San Francisco Unified School District’s revenues are 40 percent higher than five years ago yet the district just announced a $32 million deficit. That’s because spending on retirement costs went up more than 100 percent.
$31 million of those retirement costs are unnecessary. That’s the amount being spent on insurance subsidies for retired employees already covered by or eligible for Medicare, Medi-Cal, Obamacare or new state subsidies enacted into law last year. Most of SFUSD’s retirees have sufficient coverage from those sources and sufficient income from their pensions not to need the district’s help. But SFUSD provides it anyway, and at the expense of current teachers and students.
To close its deficit SFUSD is planning to cut programs but instead should adopt the approach taken by the City of Glendale, which imposes a means-test on retiree health insurance subsidies so that only retirees earning less than a certain amount of income per year are eligible. By doing so, Glendale reduced its liability for subsidies by 90 percent, freed up more of its budget for current employees, and still provides support for lower income retirees.
After a 30 percent income tax increase and including federal funds, annual state spending on K-12 has rocketed to more than $100 billion per year, nearly $18,000 per student. Yet some school districts such as SFUSD have deficits because they are voluntarily and unnecessarily subsidizing retirees at the expense of current teachers and students. SFUSD should adopt Glendale’s approach on its own but whether or not it does so, the state legislature should require every school district* that provides similar subsidies to do so.
Govern For California supports lawmakers who legislate in the general interest.
*Eg, Los Angeles Unified is spending so much on insurance subsidies for retirees that eliminating them could translate into a nearly $10,000 per year raise for current teachers. Likewise, Sacramento City Unified is facing bankruptcy in significant part because it is unnecessarily spending more than $20 million per year on retiree insurance subsidies.