The Los Angeles Unified School District has long known it needs to do something about growing health-care and pension costs, as uncomfortable as that might be for school board members and district employee unions.
Currently, the district covers 100 percent of health care premiums for eligible employees, retirees and their dependents. This has led to bigger and bigger portions of the district’s budget being committed to such an exceptionally generous offering.
Whereas in 2001-02, health and welfare expenses took up 7.6 percent of the district’s budget, it is on track to hit 18.5 percent by 2021-22 and 28.4 percent by 2031-32, according to a presentation by Scott Price, the district’s chief financial officer.
Pension costs are similarly growing in proportion to the budget, ballooning from 3.7 percent of the budget in 2001-02 to a projected 22.4 percent in 2031-32.
This unsustainable trajectory was explicitly flagged in 2015 by the district’s Independent Financial Review Panel, which recommended reforms to prevent the situation from getting worse.
Fortunately, on Aug. 29 the school board convened a lengthy discussion about potentially addressing the cost of health benefits, which are out of alignment with what other large districts across the country offer. For example, Chicago Public Schools requires employees to contribute 2 percent to 5 percent of their pay to health benefits depending on which plan they choose, while retirees pay their full premiums with subsidies varying by bargaining unit.
As the IFRP recommended two years ago, LAUSD ought to pursue reforms as soon as possible.
There are several routes the district can take. For instance, even if the district paid only for employees’ and retirees’ health costs but excluded dependents, the district could save $434 million a year. If it covered both employees and retirees, plus one dependent, the district would still save $138 million a year.
In any case, such savings will go far in enabling the district to better serve those who should matter most: students.
With enrollment falling and costs for benefits soaring, the district needs to be responsible with the finite resources it has. It can’t afford to kick this can down the road.