The Los Angeles Unified School District has been hearing dire warnings for some time about the financial cliff it’s facing in the form of unsustainable pension and healthcare costs. Board members talk often about the need to confront the fiscal reality, and the district’s own Independent Financial Review Panel warned two years ago that the issue couldn’t wait.
The school board has acknowledged the need to reach a more realistic agreement with unions and rein in these costs, and yet it continues marching toward the fall-off point. Its newest proposal to its unions, revealed in late October, would do nothing to begin the process of shaving healthcare expenses. Benefits would remain the same for the next three years.
Board members point out that for the first time, the district is “freezing spending” on healthcare during that time. But that doesn’t mean its expenses will stay the same; instead, the district will withdraw dollars from a healthcare reserve to cover the higher costs, rather than spending out of the general fund.
Once the roughly $150 million in the reserve is gone, board member Nick Melvoin said, L.A. Unified will reach the financial cliff, which should make it easier to negotiate some form of cost savings with the unions. That’s like saying it’ll be easier to talk about buying health insurance after you’re in the hospital.
The board is understandably reluctant to get into a fight with unions that’s bitter enough to trigger a strike, which would harm everyone involved, especially students. And if the district wants to draw smart, hard-working people to the job of educating future adults, it will need to compensate them as well as possible. Yet neither the district nor its employees can afford to lurch from one financial crisis to another.
Enrollment in the district is falling even faster than predicted, shrinking revenues as the district’s spending on pension and healthcare costs rise. As the financial review panel warned two years ago, “This expanding gap represents a serious challenge to the LAUSD’s financial stability in the near term, one that insists upon immediate action today.”
Right now, the district pays the full health-insurance premium for its teachers and other staff. If it required staff to pay just 10% of those costs, the panel’s report said, it would save $54 million a year right there. At least the district should insist on some changes in coverage for new employees so that it doesn’t build an ever-increasing deficit down the road.
It needs to move now, not in three years. Waiting for the next cliff isn’t a plan; it’s precisely the opposite.
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