California schools could see the most money ever, but it won’t keep LAUSD from falling off its fiscal cliff
Mike Szymanski | January 24, 2018
* Updated Jan. 25
The California governor’s new budget proposes giving more to schools than ever before — $78.3 billion — but it’s not going to keep LA Unified from driving off its fiscal cliff in three years, according to the district’s chief financial officer.
With steady enrollment declines and crushing pension debt, the district faces a 5.1 percent deficit, or $380 million, by the 2020-21 school year, CFO Scott Price told the school board last week. Even with Gov. Jerry Brown’s proposed infusion of money from the state, LA Unified’s deficit will still be 3.3 percent, or $245 million, in three years, he said. An outside auditor reported to the board at the same meeting that by last summer, the district had a negative $5.1 billion in liabilities over assets.
That deficit could be whittled down depending on how the school board decides to spend the extra $137 million the district could get, Price said. The board will weigh options, which could include paying into long-term employee benefits, spending it on attendance and enrollment incentives, adding new instructional programs, or giving it to employees.
“We have to decide what to do,” Price told the board in his report last Tuesday. “We can offset what we can to avoid the financial cliff.”
Price said there’s “still work to be done” with the district’s fiscal stabilization plan but didn’t point to future cuts. Other schools districts throughout the state grappling with deficits are slashing budgets and closing schools.
This month’s budget proposal from Brown, who will give his final State of the State address on Thursday, raises California’s per-student spending from about $10,000 to $16,000, which helped expedite last week’s tentative agreement on health benefits with eight labor unions, according to school board members.
“I am so happy we got the extra money, and it may have some effect on the negotiations, but I wish it was ongoing,” said board member Richard Vladovic. “It may have dangled bigger carrots, but it’s not enough. Those funds will run out and we may not be here in three years.”
Board Vice President Nick Melvoin said new state funds will allow California to improve its rank in per-pupil spending, moving from 46th out of 50 to 41st. (Other measures rank the state 37th.) The additional money also helps with labor negotiations, he said. “When I was a teacher, I chose the district over any charter schools because of salary and good benefits.” But “we still need to have tough conversations and make courageous decisions to deal with the debt.”
The district’s debt load is also growing and by last summer was $512.6 million more than in the previous year. An outside auditor’s report to the board showed that the district had a negative $5.1 billion in liabilities over assets in fiscal year 2016-17. The main culprit is the district’s choice to not pay down what it owes for retiree healthcare, the major part of its liability for Other Post-Employment Benefits, or OPEB.
Each year the district starts out with the intention of paying into that fund, but it’s one of the first things that gets cut as the budget is hashed out, Price said.
The district shouldn’t expect much help from the federal government either, and California may well see cuts, according to another report presented last Tuesday by the district’s federal lobbyist, The Raben Group.
“Washington is a challenging place right now, it is rather unpredictable,” said the firm’s Michael Yudin, who noted that under the new federal tax reform bill, state and local tax deductions will have long-range negative effects on school districts. He also said uncertainty over the Deferred Action for Childhood Arrivals program and overhauls in student aid will not be good for local students. “It is a shame kids are affected by the politics of the day.”
Brown’s proposal would fully fund the Local Control Funding Formula two years early, increase the cost-of-living adjustment from 2.15 percent to 2.51 percent, provide more for special education, and pay for a one-time boost of $295 per student, which amounts to $140 million for LA Unified. After the budget is finished in June, the district will decide how to spend the money.
School board member Richard Vladovic suggested at the meeting that the money go to raises for school district employees. None of the other board members had specific suggestions.
Former school board member David Tokofsky told the board during public comment they should lobby for a bigger chunk of state’s surplus. Interim Superintendent Vivian Ekchian said there are already plans to head to Sacramento with school board President Mónica García to do just that.
“The governor already put $4 billion into a rainy day fund,” Tokofsky said. “What you need to do is get a sunny day for instruction.”
* This article has been updated to correct the projected deficit.