that there will be fewer dollars to educate our children now and in the future.

“The fix must come from the Legislature, which is the one that put this unfunded project in place,” he said.

Even before AB 218, sexual misconduct has long been a painful and costly legacy for LA Unified. A Times review of media reports — and not all settlements are covered in the news — shows the school system was responsible for paying more than $372 million in judgments and settlements between 2012 and 2024.

Transparency and public accountability related to accommodations have been a problem for school districts, including LA Unified, which has included privacy clauses in at least seven sexual misconduct ordinances since 2000, according to a Times investigation.

In another example, the settlement prohibited the plaintiff’s attorney from making any kind of statement – or encouraging others to make a statement – about the settlement agreement. It also prohibits comments that may “disparage, denigrate or in any way criticize” LAUSD, its employees and leaders.

Only the plaintiffs, their attorney, “immediate family” and “tax professionals” could know about the settlement, according to the agreement.

“When asked about the status of this dispute, plaintiffs’ counsel could only say, ‘they have voluntarily and fully settled their claims against the Los Angeles Unified School District,’ or words to that effect,” the settlement agreement said.