Education

LAUSD board weighs climbing costs and cuts without a budget

The Los Angeles Unified school board is scheduled to take up employee health care costs Tuesday.
The Los Angeles Unified school board is scheduled to take up employee health care costs Tuesday.
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Los Angeles Unified Superintendent Ramon Cortines is asking the school board to sign off on a union health care agreement Tuesday that would carve out more than $1 billion from a draft budget that board members still haven't seen. 

With the next fiscal year 11 weeks away, Cortines is trailing behind John Deasy, his predecessor, in releasing a preliminary financial plan to board members for public discussion and revision.

Board member Monica Ratliff is calling for a delay in the vote on the health care agreement until it can be analyzed against "the district's budget now and over the next 10 years."

"If we committed to fiscal responsibility and good stewardship, then the requested analysis absolutely must be done prior to entering into this or any other Health Benefits Agreement and prior to our completion of the budget," Ratliff said in a statement on Monday.

Though it hasn't set aside the cash, LAUSD is committed to $11 billion for health care and other benefits covering retirees.

Cortines' budget for next year will need to balance better revenues, higher fixed expenses and possible cuts to programs like preschool and adult education. The financial plan is expected to surpass the district's current year $7.3 billion budget. 

At the board's budget committee meeting Thursday, members were warned that rising costs for employee pensions and health care benefits combined with declining student enrollment may result in a projected deficit of $160 million.

"I hate to be the downer," said Megan Reilly, the district's chief financial officer. 

During Reilly's presentation of the district's perplexing finances, Board Member George McKenna dozed off, head in hand. He perked up when the discussion turned to cutting 140 preschool teachers next year.

"I hope I don't have to continue to apologize as an elected official for what we can't deliver to deserving public and staff and particularly the children," McKenna said.

Last month, the board approved more than 600 layoff notices to counselors, art teachers and other school staff. Once final budget figures are in later this year, the district can – and often does – rescind what are known as RIFs, or Reduction in Force notices.

The district's health care obligations, which include lifetime benefits to qualifying retirees, will cost $3.3 billion over the next three years.

Source: Los Angeles Unified School District

Janice Sawyer, LAUSD's director of benefits, said the increases are driven by higher costs for medical procedures and prescriptions as well as an aging population – issues with which many public agencies are grappling.

"I understand that Long Beach Unified School District is similar to LAUSD by offering premium-free coverage to eligible employees. However, there are differences in retiree coverage," Sawyer wrote in an email to KPCC.

Watching and waiting

The board's budget discussions come as LAUSD and the teachers union try to reach a mediated agreement on a new contract. Teachers have not had a pay raise in seven years, and the two sides remain apart on the size of the next salary increase.

When salaries are lackluster, the district, like many public agencies, uses employee benefits as a recruitment and retention tool. 

Linda Pérez, a recently retired district secretary, said she turned down higher-paying offers over her 22-year career because LAUSD benefits stood above the rest.

"I think 99 percent of the staff in LAUSD is here because of the health benefits," Perez said.

As more public employees reach retirement and live longer, some analysts worry the cost of lifetime health care will become overly burdensome or even bankrupt government institutions. 

According the Legislative Analyst's Office, state employees have stockpiled $72 billion in retirement health care benefits so far, but the state has only reserved $200 million for their future care.

LAUSD's employee health care program has long leveraged Medicare to mitigate costs and will also draw on reserves to meet its latest expenses.

There are signs to suggest district's finances many not be dire just yet.

Next school year, LAUSD is anticipating an additional $230 million in revenues, and the figure is likely to swell.  The Legislative Analyst's Office reported this week that Proposition 98 funding for schools and community colleges will likely jump $7.8 billion above earlier statewide projections.

The district did not respond when asked the date the proposed budget will be released.

LAUSD administrators may try to withhold a draft budget, and news of a potential revenue windfall, until it reaches a contract agreement with the teachers union, said Mark Skvarna, retired Baldwin Park Unified superintendent.

"I think about 90 percent of it [forecasting] has to do with positioning with the union, because unions are going to want a chunk of [funds]. Those people haven't had raises of any substance for years," Skvarna said.

Without a detailed spending plan, board members are having to make sense of an expected revenue surge, potential and politically unpopular cuts and the rising costs of running schools.

Bennett Kayser, one of three board members facing reelection challenges, said having a draft budget would "make it easier to see what things should have lines drawn through them, and what should be saved." 

"Everybody is kind of waiting," he said.

This story has been updated.