CARLSBAD — The Carlsbad Unified School District board narrowly approved a $172.8 million budget for the 2025-26 fiscal year following weeks of internal conflict and public criticism over Board President Kathy Rallings’ handling of the process and her absence from the final vote.
The approved budget includes roughly $175.8 million in expenditures, resulting in an estimated $3 million shortfall. The district also closed out the current year’s budget with a $7.5 million deficit, projecting a decline in its general fund balance from about $35 million last fall to $24.6 million by June 2026.
A majority of board members had postponed the initial vote scheduled for June 18 to allow for public input on revisions, including the restoration of $3.12 million to the district’s stabilization fund and the removal of a proposed line item labeled “Board LCAP Priorities.”
Suzanne O’Connell, the district’s retired deputy superintendent who returned to present the budget, said she was uncomfortable reclassifying the funds under the new title.
“To me, ‘Board LCAP Priorities’ gives you a broader use of the funds than the restrictions that were implied when we formed it,” O’Connell told the board.
O’Connell explained that discussions to change the name and reduce the district’s required reserves from 5% to the state-mandated minimum of 3% began during board meetings in December and January. While the board ultimately rejected the policy change in January, the renaming proposal was not formally addressed at that time.
“Since there was no mention at that time of the name change, I felt like it was an unfinished piece,” she said.
O’Connell began presenting the budget in February after the departure of Eric Dill, the district’s former associate superintendent of business services, who left for a similar position at Poway Unified.
Board President Kathy Rallings, the lone trustee in favor of keeping the money in the new category, voted against the change on June 18 and was absent from the final vote on June 25. She had previously supported reducing reserves to 3%, one of only two board members to do so.
Vice President Michele Tsutagawa Ward, who also supported the reserve change in January, said she later reconsidered the reclassification and worked to reverse it. She helped reach a consensus with the rest of the board to finalize the budget at the special meeting.
During the June 25 meeting, several members of the public criticized Rallings for her demeanor during earlier discussions and for missing the final vote.
Carlsbad resident Shauna Hearst expressed frustration with Rallings’ conduct and absence.
“(Rallings) talked repeatedly at the end of the meeting on another item about performing your board duties that you’re elected to, and she did not do that on the budget for you guys,” Hearst said. “As board president and as the longest standing trustee, she should have given you the board policy … she should have given you the parliamentary procedures, and it’s very unfortunate that she didn’t guide through this budget process in a way that conforms with the budget laws.”
During the June 18 meeting, Rallings appeared frustrated with fellow board members as they sought to amend the budget and reschedule a vote, expressing concern over their understanding of board procedures.
“I’m not going to do this for you,” she said.
Resident Tamara Dixon called on trustees to consider removing Rallings from the board. Some community members also questioned Rallings’ motives for supporting the reclassification of the funds.
Ward said her vote was driven by concerns about future federal and state budget cuts, as well as financial obligations to public charter schools.
“My vote is not about any one trustee, or any false claims about someone trying to steal $3 million or any amount of money, because that simply is not true,” Ward said. “This vote is about ensuring we have a sound budget that supports all of our students, especially those facing academic and social challenges.”
Trustee Gretchen Vurbeff, however, sharply criticized Rallings.
“I also want to make clear that the entire reason we are here is because we apparently have a board president who does not respect the board or our rules,” Vurbeff said. “Instead, Trustee Rallings abused her authority as president and unilaterally usurped the will of the board to improperly transfer $3.1 million out of the stabilization fund hoping we wouldn’t notice. This behavior has to end, and it is up to all four of us to take a stand, and I hope that will happen soon.”
The board will not meet again until August. District staff may bring back a revised budget within 45 days if significant changes are made to the state or federal budgets.
