3.7 Provide Attractive Benefits
Most public school teachers are employed by school districts, which include health care in the benefits they offer their employees. Like all employers, districts have struggled to address spiraling health care costs. These benefits are negotiated locally between districts and unions, but they are also negotiated between employers and insurance providers. Most districts are small, and lack the power to negotiate good terms with health insurers on their own.
Once, many teachers received lifetime health insurance for their families as part of their compensation. Such benefits are generally a thing of the past – few if any districts provide teachers with lifetime uncapped health benefits. Some districts and unions were slow to drop these elements from their agreements, and now find themselves grappling with significant unfunded liabilities. This creates a problem not only for districts but also for current students; when liabilities grow large, a district’s financing costs go up, which takes funds away from instruction. This process is of little interest to most community members, and even to most school boards and union leaders.
Everyone has a shared interest in the solvency of school districts. The State of California is ultimately on the hook for providing students with an education. Liabilities incurred locally through district and union negotiations must fall within the means of the community, or that community loses the responsibility to govern its own schools. For example, In 2003 Oakland Unified School District and the Oakland Education Association jointly declared a fiscal crisis and appealed to the State of California for relief. The district was placed under a state-appointed administrator with broad powers to restore the district to solvency and operational adequacy. Happily, the district emerged from the crisis and went on to become California’s fastest-improving large urban district for years thereafter. But ten years on, the district still carried debt from the mistake.
The Oakland example is spooky in the context of an economic downturn. The job of evaluating district finances is distributed among County Offices of Education, which certify district budgets. In California, most County Superintendents of Education are elected, not appointed. Voters, understandably, tend to evaluate a candidate for this office based on experience in educational leadership rather than financial and organizational experience. The state’s Fiscal Crisis and Management Assistance Team (FCMAT) provides counties and districts with technical support, but mistakes happen.
Non-salary benefits for teachers are a complex area of public policy area, and it is easy to imagine disaster scenarios in the context of a downturn in state tax receipts paired with a failure of Federal support.
Next: 3.8 Pay Teachers Competitively
Health and welfare benefits for California’s employees are an important element of the compensation structure of school districts—but the cost is off the scale. Most districts provide benefits for the employee and family and most commonly include full health benefits, full dental benefits, vision care and life insurance. Per employee costs were, in 2009-10,over $20,000 per employee in some districts with the average total costs over $12,000 per employee. Average per ADA [student in average daily attendance] costs for employee benefits is over $800 per ADA and almost 15% of a school district’s expenditures.
Of highest concern is the unfunded liability for retiree benefits. For LA USD the liability is in the billions—yes with a “B”—and for Sacramento USD, as an example, over $500 million. And at the moment, neither district has a plan to reduce the unfunded liability—the unfunded costs just keep growing. About 125 districts in California provide lifetime retiree benefits with some of them covering dependents too.
A great benefit—but a very costly one that is growing by leaps and bounds.