If Johnny has $1.8 billion in his piggy bank and was committed to spend $24 billion over the next three years and was expecting to earn only $22 billion during the same time period, what would that mean to Johnny’s bottom line in three years?
The answer is he’d be $200 million in the hole.
That simple math problem is at the crux of the Los Angeles Unified School District quagmire. Every one of California’s 977 school districts is wrestling with similar versions of that problem. The biggest reason is more than $70 billion in unfunded teacher retirement liability through the California State Teachers Retirement System (CalSTRS).
LA Unified has offered teachers a six percent pay increase over the next two years and to hire 1,300 more teachers and support staff.
The strike by the United Teachers Los Angeles isn’t just about money although the union is pushing for slightly more than what the district is offering. It’s about class-size reduction and a demand that the district cap the opening of charter schools that now instruct 19 percent of Los Angeles’ public school students.
Districts like L.A. Unified can’t escape the fact close to 90 percent of their day-to-day operations rely on state funds or that the state mandates a three-year budget plan that is balanced. That budget has to use projections based on current revenue trends. It also has to take into account the 900-pound lead weight weighing schools down — unfunded retirement liabilities.
The teachers in L.A. Unified earn an average of $75,000 per year. That’s $6,000 lower than the California average. That, however, is only part of the picture. Once compensation such as retirement and health benefits are added, teachers are earning an average that is in excess of $110,000.
Some educators will quibble about the $110,000 figure being injected into any discussion about pay. They are among those who do not view pre-established step raises based on longevity or continuing education units as a pay raise. That $110,000 figure represents retirement income and health benefits that in today’s world may not be “A+” but it is at least a strong “A-” compared to most people. They are not dipping into take-home pay to addresses most medical issues and, if they are, not to the degree of most people.
Setting aside the gold standard of retirement for government employees for a second, you need to keep in mind $75,000 a year isn’t going to exactly make it easy to afford to live in the Los Angeles Basin which is akin to living in the high-priced San Francisco Bay Area. If you are an entry-level teacher at the bottom of the pay scale in L.A. grossing $44,000 and are probably burdened with college debt and you aren’t married to someone with an equal or greater income, the odds are you would have to room with at least two other teachers to be able to afford a roof over your head.
Then there are the nagging statistics that teachers would like to try and address with class size reduction and so likely would the school district if it weren’t for financial realities. Based on high school student population, 12 of every 100 that start high school in L.A. will drop out. Almost seven out of every 10 L.A. Unified are not math proficient and almost six out of 10 are not English proficient.
The odds are smaller class sizes and additional support staff targeting specific issues responsible for less than stellar performance of individual students would help. However, there is no money to reduce class sizes and such on the scale that teachers demand.
One of the biggest reasons the money isn’t there are pension costs. Remember the 2012 statewide election that saw passage of Proposition 30 to increase income tax on the wealthy for the expressed purpose of funding education that was extended by voters in 2016 through the year 2030? It helped increase overall state spending on K-12 education since 2013 but rising pension costs have sucked up most of the increased funding.
Pension costs are eating into school budgets California. In 2018 voters in San Francisco approved a $300 annual parcel tax to fund city schools as increased pension costs were making it impossible to fully fund basic day-to-day costs of running schools. Sacramento City Unified is warning it may go bankrupt later this year due to rising benefit costs.
The reality that some are not accepting is that in order to honor pension and health benefit commitments to teachers, costs have to be cut.
Given that well over 80 percent of the costs of running schools are going to salaries and benefits, the only way to free up substantial money to cover rising pension costs is reducing positions. Adding teaching positions without student growth will further increase pension liability.
Manteca Unified, as an example, is contributing 16.28 percent to CalSTRS this school year as opposed to 14.43 percent in 2017-2018. The district contribution is expected to jump to 18.13 percent in the 2019-20 school year. That means the amount the district pays into CalSTRS will go from $26.5 million in the 2017-18 school year to $40.4 million in the 2019-20 school year or an annual increase of $14.4 million. That money has to come from somewhere.
While Manteca Unified isn’t in the same exact position at L.A. Unified, one would think they’d want to explore throughout strategies tied to class size reduction.
Given there are issues with how the state reimburses school districts that adopted class size reduction and what penalties they may incur if they move away from it, any change that would improve the district’s financial position is dicey at best.
But there are options that are worth exploring that may help keep promises to current teachers intact while reducing teacher loads.
Providing targeted grade levels for class size reduction with classroom aides instead that could be split between two or three teachers would provide extra help for individualized instruction, reduce the potential for increased costs, and not add to the CalSTRS burden. No one is arguing it might not be more effective to reduce the teacher to student ratio instead but the stark reality is that sooner or later that strategy will sink under the weight of increased teacher salary, benefit, and pension costs.
It is easy to get caught up in emotional arguments evolving around educating kids and how teachers face a daunting task and are underpaid in relation to code writers that they helped educate. But if emotions are allowed to cloud reality and delays taking the proverbial medicine involving solutions many don’t embrace, the can will be kicked far enough down the road that the potholes the can is being blindly kicked across will eventually be so big that they can’t be bridged.
Once that happens the struggle to get out of the financial pit will be substantially more excruciating than had everyone involved opted to address the glaring issue of pension costs sooner.
This column is the opinion of Dennis Wyatt, and does not necessarily represent the opinion of The Ceres Courier or Morris Newspaper Corp. of CA.