Part Two: The Budget is tight, but not bust—contrary to the challengers and received wisdom
It is unclear whether the challengers just don’t understand the complexities of the District budget, or if they intentionally exaggerate in order to blame Zimmer for problems that he did not create or which he has been working to resolve. Here are the main points to be clarified:
- The projected deficit for next year… we’ve been here before:
School districts in California are required to submit projected budgets for approval by County boards for three years into the future. But the State of California—the conduit for all state and federal funding for annual expenditures—only budgets for one year out, not three. So those of us who have been paying attention have noticed a pattern: Almost every year since 2009, the District has announced impending deficits “in the out-years.” This makes some sense because during this time, either budgets have been falling because of the effects of the Recession, or expenses have been rising because of the mandate under the LCFF to increase expenditures to improve services for students in need. So the District compares current and future spending against current state funding and calls the difference a deficit when it looks like there will be a shortfall.
But here is the crazy thing: The deficits have never materialized. In the bad years, teachers took furlough days, union partners agreed to pay freezes, positions were lost through attrition, and the District ended up in the black. Since 2013, as the restoration of funding via LCFF kicked in, the projections for increased services looked like they would be in the red because the increased appropriations don’t occur until the Governor issues that year’s budget. So there were deficits “in the out-years.” And, inevitably, once the state appropriated the increased funding, the District ended up in the black. Every time.
The District’s accounting gap looks big right now, but the Legislative Analyst’s Office came to the Board last December and explained that state projections showed a better outlook. Zimmer has seen this before and has successfully navigated out of the worst financial times not by crying that the sky is falling but by getting cooperation with labor partners.
The current challengers complain about an analysis that shows that administrative positions were up over 22% in the past five years while teacher positions went down 9%. This complaint misses the mark on both counts.
Getting some reduced class-sizes over the past few years by keeping teachers despite dropping student enrollment would have been nice, but was not fiscally prudent during the budget cuts. So teachers retired or left the District, students left for charters, and the total payroll went down. Now that improved funding has started to flow via LCFF, some class-size-reduction efforts have begun.
Meanwhile, those same LCFF dollars came with a mandate to increase services to targeted student populations—and that is primarily where most of the administrator positions are accounted for: Interacting with students in schools. As Superintendent King explained in the piece cited above:
Concerned that the chart could be “misconstrued,” King explained that many of the administrators are hired for programs located at individual school sites and involve staffing for restorative justice and foster programs that the school board chose to focus on in the past. Also, with the Local Control Funding Formula, schools asked for more local programs requiring administrators, not teachers. Of the administrators, 1,723 are school based while 905 are not.
The District has opened over 130 schools in the past decade and overall, schools remain understaffed compared to 2008 levels. The challengers say they want to cut administrators at District headquarters. But most of the positions they are referring to are actually working with students.
- The pension crisis… is an artifact of changed accounting practices—and the District didn’t cause it:
The way pensions are reported was changed back in 2012 by a quasi-governmental organization, the Governmental Accounting Standards Board. This decision has been summarized as follows:
The major difference is that liabilities will be reported on the balance sheet for the first time. The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside to pay current employees, retirees, and beneficiaries. Currently, governments must only report as a liability the difference between the contributions they are required to make to a pension plan in a given year versus what is actually funded.
Once this took effect in 2015, news media, and now, candidates for school board, hit the panic button. This was predicted by GASB Chair Robert Attmore back in 2011:
Adding a large liability to the balance sheet will make the government’s net position lower, and make them appear to be weaker. The economic reality is that nothing has changed; it’s the presentation that has changed. We took information that was previously in the notes and put it on the face of the financial statement and therefore it appears to be a negative impact. But the rating agencies have been aware of that and have been factoring in those obligations as they do their credit rating anyway, so it’s not going to change much from their perspective.
In other words: If you are working to support your family and save for retirement, you spend to cover current expenses and deposit savings into your retirement account. What you currently have in that 401(k) is less than what you will ultimately retire on. But no one calculates the difference between their current deposits and retirement goal and calls the difference a debt. No one says you have to file for bankruptcy because you have an unfunded liability. As just reported by LAUSD CFO Megan Reilly, LAUSD’s maintains the highest credit rating of AAA.
It is a fact that pension costs are an issue for every public agency. California made some losing bets on public pensions back in 2000 and it is the State that manages the pension funds for school districts. But Steve Zimmer did not cause this problem. And it will not be solved by changing members of school boards. This is a problem that only elected officials with power over the budget can solve. The officials at the state level are the Legislature and the Governor, and Congress at the federal level. In the meantime, Zimmer has a track-record of negotiating with the District’s labor unions to gain concessions that saved the bottom-line in the recession years.
- The District’s costs for healthcare and other benefits will require real solutions not fear-mongering.
Similar to the accounting change for pensions, described above, another change came in 2015 to require the same actuarial reporting for healthcare and other post-employment benefits. Again, this was not a sudden crisis caused by any mismanagement. All public employers suddenly have this red ink on their books.
One BD4 challenger decries the recent extension of health benefits to aides and other personnel, saying that it doesn’t put kids first and is unaffordable. However, since almost half of these workers are parents, affording them health coverage does put kids first. Generally younger and healthier paying members growing the District’s healthcare plans presents an upside, as well. True progressives know you protect the worker before you protect the job. Zimmer is a progressive who has navigated the balance between budget realities and the needs of the children and families of the District.
In the end, given current political realities, a much more fundamental solution is being pursued: If California succeeds in implementing single-payer coverage for the state, then the District (and, indeed, other employers) will have an alternative to this budget dilemma via a separate state fund all Californians can participate in.
Now is the time to act boldly to protect public education, the dignity of our teachers and workers, the health of our families here in California. The Golden State remains 46th in per-pupil funding and disparities in wealth are still shocking despite the effort to create equity via the LCFF mandates. Zimmer has been advocating to correct the Proposition 13 commercial property tax loophole to meaningfully restore the promise of public education in California.
Perhaps unsurprisingly, his challengers, funded by real estate developers and other magnates, have been utterly silent about these ways to really put kids first.