Want to see the future of school district budgets? Take a look at a slide deck presented this week by the Chief Financial Officer of the Los Angeles Unified School District (hat tip to reporter Kyle Stokes). The presentation was primarily about the rising cost of healthcare and post-employment benefits, but it included this alarming slide:
As shown in the graph, Health and Welfare (labeled “H & W” in the graph) benefits consumed 9.2 percent of the district’s budget in the 1991 school year. By 2021, they are projected to consume 18.5 percent of the district’s budget, rising to 28.4 percent by 2031. Pensions are similar: Los Angeles devoted 4.1 percent of its budget toward pensions 1991, but that will rise to 19 percent in 2021, and rise again to 22.4 percent by 2031.
Los Angeles is now considering a range of cost saving “opportunities,” primarily on the healthcare side, but assuming no policy changes, benefit costs for current workers and retirees will eat up more than half of L.A.’s budget by the year 2031.
As we’ve written before, this is a national trend, and it’s not a good one. It will compress teacher salaries and mean less money for books, field trips, libraries, foreign language, after-school programs, pre-k, etc. Like the Pac-Man game, benefit costs are steadily eating into the budget for everything else we care about in schools.
Michigan is about to adopt legislation that would enroll new teachers in a portable defined contribution plan, with a shorter vesting period and more money going toward teacher retirements. That will cost the state a bit more money, but it's a win for teachers.