Even as its teachers have in mind going out on strike, the Los Angeles Unified School District’s budget clearly is in crisis. The draw back is so huge it might wipe out irrespective of surplus the roaring California financial system might generate in 2019 – after which some.
The LAUSD merely launched its Comprehensive Annual Financial Report, or CAFR, for the fiscal yr ending June 30, 2018. As I have been predicting, the LAUSD’s new CAFR doubled the dimension of its detrimental Unrestricted Net Position (UNP), the best amount I’ve found for judging financial soundness. The trigger was, for the first time, municipalities at the second are required to include unfunded liabilities for retiree medical care on their steadiness sheets.
The unrestricted net deficits for 2016 and 2017 have been $10.5 billion and $10.9 billion, respectively. For 2018 it is $19.6 billion, or 80 p.c bigger! That’s what a $15 billion obligation will do when it’s acknowledged.
In bureaucratic language, the CAFR itself outlined, the detrimental UNP “is largely the result of net other postemployment benefit (OPEB) liability and net pension liability for various retirement plans.” They blamed this transparency on the present accounting regular they solely utilized.
According to Assembly Bill 1200 from 1991, generally known as the Eastin Act, the state of California is required to maintain the financial soundness of public school districts. Since that yr, 9 districts have been given emergency loans beneath what’s generally known as the AB 1200 System.
Until not too way back, CAFRs have been onerous to seek out because of they solely have been printed and certain misplaced to the world since many weren’t positioned on the net. But proper right here’s what I have been able to find:
- Oakland Unified’s UNP for 2003 was $48.7 million, in the detrimental. So the state’s 2003 emergency mortgage of $100 million was 205 p.c of this deficiency.
- Vallejo City Unified’s deficit for 2004 was $16 million. So their 2004 emergency mortgage of $60 million was 375 p.c of the detrimental UNP.
Looking at Oakland Unified’s historic previous, doubling LAUSD’s $19.6 billion fiscal hole would possibly require a $39.2 billion emergency mortgage from the state. Unfunded liabilities weren’t on the steadiness sheet in 2003; nevertheless even foregoing a multiplier, a $20 billion mortgage shall be sturdy to make.
This coming yr, the State of California would possibly want a $15 billion general-fund budget surplus, plus the $15 billion in the Rainy Day Fund. Will this be ample to bail out the LAUSD?
What about the Public School System Stabilization Account from Proposition 2 in 2014, which was presupposed to be on excessive of the Rainy Day Fund? According to a Nov. 14, 2018 report by the Legislative Analyst, “To date, these formulas have not resulted in any deposits being made into the school reserve.” The cupboard is bare.
In my October report on the CAFRs of all 944 California public school districts, I moreover ranked them by per-capita UNP. That was based on the inhabitants census of each district from the California Department of Education.
LAUSD ranked 922nd, at a detrimental $2,315 per capita, based on its 2017 CAFR; just some districts have been worse off. Using the LAUSD’s new 2018 CAFR, that amount now jumps to a detrimental $4,180 per capita. This is what every man, lady and child should pay to get LAUSD out of its detrimental state of affairs.
As 2019 progresses, revised data will can be found for all the totally different 943 school districts, which may now embrace their respective retiree medical liabilities. If a substantial number of them moreover need emergency loans, the place will that money come from?
For a partial decision, would possibly I like to recommend that, as Gov.-elect Gavin Newsom crafts his first budget for launch on January 10, he start funding the school stabilization account? Next, the new governor ought to assist the school districts in renegotiating retiree medical benefits, thus doubtlessly reducing these unfunded liabilities.
California’s future is our kids’ future. So together with guaranteeing our kids get respectable educations, their districts should even be fiscally successfully managed and solvent. Don’t make the school college students endure with the weight of unfunded liabilities on their tiny backs. The time to behave is now.
John M.W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate