The board of the Los Angeles Unified School District passed a $7.5 billion 2017-18 budget this week on a 5-1 vote with Superintendent Michelle King

But despite the upbeat rhetoric, a crisis is looming in the nation’s second-largest school district as enrollment falls from a projected 514,000 in 2017 to 480,000 in 2020. Since the state’s main education funding formula is based on average daily attendance, this could force mass layoffs of teachers or even drastic measures like shortening the school year. A $422 million deficit is anticipated in 2019-20, with red ink after that for as far as the eye can see.

None of this comes as any surprise. A blue-ribbon commission’s report issued in November 2015 said L.A. Unified was facing fiscal disaster because of the enrollment declines, which are primarily due to falling birth rates, and because of the cost of pensions and retiree health care benefits. Employee retirement benefits will claim 8 percent of the school budget in 2017-18 and more than double that sum in coming years as the state’s 2014 bailout of the California State Teachers’ Retirement System ratchets up required payments from districts and as more of the district’s aging workforce retires.

These costs are the primary reason that while the 2017-18 LAUSD budget is nearly 7 percent larger than for the just-concluded school year, the plan still only penciled out after 121 layoffs or “separations,” mostly for holders of clerical positions. About 180 employees will be reassigned, many to part-time duties.

Blue-ribbon panel warned of disaster in 2015

Since the grim 2015 report was issued, three developments have cast L.A. Unified’s finances in an even harsher light.

The most significant is charter school advocates backed by billionaire philanthropist Eli Broad and other wealthy reformers taking over the LAUSD school board in a May election, defeating teachers union-backed candidates who have generally controlled the board in recent times. Broad wants half or more of Los Angeles students in charters, double the current amount. While reformers have a case that this would be better for students, it would sharply reduce state funding under control of district officials and thus make it harder to forge any comprehensive response to the coming budget crisis.

The second development is a legal challenge mounted by civil rights groups that alleges the district has misspent vast amounts of state funds that were supposed to go specifically to help English-language learners, impoverished students and students in foster homes.

Filed in July 2015, the claim initially seemed unlikely to succeed. The previous month, state Superintendent of Public Instruction Tom Torlakson had overruled a subordinate and held that Local Control Funding Formula dollars could be used for teacher raises – suggesting the restrictions on how the funds could be spent weren’t as strong as reformers believed.

But in May 2016, the Department of Education that Torlakson oversees held that L.A. Unified had improperly diverted $450 million in Local Control dollars.

The third development is the election of Donald Trump as president. Under Education Secretary Betsy DeVos, federal funding for education programs in all 50 states seems likely to significantly decrease. Federal dollars covered 9 percent of California’s education spending in 2016-17.

But a big topic has never seemed to come up: the fact that LAUSD’s finances are in such grim shape the district could be headed for bankruptcy. That was the conclusion of a panel of experts asked by district leaders to do a de facto audit in response to criticism that the school board and then-superintendent Ramon Cortines weren’t being realistic about medium- and long-term costs of LAUSD’s operations. In November, the Los Angeles Times obtained a copy of the panel’s report and printed key details:

The group, which met in private over the last several months, concluded that L.A. Unified will face a budget deficit of $333 million in the 2017-18 school year, an additional $450 million the following year and $600 million more the year after that.

 

This year’s general fund totals about $7.1 billion. …

 

If declining enrollment “cannot be reversed, the district’s future planning will be characterized by constant down-sizing and loss of revenue until the district reaches a new equilibrium at a lower, but sustainable, level,” the report said. If the district can’t adapt, it can’t remain viable, according to the report. …

 

L.A. Unified also spends more than it should on cafeteria operations and compensation for injured workers, the report said.

 

The panel made numerous recommendations, including: improving student and teacher attendance, offering an early retirement program, advocating for increased funding and reducing the total staffing in line with declining enrollment.

District must pay $493 million in 2020 for pensions

The experts’ report focused on costs that Los Angeles Unified officials could in theory contain or reduce. But it didn’t focus on a key reason that the district’s finances are about to get much worse because it is dictated by state law: the 2014 bailout of the California State Teachers’ Retirement System approved by the Legislature and signed by Gov. Jerry Brown.

While Brown in 2011 had released a pension reform blueprint that called for government agencies and their employees to roughly share the costs of pensions going forward, the CalSTRS bailout had far different terms. It requires total annual contributions to CalSTRS to go from $5.9 billion in 2014 to at least $10.9 billion in fiscal 2020-21. Of that additional $5 billion a year, 70 percent is to be provided by school districts, 20 percent is taken from the state general fund and 10 percent from teachers’ paychecks.

