Deal is supposed to trim 20% from $11 billion in long-term debt
Howard Blume | LA Times | http://lat.ms/1F8pKAV
L.A. schools Supt. Ramon C. Cortines, said he hopes a deal over health benefits could provide stability for employees. Teachers and the school district remain at odds over a full contract. Al Seib / Los Angeles Times)
6 April 2015 3:53PM :: The Los Angeles school district and its employee unions have reached a multibillion-dollar tentative agreement on healthcare benefits that would run through 2018.
The agreement factors in modest annual increases in benefit expenses and resolves some long-term unfunded costs for the L.A. Unified School District. But the pact still could strain the annual budget, possibly contributing to cutbacks or layoffs.
Benefits without funding
The terms have the support of Supt. Ramon C. Cortines, who said he hopes they could contribute to a broader contract settlement with the teachers union.
The pact could “calm the unrest that is building within the district because of looming budget reductions” and potential layoffs, “especially since we have not settled” with United Teachers Los Angeles, Cortines said in a memo to the school board sent Friday.
“While this agreement is not the final solution, it will give us time to address the changing world of health benefits,” said Cortines, who has faced numerous protests by teachers as negotiations continue over the size of a pay raise and other issues.
L.A. Unified has long offered a generous package of benefits, which cover family members of employees as well as retirees who work long enough to qualify. Based on 2014 district figures, these benefits cost about $10,500 a year per current employee, about $16,000 per retired employee who doesn’t quality for Medicare and $7,500 annually for those eligible for Medicare.
For 2015 that will add up to more than $1 billion in the nation’s second-largest school system. The agreement would factor in cost increases of between 6% and 7% a year, totaling $200 million over three years. The terms also call for partly drawing down a health benefits reserve fund.
The unfunded debt for providing lifetime health insurance to retirees and their dependents has more than doubled since 2005, resulting in an estimated $11 billion in future costs. The district would have to pay $868 million annually for 30 years to fully fund retiree healthcare obligations, according to estimates.
Under the tentative agreement, this unfunded debt would be reduced by 20%, the district said.
Other districts also face similar dilemmas. About 70 of California's 1,000-plus school districts provide some type of lifetime health benefits to retired employees.
With management and unions backing the deal, the Board of Education seems unlikely to oppose it. But at least one board member has concerns.
Monica Ratliff said the agreement relies on making future budget cuts that have not yet been determined. As such, she said, she cannot support it based on her current understanding of the budget situation.
Teachers union officials were not available for immediate comment.