This error occurs because the correct values were not populated on the CALPADS > Other Options tab.  Also, see FAQ - What Should be Entered if the Race and/or Ethnicity for a student is "intentionally left blank or missing"?

Resolution:

Use the CALPADS > Other Options tab and confirm that the "Intentionally Left Blank" code value has been set and is correct. The same code values should be used for Staff and Students.