In Partnership with The 74

Analysis: With school revenues at record highs, why are California districts facing insolvency? Auditor offers a case study in Sacramento

Mike Antonucci | January 8, 2020



Mike Antonucci’s Union Report appears weekly at LA School Report.

California State Auditor Elaine Howle can’t be making too many friends among the state’s education policy establishment.

After releasing a report concluding that the state’s system for financing public education “has not ensured that funding is benefiting intended student groups and closing achievement gaps,” Howle followed up with another, warning that the Sacramento City Unified School District would soon face insolvency unless drastic measures were taken.

Sacramento’s situation is hardly unique. Districts across the state are approaching financial crisis even as California increased education expenditures by extraordinary amounts — about 50 percent in the last five years.

Howle’s report on Sacramento is remarkable for its candor. Any Californian can understand her explanation for what happened and why.

“Sacramento Unified increased its spending by $31 million annually when it approved a new labor contract with its teachers union in 2017,” she wrote. “Despite warnings from the Sacramento County Office of Education that it could not afford the agreement, the Sacramento City Unified School District Board of Education approved the agreement without a plan for how it would pay for it.”

Unlike most school districts, Sacramento Unified pays 100 percent of the health care coverage for its teachers and their dependents. The auditor found this cost the district an average of $35,000 annually for each teacher. District officials were warned in 2003 that this benefit was unsustainable, but they failed to address it in six collective bargaining agreements negotiated since then.

The district used its reserves and one-time revenues from the state to cover ongoing costs, which only delayed the inevitable.

How could this happen? Simple. The district valued labor peace over fiscal responsibility. The Sacramento City Teachers Association threatened a strike in 2017, and the district was under a great deal of pressure — most notably from Mayor Darrell Steinberg — to avoid one. A deal was brokered by the mayor, with district and union officials “hammering out the details at the mayor’s Greenhaven home over soda and kettle corn, according to Steinberg,” the California Teachers Association reported on its blog.

The Kettle Corn Contract may end up being the cause of the district’s bankruptcy and a state takeover.

The local union is not blind to the situation. “We also have given the district several ideas that we think they could use right away to start to make an immediate impact,” said David Fisher, president of the Sacramento City Teachers Association.

Howle looked at those ideas and didn’t pull her punches.

“Although both Sacramento Unified and its teachers union have proposed changes to stabilize the district’s finances, we found that the proposals are unlikely to solve the district’s ongoing financial problems,” she wrote. “In fact, several proposals from the teachers union would increase costs dramatically.”

Howle has her own recommendations. They include cutting salaries by 2 percent, capping at 75 percent the district portion of health coverage and having employees contribute 3.5 percent of their salaries toward retiree health benefits.

Fisher’s response was predictable. “Well, right now, we have a huge teacher shortage,” he said. “So, any discussion of trying to cut pay for teachers at a time when it’s this huge shortage is kind of shortsighted.”

Since 2016, enrollment in Sacramento Unified has increased by 150 students. The district has hired 255 additional teachers. If there’s a shortage of teacher candidates, it’s because they have already been hired.

It’s understandable that Fisher wants to protect the benefits his members have already received. But by doing so, he is abetting a state takeover. This will guarantee that future Sacramento teachers will receive much less than they would have working for a financially stable district.

That’s shortsighted.

Read Next