Strike or no strike, pen­sions a prob­lem for LA schools

Chattanooga Times Free Press - - WORLD / NATION - BY CHRISTO­PHER WE­BER

LOS ANGELES — Strike or no strike, after a deal is ul­ti­mately reached on a con­tract for Los Angeles teach­ers, the school dis­trict will still be on a col­li­sion course with deficit spend­ing be­cause of pen­sions and other fi­nan­cial obli­ga­tions.

School sys­tems across Cal­i­for­nia are ex­pe­ri­enc­ing bur­den­some pay­ments to the state pen­sion fund while strug­gling to im­prove schools.

The prob­lem is es­pe­cially acute for dis­tricts like Los Angeles Uni­fied that will see a fi­nan­cial hit in part be­cause of steadily de­clin­ing en­roll­ment.

As fewer stu­dents en­roll, pub­lic schools get less in per-pupil fund­ing from the state, said He­len Creg­ger, an an­a­lyst and vice pres­i­dent at the fi­nan­cial ser­vices com­pany Moody’s.

“Then comes the trade­off be­tween mak­ing good on pen­sion prom­ises and what you’re ca­pa­ble of of­fer­ing in salaries,” she said.

The down­ward trend in en­roll­ment is due to sky­rock­et­ing hous­ing costs that keep fam­i­lies with school-age kids out of the city and the growth of char­ters — pri­vately op­er­ated pub­lic schools that com­pete for stu­dents and the funds they bring in.

Los Angeles is among the school dis­tricts across Cal­i­for­nia that are not well-po­si­tioned to man­age the com­ing con­flu­ence of slower rev­enue growth, de­clin­ing en­roll­ment and rising pen­sion con­tri­bu­tion rates, ac­cord­ing to a Moody’s study pub­lished in Septem­ber 2018.

The LA dis­trict’s con­tri­bu­tions to the state’s two large pen­sion plans — Cal­i­for­nia State Teach­ers’ Re­tire­ment Sys­tem and the Cal­i­for­nia Pub­lic Em­ploy­ees’ Re­tire­ment Sys­tem — amounted to about 5.5 per­cent of the bud­get in the 2014-15 school year. By last year, that num­ber had climbed to nearly 8 per­cent, ac­cord­ing to an As­so­ci­ated Press anal­y­sis.

The con­tri­bu­tions ramped up quickly to chip away at plan un­der­fund­ing and be­cause of de­mo­graphic trends: As re­tirees live longer, their life­time pen­sions cost more. Mean­while, the dis­trict is spend­ing more on spe­cial ed­u­ca­tion pro­grams and see­ing climb­ing health care costs.

Gov­ern­ing bod­ies in some places — though not LA Uni­fied — have skipped pen­sion con­tri­bu­tions al­to­gether to deal with other more im­me­di­ate bud­get crunches, com­pound­ing the short­falls. Cal­i­for­nia’s ma­jor plans are short largely be­cause they did not reach lofty in­vest­ment re­turn tar­gets.

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