LAUSD’s Temporary Settlement

Earlier this week the Los Angeles Unified School District reached agreement with striking teachers. The settlement is at best temporary because structural issues were not addressed.

You can’t blame LA’s teachers for striking. During a period when state spending on schools in California rose 60 percent:

And spending per pupil rose >50 percent to more than $17,000:

LAUSD’s aggregate spending on teacher salaries was flat:

There are two reasons for that outcome:

• LAUSD’s revenues grew at half the pace at which state spending on K-12 grew during the period described above. That’s because of declining student enrollment (schools are funded based upon attendance) resulting from a drop in the overall student population and more parents choosing to send their children to private schools and public charter schools.

• While declining enrollment also translates into less expense (because there are fewer students to educate), it also leaves a smaller population over which to spread fixed costs and retirement costs (pensions and subsidies for retired employee health insurance). LAUSD has been slow to reduce fixed costs and the district’s retirement spending grew twice as fast as LAUSD’s revenues over the period described above.

The settlement addresses none of those problems. Also, the settlement doesn’t take into account the variability of state revenues, which are dependent for growth on bull markets. The beneficial changes agreed in the settlement to class sizes and salaries will be quickly overcome by the next bear market. Even without a bear market they will be swamped by rising retirement spending because the district owes $13+ billion in retiree health subsidy obligations and is a member of two pension systems with rapid liability accretion:

Even a 30 percent increase in state income tax rates in 2012 didn’t help because more than 100 percent of schools’ share of that tax increase went to increased school spending on retirement costs.

One consequence of all this is disappointment — taxpayers paying more but teachers barely noticing a difference in their pay or lives. Another is scapegoating. In LAUSD that takes the form of unfair blame being placed on charter school parents.

5/6ths of LAUSD’s students attend traditional public schools. The balance attend public charter schools. Revenues follow students, so when a traditional school loses a student to a charter school, they also lose the revenues associated with that student. But they also lose the expenses of educating that student. However, because traditional schools have unfunded retirement obligations and other fixed costs, when enrollment declines they must spread those costs over a smaller base. That means that districts that are slow to rationalize those costs penalize their remaining teachers and students. That problem isn’t caused by parents choosing charter schools any more than parents choosing private schools. It’s caused by districts not rationalizing those costs. You can prove that to yourself by taking note of the many school districts in California with few charters that are in financial distress.

So what should LAUSD and the state do?

For now, LAUSD itself can only address one issue — faster reduction of fixed costs. The rest must be addressed by the state legislature and governor, who need to:

• Grant LAUSD the ability to reduce insurance subsidies for retired employees entitled to Medicare or Affordable Care Act subsidies. Because of state action in the 1990’s, those subsidies are not under the control of the district. Eliminating those subsidies would translate into a ~$10,000 salary increase for current teachers.

• To attract more enrollment and boost student performance, grant local control to school boards to (i) reward teachers based on performance, the subjects they teach, and for teaching in high need schools, (ii) stop offering permanent employment (tenure) after just two school years, (iii) dismiss under-performing teachers, and (iv) end the practice of determining layoffs by seniority.

• After the California Supreme Court rules on pension reform cases currently under review, encourage school districts to modify pension accruals for years not yet worked (no different than their existing ability to modify salaries for years not yet worked) and to suspend cost-of-living adjustments until pension accounts are better funded.

• Direct the Superintendent of Public Instruction to ensure that Local Control Funding Formula (LCFF) dollars get directed to high need students and other stated purposes of the LCFF legislation rather than employed for district-wide raises or expenditures.

Absent reform, more money alone will not solve LAUSD’s — or any California school district’s — problems. If in doubt, look again at the charts above showing the growth in K-12 spending that didn’t prevent a strike or see herefor the ineffectiveness of the last tax increase unaccompanied by reforms. If under the mistaken impression that California ranks low in school funding, see the state’s Legislative Analyst’s Office K-12 analysis, which says “California per-pupil spending ranks in the middle among the states” and the National Center for Education Statistics, which says California’s state spending per pupil is greater than most states:

More money without reform would only cover up the underlying problems that are disappointing teachers, harming student performance, and driving parents to private and charter schools. The state legislature and governor must liberate school boards to manage their school districts.

Britain, the National Health Service (NHS) is always a major issue in parliamentary elections. That’s because the British public holds their elected officials responsible for the performance of a system they rightly perceive as governed by those officials. But even though K-12 in California is funded by the state and the Education Code is written by the governor and legislature, for some reason Californians don’t hold them accountable for K-12’s performance. NHS and California K-12 are both single-payer systems governed by elected officials. Californians should start holding their elected state officials accountable for the state’s K-12 system.