LAUSD Must Get a Grip on Its Finances and Not at the Expense of Students

Last week, LA School Report published an article outlining how LAUSD plans to stay solvent. The solutions that were suggested were adding four more students to every classroom and taking money back that principals do not spent at the end of the year.

According to LA School Report:

During Superintendent Michelle King’s report to the school board, the district’s new chief financial officer, Scott Price, explained how LA Unified plans to maintain a minimum reserve of 1 percent of its expenditures — or $75 million — as required by the state over the next three years. The LA County Office of Education requires districts to show how reserves will be maintained three years out. Price pointed out that every other school district has a higher minimum reserve than LA Unified’s, such as 3 percent or 5 percent.

Some new costs have arisen since June, when the school board passed a $7.5 billion budget for the 2017-18 school year. Those costs, combined with other long-term expenses like pension contributions, threaten the district’s solvency and its ability to maintain its reserves.

A major cost is what the district is required to pay into employees’ retirement funds, known as CalSTRS and CalPERS. This year, the district’s mandatory contribution is increasing by 2 percent, which will cost $90 million. The “devastating” contribution increases will continue through 2021, Price said, when it is predicted the hikes will slow down or stop.

The district is also burdened with $13.6 billion in unfunded liability for retiree healthcare benefits, but it has chosen not to pay that down, so that it can maintain its reserves. It will not contribute to this fund, known as OPEB, in either 2018-19 or 2019-20.”

The articles goes on to suggest that the district will remain solvent by increasing class sizes and taking back carryover money (unspent money) from principals. Another possible cost is a penalty from the state for having too many administrators. LAUSD has been criticized for being top-heavy, having too many upper level managers who are well compensated and not based in a classroom.

Before adding more students to each class, LAUSD should look at cutting other costs, move towards a plan to get a grip on the pension and health care costs, and search for alternative sources of revenue. Some solutions that have been suggested include offering less generous benefits packages to future employees.

By next year, it is projected that LAUSD will spend $1 billion on healthcare. Some of these costs can be shifted to the employees. Employees are paying a larger share of health care costs across multiple sectors, so this follows a trend nationally. It is possible that shifting some of the healthcare costs to employees will put political pressure on legislators to contain costs with proposing viable single payer solution (we have seen movement toward this here in California) or other measures to improve the existing healthcare system.

At La Comadre, our position is that LAUSD must do all that it can to remain solvent and that the focus should remain on the students first. Therefore, the district should not propose budget solutions where students will carry the burden by having more crowded classes.

What do you think?

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