In Los Angeles Unified, the financial burden this adds to the district budget is immense, as LA School Report noted in 2014 after the bailout was enacted:

While teachers and school districts across the state will see their contribution rates increase, LAUSD, the largest school district in the state, will pay the lions-share.

 

The rescue, which will help address a $74 billion shortfall in the teachers pension fund, requires school districts to radically raise their contributions to the fund from the current rate of 8.25 percent, to a rate of 19.1 percent by 2020. Teachers will see a more modest step up, from 8.15 percent to an eventual 10.25 percent of their salary, over the same seven year period. The state’s contribution will rise from 3 percent to 6.3 percent.

 

But in real dollar terms, the pension contribution price tag for LAUSD is steep: it will eventually more than double by the end of the phase-in period, from its current payment of $213 million per year, to $493 million per year by 2020.

 

“It is a daunting thought,” Dennis Meyers, executive director for governmental relations at the California School Board Association, told LA School Report.

Children entering charter schools in Los Angeles already outperform peers who attend traditional public schools, then pull ahead even a bit more, especially those attending charter middle schools … .

 

Pupils who enter charter elementary or high schools displayed significantly higher test scores, relative to counterparts entering traditional public schools at the same grade levels, the report said. Elementary students in charter schools benefit from slightly steeper learning curves, relative to peers remaining in conventional schools, researchers said. Charter high schools were no more or less effective than traditional schools in boosting student performance.

 

Charter schools, while publicly funded, operate independently of many state requirements and the administration of the Los Angeles Unified School District. Some 274 charter schools operate in L.A. Unified this fall, more than any school district nationwide.

 

The four-year study of 66,000 students at charter schools in Los Angeles Unified — one of the largest research projects yet on charters — offers generally positive news about their quality of education.

The $490 million ‘Great Public Schools Now Initiative’

The study is sure to be invoked by Broad and others unhappy with the quality of education in the nation’s second-largest district. In September, the Los Angeles Times obtained a copy of a 44-page report prepared for Broad called “The Great Public Schools Now Initiative” that corroborated earlier stories that Broad hoped to increase from 16 percent to 50 percent the number of L.A. Unified students in charters, which would require the creation of an estimated 260 new schools. A key passage in the executive summary:

The opportunity is ripe for a significant expansion of high-quality charter schools in Los Angeles. Thanks to the strength of its charter leaders and teachers, as well as its widespread civic and philanthropic support, Los Angeles is uniquely positioned to create the largest, highest-performing charter sector in the nation. Such an exemplar would serve as a model for all large cities to follow.

According to the Times account, the report cited …

… numerous foundations and individuals who could be tapped to raise money, including the Bill and Melinda Gates, Bloomberg, Annenberg and Hewlett organizations. Among the individuals cited as potential targets for fundraising were Eli Broad, Irvine Co. head Donald Bren, former entertainment mogul David Geffen and Tesla’s Elon Musk.

 

It also suggested a strategy of grassroots organizing and civic engagement designed to generate more interest among parents in charter schools.

UTLA, CTA gear up for public-relations war

The California Teachers Association and its largest chapter, United Teachers Los Angeles, are ramping up for the challenge. The UTLA has already launched a picketing campaign against the plan. At a November rally, CTA President Eric Heins said, “We are here to say to Eli Broad and to Walmart that our schools are not for sale. … The 325,000 members of the California Teachers Association stand arm in arm with UTLA and with CFT to say no to Eli Broad, to say no to Walmart, and to help build the schools that all L.A. students deserve.”

The CTA has won support from Diana Ravitch, a high-profile education reformer and author who’s made an odyssey from harsh union critic to someone who agrees with the union claim that there is something unsavory, corporate and ominous about a school reform movement organized by billionaires. That’s how she characterized Broad’s effort on her website.

“Will the [LAUSD] board go along with Eli’s silent coup or will they choose someone to represent the public interest?” Ravitch wrote.

Broad’s defenders describe his school reform ideas as very comparable to President Obama and his push for school and teacher accountability. But the nation’s two largest teachers unions, the National Education Association (which counts the CTA as its biggest affiliate) and the American Federation of Teachers (the California Federation of Teachers is its biggest affiliate), reject that comparison.

Obama’s recent decision to sign the Every Student Succeeds Act, a national education framework replacing 2002’s No Child Left Behind law, would appear to back up the NEA’s and AFT’s view. It pulls back sharply from federal accountability requirements imposed on states and individual school districts.

The new law swept to bipartisan passage because of an unusual coalition of Democrats who joined teacher unions in saying too much class time was being spent on testing and Republicans who said Congress should not be a “national school board,” in the phrase of Tennessee Sen. Lamar Alexander, a former secretary of education.

The oldest serving United States Senator waved off the suggestion.

