But in key ways, the dynamics appear different. In Los Angeles and Oakland, the public and the local media were clearly sympathetic. Teachers had not had significant raises in years, and with the cost of housing going up arguably have lost purchasing power in recent years.

In Sacramento, however, the argument that the local school district simply can’t afford raises because of the huge long-term increase in pension costs and loss in state funding because of declining enrollment has resonated far more than similar warnings did in Los Angeles and Oakland. Coverage in regular and social media has repeatedly emphasized three points:

• The Sacramento City Teachers Association secured an 11 percent raise for most members in September 2017 after threatening a strike. The Sacramento County Office of Education warned at the time that without significant cuts, the district faced fiscal disaster. But the local teachers union has rejected calls to reduce the cost of health benefits that the state Fiscal Crisis & Management Assistance Team (FCMAT) says are the most generous in the Sacramento region.

• The warning from school officials that even without having to provide new raises, the district faces a $35 million hole in a nearly $400 million annual budget and is on track to run out of money in November. At that point, under state law, the district could seek an emergency loan from the state Legislature, but on the condition that it accept an appointed administrator to make key financial decisions going forward, taking away most of the school board’s and Superintendent Jorge Aguilar’s powers. The primary goal of those decisions would be ensuring the district pays back the state loan.

• The fact that the four other employee unions in Sacramento City Unified have sided with Aguilar’s warning that a raise could seal state control of the school district for a decade or more, as has happened in other California districts that have been unable to pay their bills. They don’t buy the teachers union claim that the district has failed to honor the contract it signed in 2017, thus making a strike necessary even though state law says such a strike would be illegal since the teachers are still under contract.

Writing Monday, Sacramento Bee columnist Marcos Breton warned the teachers union that it risked disaster not just for the district and its 42,000 students but for a city that has built up civic momentum in recent years under Mayor Darrell Steinberg.

“Sacramento’s efforts to sell itself as a place for companies to invest would be damaged because a major selling point is good schools,” Breton wrote. “How many investment opportunities would be lost if Sacramento became known as the city whose schools were bankrupt?”

Aguilar arrived in 2017 at the district and is given good marks in most circles for his determination to avoid financial disaster. But a FCMAT audit released in December pointed out a vast array of problems in Sacramento City’s management that dated back many years. It cited incompetence and poor communications by the district’s business team and a failure to properly analyze budget data that indicated the headaches to come.

Union leaders say these management failings are not their responsibility and should not be held against their push for better pay.

The union’s hope that a strike authorization vote would lead to new concessions hasn’t happened so far. A union statement said the strike was coming “at a date likely in the next month.”

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.

But even at a time when school funding has reached an all-time high, districts are apprehensive at having to spend so much more on pensions. This month, their strategy has become clear: establish separate, specific state funding for districts to cover their increased contributions. Ed Mendel of Calpensions.com has more:

… a coalition of school districts, including the giant Los Angeles Unified School District, is proposing a separate budget item for the CalSTRS rate increase within the Proposition 98 school-funding guarantee.

The change would not require the state to spend more money on schools. But the coalition thinks a separate budget item could ensure that funding for the CalSTRS rate increase, as it’s phased in over seven years, “will grow at a predictable rate” for all school districts.

As it stands now, school districts would have to pay for the CalSTRS rate increase with money from a new K-12 funding plan adopted two years ago, the Local Control Funding Formula.

No carve-out from Proposition 98

There had been speculation that the CTA and CFT would seek to have pension funding separated out from Proposition 98 spending — money the state is required to give schools under a 1988 ballot measure that guarantees about 40 percent of revenue goes to K-14 campuses. But that’s difficult under Prop. 98’s dense, specific language.

Instead, the education establishment expects to use the flexibility and extra dollars provided by the Local Control Funding Formula to pay for the higher pension costs. But that’s not what the change in how schools are funded was supposed to be about, according to its champion, Gov. Jerry Brown. The governor’s website contains a 800-word account of the signing of the LCFF law on July 1, 2013. It depicts the funding change as being solely about getting more help to struggling English-learners, the state’s “neediest students.”

Brown’s quote in the account:

“Today, I’m signing a bill that is truly revolutionary. We are bringing government closer to the people, to the classroom where real decisions are made and directing the money where the need and the challenge is greatest. This is a good day for California, it’s a good day for school kids and it’s a good day for our future.”

Then-Senate President Darrell Steinberg’s quote:

“Our disadvantaged students deserve more resources to overcome the extra obstacles they face, and this formula does just that. At the same time, we’re investing more resources in all of our students, and building on proven programs of career technical education and partnership academies to keep our students engaged and give them better preparation for college and careers. This dramatic shift in funding allows our schools to target investment where it’s needed most. By empowering our students for success, we pave the way for a stronger California.”

School districts preparing long-term budget analyses are beginning to realize what they face. This is from the U-T San Diego:

Administrators say they’re at a loss for how they’ll come up with the cash, which for some districts could be tens of millions per year. …

Some school districts in San Diego County highlighted the sticker shock in so-called “interim midyear” budget reports released this month that show escalating contributions from teachers, school districts and even the state as a way to dig the teachers’ retirement fund out of debt over the next several years.

Administrators said that in the coming fiscal year, they may be faced with tough decisions to cut instructional programs, cut professional development or delay technology infrastructure improvements at the expense of paying their share of unfunded pension liabilities — totaling $74 billion statewide.

Officials in districts throughout California are talking about forming a coalition to explore ways to fix the teacher retirement system without cutting into their own school programs.

Coming: The CTA, CFT ‘sequester’

That coalition is sure to end up seeking refuge in new money from the state general fund. The scenario outlined in Cal Watchdog last May looks more likely than ever:

[We will see] perpetual junkyard-dog budget fights in which the CTA and CFT — determined to grab every last dollar to maintain the status quo of teacher pay raises — fight constantly over funding with every competing lobby or interest group.

Why? Because the bailout is going to cost so much, and in the zero-sum game of state budgeting, the question is whether the cost is absorbed in the larger K-12 state budget — or out of the hides of other state programs. … 

The CTA and the CFT didn’t achieve their dominance of Sacramento by playing nice. Covering the cost of the CalSTRS bailout going forward is going to be the Sacramento version of the federal budget sequester for non-education budget categories. Spending on just about everything but  K-12 is going to be curtailed.

Of course, we’ll also see redoubled efforts to raise taxes and make “temporary” hikes permanent. But the day in which the Maviglios of the world could pretend the pension crisis was exaggerated or no big deal will soon be history. Pretty soon the pain is going to be shared by all users of California government services and programs outside of K-12.

Pension tsunami? More like wrecking ball

I wrote more about the coming epic budget battles — the war of all against all — here:

Practically everything in district budgets besides employee compensation will take a huge hit, with less money for classrooms, teacher training and to pay off bonds for construction and technology projects.

This is inevitable when 85 percent or more of school district operating budgets already go toward pay and benefits, and a huge new bill comes along. Gary Hamels, a San Marcos Unified official, said “the things you want and need for educational purposes will take a second seat to funding this retirement system, or paying for utility bills.”

The pension crisis has been likened to an oncoming tsunami. With local schools, it will be more like a wrecking ball — even if temporary state sales and income tax hikes are extended.

Happy New Year!