Nine months after agreeing to come to the table, LAUSD’s employee unions are finally sitting down with parents for the first time Friday to explore ways to rein in the soaring cost of retiree healthcare, which is eating up a larger portion of education funding every year.
There’s now a $15 billion price tag for the promises LAUSD made to current and future retirees for their free lifetime healthcare, and the Independent Analysis Unit has warned that LAUSD cannot afford to “pay as you go” for these promises and still have enough money left to educate kids. Unless something changes, half of LAUSD’s education funding will go toward retiree pension and healthcare costs before this year’s kindergarten class finishes high school. That means LAUSD is in the process of morphing into more of a retirement agency than an institution dedicated to educating kids.
The employee unions prioritized the preservation of free retiree healthcare benefits over every other need by negotiating that portion of the contract first. In February, they pressured LAUSD to put $3.3 billion toward employee healthcare alone – leaving less money now for lower class sizes, teacher salaries, and more counselors, nurses and librarians.
Current working teachers are already feeling the slow-boil pain of the problem and demanding lower class sizes under threat of a strike, but it’s too late now for LAUSD to meet those demands. The money has already been committed to cover healthcare costs for the next two years, so LAUSD can no longer afford class size decreases and demands for more counselors without tipping into insolvency.
The good news is, teachers can look to their own union to help solve the problem. LAUSD is in the unusual position of having no control over its employee health benefit plans. While the amount LAUSD pays for healthcare is negotiated, the unions themselves control the details of plans through an entity called the Health Benefits Committee. Each employee union has one voting seat at the table, and the district has one seat.
In part because of this employee control, LAUSD’s health benefits plans are far more generous – and expensive – than any other school district in the state. LAUSD offers employees, their families, retirees and spouses free lifetime health benefits with no monthly contribution for insurance premiums. That costs more than $13,000 per employee per year. Most districts require retirees and employees to share in those costs.
While parents have no seat on the Health Benefits Committee or a vote, they have, for the first time, been invited to sit on a subcommittee to explore cost savings after Speak UP called for parents to have a seat at the table. Ben Austin, the executive director of Kids Coalition, is one of the LAUSD parents who will join the subcommittee meeting Friday.
Including parents in the conversation was one of the few concessions the unions made in February when they pushed LAUSD under threat of a strike to maintain the contribution for the health benefits at their current levels for three years, despite declining student enrollment and despite the fact that union-controlled HBC has amassed a $300 million reserve.
Because LAUSD is such an outlier in terms of its benefits plans, there are simple fixes the unions could make to save money that could potentially be put toward lower class sizes without any employees or retirees losing quality health coverage. Here are some of the options and the amount that LAUSD’s chief financial officer believes could be saved and put toward other needs:
· LAUSD could save $169 million a year if the unions simply agreed to switch employees to the lowest-cost health plan, while retaining employee flexibility to choose another plan if they want to pay the cost difference. That $169 million per year in savings would cover much of the $200 million cost of UTLA’s class size demands.
· Asking employees to pay 20 percent of premium costs would save $206 million per year, almost the exact cost of UTLA’s class size demands.
· If LAUSD continued to offer free benefits to employees and one dependent but asked employees to pay for additional dependents, LAUSD would save $146 million per year.
· If LAUSD only covered employees and retirees in full but asked them to pay the premiums for dependents, LAUSD would save $460 million per year.
Switching retirees 65 and older to Medicare and asking retirees under 65 to pursue Obamacare subsidies also would save $300 million per year, according to David Crane, president of Govern For California. Retirees rightly point out that they accepted lower salaries for the promise of free lifetime health benefits from LAUSD, and it would be unfair to break those promises.
However, the reality is that everyone must come to the table and collaborate on reasonable, commonsense solutions if we are to save the district, which currently spends $500 million more every year than it receives in revenue. If LAUSD depletes its reserves and tips into insolvency, the state will take over and is likely to swoop in and slash retiree benefits itself.
That’s because the benefits are simply too costly to be sustainable, especially as so many teachers reach retirement age at once. A similar benefits package is what bankrupted the City of Stockton, and when that happened, Stockton eliminated healthcare benefits altogether. We hope the unions choose more modest fixes now, such as switching to the lowest-cost plan, so drastic cuts don’t become necessary later, when the current crisis worsens.
We all need to be pushing for more funding, but the state and taxpayers are far more likely to help if they see LAUSD and the unions being responsible by reining in healthcare costs and bringing health benefits plans in line with those in other districts.
While the unions have the power to fix this problem unilaterally by making plan changes, the LAUSD Board also bears responsibility for the predicament we’re in now. For many years, the Board has failed to set aside money to fund the promises made to retirees. The Board also failed to push the unions to make necessary changes to the plans in February by lowering the amount paid into the Health Benefits Committee.
Board members -- except for Nick Melvoin, who warned the deal was unaffordable – wrongly believed that conceding to UTLA’s demands on healthcare would avert a strike. LAUSD clearly should have insisted upon negotiating the entire contract at once because as soon as the healthcare deal was inked, then the teachers union started making noises about striking over salary and class sizes. But by then, it was too late. The $3.3 billion was already committed to healthcare.
LAUSD’s unusual health benefits package is also the main reason that teachers should not expect the state to swoop in and help bail them out if the teachers go on strike. The state is far more likely to tell teachers to look within and pressure their own union to make modest changes to the benefits plan in order to find the money to meet their other demands.
It will be interesting to watch whether younger, healthier teachers who prioritize higher salaries and smaller class sizes over pricey lifetime health benefits will pressure their union to make those changes. Young teachers will be the first laid off when jobs get cut because of the funding crunch, and those who survive will be saddled with larger class sizes. But they now have the leverage to threaten to withhold union dues if their needs are not considered.
We hope there is a genuine effort to solve this problem when all the parties come to the table Friday. Something must be done.