By Taylor Swaak | LA School Report

The unified school board L.A. has approved a Contract with his teachers' union that officials admit they can not afford to, questioning the sustainability of the agreement as the district receives repeated warnings from the county that it is in a difficult financial situation.

To assume about $ 840 million in additional costs until 2021, district officials said they relied heavily on increased funding from the state and on a tax referendum. in California in 2020 – which are not guaranteed. District council members may also charge a parcel tax, although this has been unpopular in the past. Short-term solutions now include cuts to the central office and reallocation of funds in the budget, said a spokesperson by e-mail.

Contract aggravates LA Unified's financial difficulties, which include unfunded liabilities of $ 15.2 billion for post-employment benefits, such as health care, an annual deficit of $ 500 million and Millions of funding losses due to lower enrollment. In fact, the new deal could lead to a deficit increase of about $ 187 million this year, according to a recent district report. projection. The deal tripled L.A. Unified's previous offer – from $ 130 million to $ 403 million over three years – to reduce staffing and hire more support staff, such as nurses.

Aaron Garth Smith, Education Policy Analyst of the Reason Foundation, said the contract resulted in "a desire to end the strike" and alleviate tensions between LA Unified and United Teachers, Los Angeles, without "clearly indicating how the district will pay." for these new and existing long-term liabilities. "

While LA Unified has closed the last academic year with reserves of nearly $ 2 billion, officials say the bulk of this money has already been allocated to 6% increases, mandatory programs and deficits budget, with the district continuing to spend more than budgeted.

"I do not think that part of [this deal] The district thought he could afford it, "said Smith, co-author of last year's study by a right-wing think tank on L.A. Unified's finances. Ideas for new funding "basically come down to wishful thinking. They hope the state will invest more dollars. They hope taxpayers will approve tax increases. "

And time is running out for a solution. LA Unified has until March 18 to submit to the county an updated fiscal stabilization plan, proving that it can keep its head out of the water until 2020-2021, even with the new contract. A team of four county-appointed tax experts began "more regular face-to-face meetings with district staff" after a thorough review of the district's budget situation, told SL School Manager and former Chief of Unified Operations Los Angeles. Report. They serve only in an advisory role.

"We think we are off to a good start," he said. "But by March 18, it's really time to do most of the work."

At the present time, LA Unified expects that it will not meet the required reserves for 2020-2021, which the County Superintendent, Debra Duardo, reminded the school board at the end of January would be the recipe for the district to lose control of its finances.

"If the [school board] fail to submit a [plan]"That sums up the financial situation:" I am ready to take other measures, "she wrote in a letter to the council.

A LAUSD financial report published in December shows that the district estimates that the amount of reserve funds will be exhausted during the 2020-2021 fiscal year. The percentages on the vertical axis are markers for the percentage in reserve, which, according to the district, will be depleted (less than 1%) by 2020-2021. (Source: LAUSD)

A search for additional financingDistrict officials are counting on new funding, both at the state and local levels, to pay for the contract. But most of these financing ideas are not yet guaranteed, far from materializing or likely to run into opposition.

As longtime district observer Jack Humphreville said, "It's a pile of smoke and mirrors."

One of the most touted new sources of funding is Governor Gavin Newsom's 2019-2020 proposal. budget. This includes a boost in education spending from kindergarten to grade 12 and special education as well as a unique $ 3 billion pot for pension relief. , generating about $ 140 million in new revenue for the district, according to the state. Approximately $ 44 million would be added to the district's general fund starting in 2019-20, a district spokeswoman said in an email. At the time of publication, the state finance department had not responded by explaining how the estimate had been calculated.

L.A. Unified mentions new state funding in a recent budget document explaining how she plans to pay for the contract. Funding, however, is not guaranteed. The Legislative Committee hearings on the draft budget are "underway," a spokesperson for the Newsom office told LA School Report by e-mail. "The governor will issue a revised budget in May and negotiations with the legislature will continue until a final agreement is reached and voted in June."

"The biggest problem is that [the contract] is based on two things: one, the governor's budget assumptions and, second, future revenues, "said Alex Johnson, a county education board member. These "concerns are the two most critical things about this proposal." California observers, including former governor Jerry Brown, predict a state recession after a period of strong tax revenue growth.

Charter schools have also become a political lightning rod in the search for funding. UTLA has repeatedly called for stopping the growth of the charter in L.A. Unified because independent – and often non-unionized – schools divert student funding from traditional public schools. The unified school board L.A. approved a resolution that ended the strike calling on the state to impose a moratorium on new charters in the district. And last week, Newsom announced that state superintendent Tony Thurmond had been tasked with forming an expert panel to examine the impact of the charter's growth on district finances.

National and local taxpayers are also exploited as a new source of income. Union and District Leaders support a tax reform initiative of Proposition 13 on the 2020 ballot, which, if approved by voters, would increase property taxes on commercial and industrial properties across the state and would generate about $ 1.4 billion for LA County Schools About 55% of California voters expressed "at least some support" for a change to this tax in a USC poll released last week .

Some education observers note, however, that the revenue from this tax reform will come too late, as the district is already running out of reserves by 2021. A coalition of business groups has also denounced the measure and promises to pay up to 20%. 39 to 100 million US dollars. defeat him.

At the local level, the school board accused Superintendent Austin Beutner of developing a three-year "business plan" by March 18 to bring more money to L.A. Unified. One option is to add a parcel tax, a property tax based on the characteristics of a property, such as area or area, rather than its estimated value. A tax of about $ 600 per parcel could yield about $ 500 million a year to L.A. Unified and essentially cover its expenses in deficit.

