Los Angeles Unified is facing renewed questions after a new watchdog report found the district committed about $2 billion to tech contracts since the 2021-22 school year, with many of those contracts going to private equity– and venture capital–backed firms.

The report, released by the Private Equity Stakeholder Project using data obtained by United Teachers Los Angeles, found that within that spending, $255 million of the district’s $297 million in new digital instruction contract commitments since 2022 — about 86% — went to companies backed by private equity or venture capital. Nearly 70% of those vendors have been paid more than originally authorized under their contracts.

The findings arrive as the district faces projected deficits, recent layoff notices and continued scrutiny over spending priorities after tense labor negotiations that concluded earlier this week.

But outside experts said the central issue is not simply whether LAUSD uses outside vendors, something common in large urban school districts, but whether those contracts are closely monitored, whether vendors are delivering value and how that spending fits within the district’s broader budget priorities.

A district spokesperson on Friday did not directly dispute the report’s findings, but said all contracts approved by the Board are awarded based on the value of services provided to students and in compliance with applicable laws.

The district said it actively monitors contractor spending, with thresholds in place to alert staff when expenditures approach limits and trigger either a request for additional spending authority or a new solicitation process.

“All requests for increased spending capacity are reviewed by the District’s finance team to ensure fiscal responsibility and alignment with the District’s highest priorities,” the spokesperson said.

The district added that it is reviewing all areas of spending, including contracts and staffing, as it navigates ongoing fiscal constraints and works to maintain a sustainable budget.

UTLA pointed to the tentative agreement the union recently reached with the district as a sign of a shift in investment priorities.

“UTLA’s tentative agreement with the district marks a shift in LAUSD’s investment in classrooms and their recognition of the central role of educators in students’ lives,” the union’s vice president Julie Van Winkle said in a statement. “It is a concrete commitment by the district that they cannot displace or replace educators with screens and AI.”

She added that the union hopes the agreement, along with new district leadership and increased scrutiny of ed-tech spending, will lead to greater transparency and a shift in priorities.

The report says LAUSD’s approach mirrors a broader national trend of schools relying more on investor-backed companies to provide core services.

Patricia Burch, a University of Southern California professor who studies education policy, including the role of private companies in K-12 schools, said Thursday that the pattern is not unique to Los Angeles and is consistent with what she has observed nationally.

“For large urban districts, it’s very common to rely heavily on outside vendors for core digital instruction, assessment, and safety tools,” Burch said.

Rather than building those systems in-house, districts typically purchase platforms that become part of the infrastructure of schooling, such as learning management systems and AI programs, she said.

“What’s striking in the LAUSD analysis is less the outsourcing itself and more who those vendors are,” Burch said. “A large share of contracts going to private‑equity or venture‑backed firms is consistent with what we see nationally, where a small cluster of investor‑owned companies now control key K‑12 platforms.”

The bigger concern, she said, is what happens once those products become embedded in daily school operations.

“The main tradeoff is that districts are locking themselves into recurring, often bundled contracts with companies whose first obligation is to investors, not to students,” Burch said. “Private‑equity‑backed firms in particular are under pressure to show rapid revenue growth.”

That can encourage aggressive expansion, price increases and product roll-ups — where companies combine multiple products — making it difficult for districts to unwind those systems, she said.

Burch said the trend also raises questions about whether some widely used tools have strong enough evidence to justify long-term public spending.

“Market dominance is driven more by procurement relationships and infrastructure lock‑in than by proof of impact,” she said.

One of the report’s sharper findings involves contract ceilings. According to the analysis, many of the digital instruction vendors it examined had reached or gone beyond their original contract commitments.

Burch said that kind of pattern can signal weak oversight. Typically, she said, spending beyond a contract’s original limits should trigger a formal amendment.

“In our national data, we see AI and digital tools becoming recurring infrastructure line‑items, often with private‑equity‑backed vendors whose business model depends on growing contract value over time,” Burch said. “When oversight is thin, that can make it easier for spending to creep beyond original limits before anyone steps back and asks whether the district is getting commensurate value or evidence of impact.”

But while the report highlights billions in technology spending over several years, the district’s annual budget is far larger, meaning those costs account for a relatively small share of overall spending.

“Eighty to 90% of the spending is typically on labor in a school district’s operating budget,” said Marguerite Roza, director of Georgetown University’s Edunomics Lab, on Friday.

She said the findings should be viewed in the broader context of how school districts spend money.

That does not mean contracts should escape scrutiny, she said, but it does mean procurement spending can sometimes be overstated in labor disputes, particularly when unions argue that contract dollars could simply be redirected into raises or staffing.

Roza also said the growth in district contracting over the past several years cannot be separated from the flood of temporary federal relief money schools received during the pandemic.

Across the country, she said, many districts chose to spend one-time money on contracts rather than permanent hires, since contracts could be scaled back more easily once the funding expired.

“There was a huge amount of money that came out from the federal government, and they said, you have three and a half years to spend it, and then it’s gone,” Roza said. “Some districts, lots of them, used some of that money to try to do a procurement contract, because you can turn it on and off without giving out pink slips.”

Roza also cautioned against assuming from the report alone that LAUSD is currently more contract-heavy than comparable districts. Based on the broader statewide spending data she reviewed during the interview, she said LAUSD appears to spend more per pupil overall than many peers, but much of that difference is tied to labor benefits, not necessarily procurement alone.

For example, in the 2024-2025 school year, LAUSD spent about $1,240 per student in a category labeled “books and supplies,” which includes some procurement-related costs, compared with about $913 statewide, according to data from Ed-Data, a California education finance database. In another category that captures contracted services, the district spends about $1,473 per student, also above the statewide average of $913.

But those figures remain far smaller than spending on salaries and benefits, which total more than $23,000 per student in LAUSD, compared with about 17,000 statewide, according Ed-Data.

Regardless of whether contract spending is large or small, experts say the key question is how closely those agreements are monitored.

Sean McMorris, transparency, ethics and accountability program manager with California Common Cause, a nonpartisan government watchdog, said in an email Friday that heavy reliance on outside vendors can increase the risk of fraud or mismanagement if oversight is weak.

He said large contracts should typically go through a competitive bidding process and be reviewed publicly by the elected body representing the jurisdiction, both to ensure better pricing and to provide transparency.

“When corruption in contracting occurs, it usually involves a no-bid contract and/or deals doled out behind closed doors,” McMorris said.