A tentative three-year agreement between the Los Angeles Unified School District and eight unions is good for the district's 60,000 employees, at least in the short term. They hold onto the healthcare choices they have now without having to contribute to their costs.
"After years of district threats to our healthcare, it is a victory to have all unions remain steadfast against any concessions," the unions said in a joint statement.
The district's continued commitment to covering a broad range of benefits for employees, however, does nothing to ease its pressing financial problems.
L.A. Unified employees are not among the nation's highest paid, but they enjoy comprehensive medical benefits for themselves and their families — without paying monthly premiums — a perk that is increasingly rare in the workplace.
The Board of Education and members of the unions are expected to approve the new pact.
All seven board members responded to the agreement in a district statement Friday. Six of the seven signaled their support.
"This agreement is a testament to our district's ability to take responsible actions to honor their promises to employees while also continuing to provide a quality, public education for all children," said board member Scott Schmerelson.
Healthcare costs are a major stress on the nation's second-largest school system, particularly coverage of retirees.
The district pays more $20,000 annually for the healthcare of each retiree who is too young to qualify for the federal Medicare program, said Najeeb Khoury, the district's chief labor negotiator. Older retirees use district benefits as a healthcare supplement to cover what Medicare doesn't, which costs the district about $7,100 a person each year.
It would cost about $13.5 billion in today's dollars to pay for all retiree health benefits over the next 30 years, Khoury said.
That's a problem because L.A. Unified has put aside relatively little to cover these expenses. Instead, it largely pays for health costs out of each year's budget.
Over time, medical costs for retirees could swamp the general fund, crowding out funds for academic programs or for competitive salaries for teachers.
Nick Melvoin is the only member of the school board who said he has yet to decide whether to support the tentative agreement.
"There was an opportunity to drive a little harder line," he said. The district, he added, needs to plan ahead "so that we don't have to face drastic choices in the future."
Officials said the district, too, won some concessions in the agreement. The most important one is that L.A. Unified will freeze the total annual amount it pays out of the general fund for healthcare benefits for 2018, 2019 and 2020, the three years covered.
Under the agreement, the district will hold to the roughly $1.1 billion it pays for the benefits at the moment. The freeze is intended to spare the general fund from having to absorb healthcare costs that have been rising more than 6% a year.
The rising costs instead will be covered by a healthcare reserve that has grown to about $300 million. The unions control this reserve and have now agreed to let this reserve pick up the increases.
The district has pledged to maintain this reserve fund at $100 million, provided that the unions do more to lower healthcare costs.
In L.A. Unified, the district negotiates with the unions over how much to pay for healthcare, but the unions control how the money is spent. The unions determine which health plans to offer and how much, if anything, to charge employees for premiums and co-payments.
Board member Richard Vladovic said the agreement buys the district and its workers needed time to make the hard choices ahead.
"We now have three years," he said, to deal with the long-term funding problem "once and for all."