Parcel taxes, however, tend to represent a higher percentage of the income of low-income taxpayers and may therefore be unpopular. Last year, a call for a new tax on parcels was not passed by a school board vote. The corresponding measures taken in 2010 and 2012 have also failed. About 68 percent of local taxpayers said last June that they were in favor of a $ 330 parcel tax, which is cheaper. A majority school board must approve a parcel tax to place it on the ballot; at least two-thirds of the district electors must then vote for.

Nick Melvoin, District 4 Council member, told the news site on Education EdSource that he hopes that those who supported the teachers' strike and the new contract are now willing to carry them out.

"It is undeniable that the union has mobilized the attention not only of the Los Angeles community, but also of the national community on the living conditions in our schools," he said. "If the tens of thousands of people honking, parading and tweeting really want to stay with teachers, they will vote for it. [2020 reform] measure, and they will vote for a tax on parcels. "

But UTLA chief negotiator Arlene Inouye told Jacobin magazine last month that "workers are already paying enough taxes – it's the rich who have to pay their fair share."

"We will continue to fight on this tax issue. There will be a big battle in 2020, "she said. Inouye did not respond to LA School Report's request for comment or to any ideas the union might have about how the contract can be funded.

The district is also reviewing its current spending obligations. L.A. Unified – who is bound by a separate contract for health benefits for three years – proposed, during contractual negotiations, a two-year period when new teachers would receive the district's generous health benefits. The district spends $ 1.1 billion a year – about 15% of its budget – on health and welfare benefits. These benefits, as well as pensions, are expected to absorb half of L.A. Unified's budget by 2031-2032.

The union, however, rejected the proposal, citing part of the district's reserves.

Humphreville, a district council budget advocate, said L.A. Unified could also cut spending by cutting board spending. The number of certified administrators in the district has increased by 22% between 2011 and 2016, from 2,146 to 2,628, despite declining enrollments of teachers and students. The district is losing at least 12,000 students a year, costing it about $ 130 million in lost public funds.

"One of the things that strikes me is that the number of schools is going down," while "the bureaucracy – the number of people hanging around in overhead – is up 20%" said Humphreville. "It is not fair. They really have to do a lot of work to find a way to reduce their numbers. "

L.A. Unified announced last year a 15% reduction in central office resources, which will save $ 86 million over two years. Last fall, Beutner reportedly also planned to restructure the district into 32 autonomous networks to further reduce the number of its central offices. This is an "ongoing" discussion and has not been finalized, confirmed a district spokeswoman by e-mail.

Sylvia Torres-Guillen, Director of Equity in Education at ACLU of California, fears that the district does not allocate current funds, including using the local control funding formula, the State funding mechanism targeting support for low-income, hospitality and English languages. student students – in a race to pay the contract. In 2015, ACLU sued the district for misusing about $ 450 million of local control funds, she said.

"Where we have problems with insufficient funding, then it must be the conversation: how can we get additional funds to support district spending?" She said. "But do not take away our most vulnerable children."

Delayed clockRegardless of the solutions proposed by the district, it will have to convince the county overseers by mid-March that these measures will resize the levels of its reserves to avoid a takeover.

If the county is not satisfied with the updated financial forecasts, County Superintendent Duardo can appoint a tax advisor with the ability to stay and cancel the power, which means he can change budgets and cancel decisions of the school board.

The district is initially monitored, as its three-year reserve forecast indicates a 0.96% cushion in 2020-21 – a little less than the 1% mandatory minimum reserve that school districts must maintain. At least 1% of a district's total expenditures must be allocated to "rainy day" emergencies.

The latest budget document indicates that total available reserves have fallen from about $ 836 million this year to about $ 74 million in 2020-21.

County officials have repeatedly sounded the alarm that the district is financially unstable. The last warning was issued on January 29 – a few hours before the unanimous approval of the contract by the school board – when Duardo wrote in a statement stating that the new contractual agreement "continued to move the district towards the school." fiscal insolvency ".

She also cautioned the district against excessive reliance on ad hoc funding sources and projected revenues, such as the budget proposed by Newsom.

Although Duardo did not go so far as to recommend Board members to reject the contract, Johnson of the County School Board said it was not his job.

The County Education Board "is a neutral party. There was no issue if the negotiations went one way or the other, "Johnson said. "Their role was to assess and ensure that the district in particular was aware of the impact of their budget decisions. … I think the letter absolutely had the right tone.

UTLA previously accused the county of working on the district side – a charge and district and county officials were categorically rejected.

The union is skeptical about L.A. Unified's financial forecast. The reason is that: L.A. Unified ended last year with reserves of nearly $ 2 billion, although district officials pointed out that most of this money was already reserved. The district has also overestimated its "fiscal cliff" in the past. According to his forecasts, in 2016, for example, it would be $ 400 million in the red by 2018-2019. This is not the case.

"There is a story of district crying wolf because of the negative balances two years later, which seem never to happen," said David Tokofsky, former member of the District 5 Board of Directors, in January. to the website funded by Capital & Main.

Some education experts have noted, however, that the recent involvement of the county adds to the validity.

It's up to the county to make sure districts are "in good financial shape," Duardo told The School Report last month. "We hope that the tax experts will be able to go there and be able to work with the district … and be able to develop a plan that satisfies us."

Although the tax experts – who have experience in the field of budgeting and budget monitoring – have not yet reached the point of proposing specific recommendations on budget reduction, the team leader Morris said it was encouraging that the district "welcomes our support".

"The Unified is a very important school district," he said, "I think that's why Dr. Duardo made it clear that we're here to support them."