Feinstein spent time discussing her support for the Iran deal on nuclear power forged by the Obama administration. She argued that there was no better deal to be had, that it was this deal or nothing. If no deal were confirmed, the senator suggested, in as little as three months there would likely be a military conflict.

Feinstein argued that the United States, which led other world powers in the negotiations, would suffer its leadership position if Congress rejects the deal. Other nations involved in the deal would drop sanctions on Iran forcing the U.S. into the difficult position of deciding to sanction allies, Feinstein said.

Feinstein spoke on the day that news broke that enough senators have now agreed to support President Obama in any veto override attempt.

The senator was clearly basing her vote on the hope that Iran will change its official policies and attitude over the course of the agreement. “Fifteen years will tell if Iran is capable of change or not,” she said.

On California’s devastating drought, Sen. Feinstein touted a proposal she put together with California’s junior senator, Barbara Boxer. She praised the Los Angeles area Metropolitan Water District for having good water storage and reservoirs, which she said the rest of the state doesn’t have.

Pointing out that the infrastructure for water supplies was built for a population of 16 million people instead of the current 38 million, Feinstein argued for new infrastructure. She said her plan contains a dozen desalination plants and 105 water-recycling projects among other proposals.

Before offering her philosophy on the best way to run local government, Feinstein relived the day that would lead to her becoming San Francisco’s chief executive — the assassinations of Mayor George Moscone and Supervisor Harvey Milk by former Supervisor Dan White.

She saw White in the hallway and called to him but he rebuffed her by asking for a moment. Feinstein then heard shots and discovered Milk’s body.

Ascending to the mayor’s office a week later, Feinstein ran the city for 10 years. She said cities best run from the center, stressing practicality, not ideology. She said most people could agree on the need for improvements and infrastructure.

Indeed, in his introduction, Eli Broad remarked that the senator had an ability to find the political center during her entire career.

By WAYNE LUSVARDI

On Feb. 9, the $123 million Ray and Dagmar Dolby Regenerative Medicine Building opened on the campus of the University of California, San Francisco to house the Eli and Edy Broad Center of Regeneration Medicine and Stem Cell Research.

About $25 million of this new facility was funded with bond financing from voter-approved Proposition 71, the $3 billion for stem cell research California voters approved in 2004. The total cost to California taxpayers, including interest on the bonds, will be about $6 billion.

The architecture of the new 80,000-square-foot building, comprising almost two acres of internal floor space, is symbolically appropriate. The structure is precariously cantilevered over a steep hillside. From the street below, only the underside of the building can be seen held up by a spoke-like pattern of posts that are tied to a deep concrete footing that extends into bedrock.

The building design invites us to look at what’s underneath the government of funding of stem cell research.

Purported Cure-All

One anonymous online commenter, who seems to make a career of trolling websites as an advocate, portrays stem cell research as a high-tech race for economic development and says that stem cell research will be a cure-all for our economy and human health:

Education budget being slashed? California Institute for Regenerative Medicine (CIRM) will educate plenty of graduate students.

Infrastructure unrepaired? CIRM will bolster the infrastructure around Giants’ stadium (whatever it’s called).

Tuition shooting through the roof? Federal grants are what fuel universities – once CIRM gets a massive head start on ESC (Embryonic Stem Cell) research, it will dominate NIH (National Institute of Health) grants once federal funding is freed up – these grants may get funneled to the UC system.

How about the long-term investment CIRM will provide? We already have 4 human clinical trials using ESCs or fetal SCs. Imagine in 15 years when we have a dozen treatments using stem cells and the businesses will all be in Cal due to CIRM.

While the salaries at the top are certainly bloated, does that mean CIRM should be shut down? Did that 20% go to construct the hanging gardens of CIRM (California Institute for Regenerative Medicine) – or was it spent on functional space?

It just needs to be reformed in a few areas. In a generation we will reap the benefits of CIRM and the nation will be praising California. It’s ineluctable that human ESCs will be used in therapy.

Based on Redevelopment Model

State-funded stem cell research is based on the same model as state-sponsored real-estate redevelopment. One of its key elements is the creation of the psychology of a race for new biotechnology and the elimination of blight.

The psychology of the redevelopment model and state funded stem cell research goes like this: If you don’t build a new mall, or a stem cell research center, some other neighboring city, or state, will build it and other economies will thrive and yours will not. Just as in land redevelopment, the mission of stem cell research is to “eliminate blight.”

Biological blight is defined as “diseases resulting in sudden conspicuous wilting and dying of parts, especially young, growing tissues” caused by “a causative agent” that results in blight (e.g., cancer, heart disease, paralysis).

In land redevelopment, “blight” is defined as “something that impairs growth or impedes progress and prosperity.”

