On a day when LAUSD Board Members met behind closed doors to interview the final candidates for a new superintendent to lead the district, LAUSD released a new report showing that the unfunded liability for retiree health benefits has now grown by nearly $2 billion to $15.2 billion.
The Board members did not publicly discuss the new actuarial valuation report showing a massive spike (from $13.6 billion to $15.2 billion) in what it owes for Other Post-Employment Benefits (OPEB), which are the promises made to retirees and future retirees to cover their healthcare.
But the report, submitted during the Committee of the Whole meeting Tuesday, paints a picture of a worsening financial situation that threatens the solvency of LAUSD. Because LAUSD has failed to put aside enough money to pay for retiree health benefits and simply cannot afford to pay as it goes, the district faces the threat of bankruptcy. The unfunded liability also threatens the quality of education students receive as a larger percentage of the budget flows outside the classroom every year – leaving less for student programs.
“As our unfunded liabilities grow larger, the District is forced to make hard choices about whether we can put counselors in schools, keep art and music programs, or do better than a class size of 35 kids per teacher,” Board Vice President Nick Melvoin (BD4) told Speak UP. “If we do not take drastic steps to address a looming financial crisis, it is our kids and teachers who will suffer from inevitable budget cuts.”
LAUSD’s worsening financial picture will be one of the main challenges for a new superintendent, who is likely going to have to consider drastic steps such as school consolidation, class size increases and employee layoffs.
A knowledgeable source tells Speak UP that three superintendent finalists remain in the running: Acting Superintendent Vivian Ekchian, former investment banker and former Los Angeles Times publisher Austin Beutner and former Baltimore schools chief Andres Alonso. The Indianapolis superintendent Lewis Ferebee is no longer considering the job. A decision is expected as early as Friday and more likely within the next two weeks.
The Board recently had the opportunity to help prevent its fiscal situation from worsening during contract talks over healthcare benefits with its employee unions. The Board, however, continued to kick the can down the road, striking a status-quo deal that kept the benefits at their current level for the next three years and making no changes to the plan. Only two Board members, Melvoin and Board Member Ref Rodriguez (BD5), voted against that fiscally irresponsible deal, citing the harm to students and teachers.
LAUSD pays the entire medical premiums of both current and eligible retired employees and their spouses. There is no employee contribution. This is not the norm with other school districts. Consequently, LAUSD’s OPEB costs per student are out of whack. According to a piece in the Orange County Register using figures from 2016, LAUSD’s per student rate was $525 compared to $209 per student in Santa Ana Unified, $81 per student in Irvine Unified, and $29 per student in San Diego Unified.
A more comprehensive presentation about the actuarial report is expected at the May 8 board meeting.
-- Leslee Komaiko and Jenny Hontz