In Partnership with 74

LA schools have a tentative deal with labor partners on health benefits — but watchdogs warn it’s not aggressive enough in reining in costs

Mike Szymanski | January 23, 2018

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Los Angeles teachers rally over benefits in November. (Photo: UTLA)

A tentative agreement on health benefits marks the first time an LA Unified labor contract has directly taken on the district’s soaring healthcare costs. But watchdogs say the deal doesn’t go far enough in tackling the district’s standing debt — and some school board members warn it may actually make the next round of negotiations all that more difficult.

The district’s promise not to make any cuts to existing benefits in the next three years shows how slowly change comes to behemoth district, which pays for benefits for nearly 225,000 employees and retirees under the eight unions covered by the contract, who have some of the most generous health benefits in the country. Both current and retired employees pay no premiums for themselves or their dependents for healthcare, which includes dental, vision, life insurance, and other benefits.

No one thinks the deal comes close to fixing its enormous problems with $13.6 billion in healthcare liabilities, but it is a first for the district that has traditionally paid for healthcare increases. Another first: the agreement creates a committee to study ways of reducing the unfunded liability for retirement benefits, which are more generous than for employees of Los Angeles City or County governments, the city of Detroit, and of the school districts of New York, San Diego, Long Beach, and Chicago.

Under the tentative deal announced late Thursday, the district agreed to continue to pay $1.1 billion per year for health and welfare benefits, which will save the district $190 million over the three years of the contract. In return, the unions will allow a reserve fund that now totals nearly $300 million to cover any increases in costs. Each union must still vote to approve the deal.

“This is an important step toward addressing our financial challenges,” board President Mónica García said. “We will no longer be increasing our yearly healthcare spending levels, that is significant. This is truly a historic agreement.”

But Katie Braude, co-founder of the parent coalition Speak UP, said the deal shows the district hasn’t taken “serious action” to tackle its debt, “which threatens to bankrupt the district and siphon off a huge portion of education funding within 15 years, leaving scraps for kids in the classroom.”

Healthcare and pensions will eat up half of all available funds by 2031-32, but the district so far has chosen not to pay that down so it can maintain its reserves. LA Unified is the only school district on a list of top 10 government entities across the country that can’t afford their pension obligations — the top spot going to the city of Detroit.

Braude also criticized the district for not attempting to involve parents in the negotiations. “Like so much at LAUSD, parents were shut out of this closed-door process. Kids are just as affected by these contract talks as employees, and yet they are not represented in the process. Employees have unions. The district has lawyers and labor negotiators. But who is representing the students? Decisions are made without including the one group that will honestly and authentically represent kids, and with a lack of transparency that ensures that the public has no opportunity for input.”

Ben Austin, who last year launched Kids Coalition to put a kids-first agenda into practice at the district, agreed parents need to be involved in contract negotiations. He said the deal was a step in the right direction, and he praised García and the board for moving to contain health costs.

“It is just worth noting that this board was left with only bad and worse options because of the leadership of the previous board,” Austin said. “They were like candy men giving away candy and suddenly they all got cavities and now they are saying they are out of Novocain. This board is left with making the tough decision.”

Board Vice President Nick Melvoin said that although he isn’t thrilled with the tentative deal, it is moving in the right direction. Decisions about employee benefits, like this year’s 2 percent salary increase and that the new deal will cover a full three years, had already been made before he joined the board last year. But next time, labor partners should expect more tough conversations, he said.

“This agreement doesn’t go far enough,” said Melvoin, who campaigned on the need to solve the district’s debt and give parents a role in labor deals. “I agree with the frustration of parents, and they are right that we need more parents at the table, more reasonable concessions, and to make sure that a kindergartner today won’t have half as much money when they’re in high school, which is what the projections show.”

Board member Richard Vladovic, who wasn’t involved in these negotiations but has been in the past, said the deal “maintains benefits and looks for savings around the edges,” but is “not historic” and employees need to be aware of the high stakes.

“Employees have to understand that if we can’t pay the bills, the house will collapse,” he said. “In order to have health benefits, you have to have a district, and you can’t do that if you’re bankrupt. Bankruptcy can sneak up on you from nowhere.”

He said the district and its unions should have negotiated longer. “I think everybody rushed in with their positions, and I would have continued the dialogue,” he said. “Nobody wants to confront the reality of a really bad future.” Next time, he said he won’t sign another contract that doesn’t do more to solve the district’s debt issues.

The unions called the agreement a victory. “After years of district threats to our healthcare, it is a victory to have all unions remain steadfast against any concessions. This is an agreement that is good for employees, good for the district and good for our students and our communities. LAUSD must continue to attract and retain top-notch employees, and that includes offering fully-funded healthcare,” according to the union statement.

Interim Superintendent Vivian Ekchian said in statement the deal “provides stability and is good for our students, employees, and the community.”

Max Arias, SEIU Local 99’s executive director who was part of the negotiations, called the deal a win-win for the district and employees and said it should pass easily in his membership, despite the fact that many of his workers who are part-time laborers don’t have health benefits.

“Many of our members are also parents of children in the district, so it is important that we do not increase the health costs and maintain the benefits,” Arias said. “But we don’t think the district is in imminent danger of bankruptcy. We know there are long-term problems and we want to help with a pathway to pay them, but it’s five or more years down the line.”

Last week LA Unified’s chief financial officer confirmed that the district will run a deficit starting in the 2020-21 school year.

The toughest hurdle in the negotiations was getting the unions to agree to tap the reserve fund so the district can stop automatically paying for increased benefits costs, said Najeeb Khoury, the district’s chief negotiator.

“For the first time ever we are freezing our contributions which is a pretty important step, and we have more work to do in the future. We made progress with this deal. Getting to the point of the freeze is a big important step and a big hump to get over.”

Khoury said the budget savings do not affect upcoming bargaining with each of the eight unions involving salaries, but he said, “Given our structural deficit, an increase in cost of labor would be difficult.”

Another of the last points agreed to was forming a committee to address how to cut the district’s unfunded liability for retirement benefits, Khoury said. The group will also make sure there is no increase in the percentage of the district’s budget that goes to healthcare.

The committee’s members have not been chosen, Khoury said, but they will have a year to bring suggestions to the superintendent. There will be three district-appointed representatives and three from the unions, and the unions get to choose the chairperson.

As for the call to involve parents in labor negotiations, Khoury said there could be legal obstacles because all unions would have to agree to them being part of the bargaining process.

Austin said, “It is a bit insulting for the district to say that there are legal problems having a seat at the table because this directly impacts kids.”

Ekchian and Khoury will present the tentative agreement to the full board for a vote at the next regular board meeting on Feb. 13, and the unions must each approve the deal in the meantime.

At the same meeting, Vladovic said he is planning to introduce a resolution asking the district’s health providers, Kaiser Permanente and Blue Shield, to improve urgent care waiting times and speed up the process of getting to a specialist. He pointed out that the district will be negotiating with healthcare providers in two months and “we should get our money’s worth in terms of dollars we spend.”

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