Is it any wonder that Robert Klein, the godfather of Prop 71, is a real estate developer and investor?

Biological and Redevelopment Concepts Merge

With stem cell research, the biological and the real estate concepts are apparently merged. Stem cell “redevelopment” is like a gigantic oncogene, a viral gene that merges with a normal host cell and turns it into a cancer cell.

The point of erecting a separate research facility apparently is to send the message that public-funded stem cell research is now another permanent fixture in California; another bureaucracy with all the incurable pathologies of self-perpetuation. In other words, it is a sociological version of a stem cell resulting in cancerous bureaucratic growth immunized against any of the risks of private venture fund medical research.

Other Uses of the Funds

In the California Stem Cell Research Institute press release for the opening of the new building, no mention was made of how these funds could just have gone for funding stem cell research within the existing scattered university biomedical programs in the state — without having to build a redundant research facility. Neither is there any report of how this building and the stem cell research center may compete with parallel efforts by biomedical venture funds that don’t risk public capital.

The $300 million authorized each year for state funded stem cell research under Prop. 71 totals $3 billion over 10 years. But in the “California Biomedical Industry 2010 Report” by Price-Waterhouse-Coopers, that doesn’t even amount to a half-percent (0.40 percent) of the total $75.9 billion estimated revenues generated by biomedical research in 2008 in California.

Venture capital investments in the U.S. in all categories totaled $28 billion in 2008 and $17.7 billion in 2009. Of that, 50 percent in each year was captured by California, and 13 percent and 16 percent, respectively, was captured by biotechnology in California.  California has consistently captured the largest share of venture capital funding and biomedical funding.

Biomedical venture capital funding in California was $4.3 billion in 2008 and $3.6 billion in 2009, after the collapse of the national financial system. California’s state-funded stem cell research reflected only 7 percent of biomedical venture funding in 2008 and 8.4 percent in 2009.

The Prop. 71 funding is less than 10 percent of the $3.1 billion in National Institutes of Health biomedical grants awarded California in 2008.

Misplaced Luxury Funding

California’s proportionately small $300 million per year in state funding for stem cell research under Prop 71 is duplicative of both private venture capital funding and N.I.H. grants and is not crucial for finding near-term treatments or cures for cancer, heart disease or paralysis.

While $300 million per year is only one third of one percent (0.35 percent) of the State’s $86 billion General Fund budget, it is nonetheless a misplaced commitment when State Medi-Cal and Workmen’s Compensation funds are being drastically cut.

For example, the State Legislative Analyst has recommended that funding for visits to physicians and treatment centers could save $196.5 million per year by limiting visits to 10 per year.

Chemotherapy treatments can possibly be limited to 10 visits per year, as many patients can be given oral chemotherapy to bring home for some treatments in lieu of intravenous injections. But limiting kidney dialysis treatments may be life threatening and only end up with more patients flooding hospital emergency rooms.

Likewise, imposing a $100 per day co-pay on needy patients per hospital in-patient day would generate a $151.2 million saving to the state budget.  But do needy patients or their families have $100 per day? This is a fictional budget saving.

If voters had to choose between 1) funding duplicative stem cell research that may, or may not, find a treatment or a cure to medical maladies 15 or 30 years from now and 2) helping suffering people today, there is no doubt what their choice would be.

But the self-perpetuating California Center for Regenerative Medicine is standing in the way. We can no longer afford luxury jobs programs for biomedical professionals for hypothetical research which is already amply funded by both the private sector and the National Institutes of Health, while medically needy people are in need of resources for care in California.

De-fund 71…

Prop 71 came into being in 2004 during the height of the real estate bubble and now should be de-funded, or the funds diverted elsewhere. Voter approval of a repeal initiative would be needed. Prop 71 only has symbolic emotional value to families of loved ones who have died or are suffering from cancer, heart disease and paralysis. Religious and other advocacy organizations need to spread the slogan: “De-fund 71.”

…Or Divert Funds to Precancer Research

If Californians nonetheless were interested in continuing to use the Prop. 71 funding for state-funded biomedical research, one of the most promising would be to consider Dr. Jules Berman’s intriguing proposal to fund precancer research, as detailed in his book “Precancer: The Beginning and the End of Cancer.”

Berman’s proposal revolves around the accepted concept that “when you eliminate a precancer you are preventing the occurrence of cancer.” Research into diagnosing and treating precancers would have a more probable near-term benefit than funding nebulous stem cell research.  But according to Berman, there is little research into precancers and how to treat them.

And there is little or no incentive for drug companies and private venture capital funds to put money into precancer research, as the return on investment likely would accrue to the patient and the public purse, not the price of their stock.