SCTA leadership proposes $60 million savings plan to SCUSD Board of Education
The Sacramento City Unified School District wants to shave millions in health care spending to ease pressure on its budget, a move that will likely lead to further conflict and pushback from its most powerful employee group: the teachers union.
If that sounds familiar, it’s because district leaders have broached the topic with union officials many times before. Both the district and union hoped to lower the amount spent on health insurance coverage. But the Sacramento City Teachers Association wants to divert that money to boost staffing, which would cut into the district’s bottom line.
Negotiating the details has not been successful.
In the eyes of the district, though, there’s no greater bloat than the health benefits. Research shows it accounted for nearly 13 cents of every dollar budgeted last school year. Sacramento City Unified also spent more money on health benefits per student than all but two districts in the state, according to a recent Policy Analysis for California Education study.
Teachers – whether single or in a large family – do not contribute to their premium payments. The district is on the hook for 100 percent of the cost, a generous perk that’s common in other districts around the state, a Sacramento Bee review of state education data shows.
But that could soon change. Now in the throes of a budget crisis, Sacramento City leaders want to put health insurance on the table, outlining it as one of the few ways to save money.
“We know we spend a lot more than the average school districts in this region pays. We know it’s an outlier and we know we can bring those costs down,” Alex Barrios, a district spokesman, said.
“We have a number that we know we can hit. We know we can save a lot of money on health care. Just a switch alone, we’ve been told, could be (between) $11 to $16 million.”
Two companies offer health plans for teachers, but one insurance provider – Health Net – is nearly 35 percent more than the other, Kaiser Permanente, according to the California Department of Education.
Four out every 10 teachers with district-provided health insurance chose Health Net last school year, state data show.
Health insurance offerings vary widely from place to place. Among larger school systems in the region, only San Juan Unified School District pays 100 percent of teachers’ annual health care costs for individuals. But its plans are less expensive than those offered by Sacramento City Unified.
Other districts that offer Health Net policies, including Natomas Unified and San Bernardino Unified School Districts, don’t pay as much because they require employees to contribute to their plans. However, most of Sacramento City Unified’s costs are concentrated
Health Net officials, when asked why its policies were so much higher than other competitors, did not answer directly. Company spokesman Ken Muche said the Woodland Hills-based firm was committed to “providing high-quality care and services to all its members across California.”
Sacramento City Unified must slash $34 million from its expenses over the next two years. The bulk of those cuts – some $29 million – must happen in the budget for the 2020-21 school year.
The district and the teachers union have until the end of June to negotiate health care savings to include it in the budget. It would take three to four months to implement the deal after an agreement is struck.
But given the recent history of bitter disputes with the union, some might call the district’s latest play with the budget projections wishful thinking. Negotiations with the four other unions in Sacramento City Unified have already begun, but the Sacramento City Teachers Association has not yet joined the talks.
SCTA officials, when reached, said they wanted to know how Sac City came up with the latest figures and suggested that they reduce the number of administrators to achieve savings.
In an email, John Borsos, the union’s executive director, characterized the spending plan as “made up numbers” and declined to comment further. An earlier statement by SCTA indicates the two sides already agree.
“We should explore options that provide benefits that maintain the same level of benefits but that may be far less costly,” the teachers union said in a previous statement to The Bee. “Ultimately, that’s why we believe the best long-term solution is Medicare for All, rather than a for-profit health care system.”
Still, other setbacks continue to trouble the state’s 13th largest school district. John Quinto, the chief business officer since August 2018, recently resigned from the district for undisclosed reasons. His departure has left the finance department more strained than before.
The latest budget submitted to the Sacramento County Office of Education for approval is the handiwork of the firm Fortson Consulting, which was hired in April for as much as $60,000 until its contract expires in June, records show.
The spending plan discussed at the district’s last meeting in May offered two visions for Sacramento City Unified. The more hopeful version assumed the district would decide on the necessary cuts in time to adopt a budget by the end of the month.
The reality was more alarming: spending down the rainy day fund until the district runs out of cash.
Rising costs, limited budgets
Medical costs have been rising steadily in at least the last two decades. California school districts often pay a higher share of health care premiums, so they are more vulnerable than most private employers.
Paul Bruno, a researcher at the University of Southern California who authored the PACE study, said private sector employees pay on average between 20 and 40 percent of their annual health care costs.
“It’s pretty common for employees to make contributions of some kind to their annual insurance costs,” Bruno said. “It looks like school districts in California are bearing a larger share of those costs than many other employers.”
Bruno’s research shows that practice is slowly changing. California school districts once paid, on average, 90 percent of health benefit costs before the Great Recession. Last school year, the statewide average had fallen to 85 percent.
But the limited earnings potential in teaching has often been buoyed by summers off and decent benefits. School districts like Sacramento City Unified use health insurance and other perks to recruit and retain talent.
Still, health care costs weigh heavily on the district in more ways than one. Sacramento City Unified also carries a $700 million-plus unfunded pension liability to cover health care for retirees.
The benefit is a holdover from when school districts could pay competitively by using tax dollars. But the ballot initiative Proposition 13, approved by California voters in 1978, dramatically reduced the amount of local taxes available for schools.
Jerry Housman, a former district board member, teacher and administrator, said the law is not solely to blame for the district’s financial trouble, but it could help explain how Sacramento City Unified is on the hook for so much money.
Lifetime health care was the “premium benefit” and the district could rely on revenue from property taxes to pay for it, Houseman said.
“But Proposition 13 curtailed all city, district, fire district and police from taxing the public and all of them became dependent on the state for funding,” Houseman said. “When all these benefits were given they had a way to pay for them by increasing taxes. They can’t do that now.”
Dispute over savings
Changing the health plan could affect hundreds of teachers covered by Health Net – and the district’s bottom line.
The millions in savings needed to put Sacramento City Unified on a better financial course might come from reductions in health care, district officials said. But any new plan would have to be of similar quality to the current one for the union to agree.
The union, however, wants to redirect any savings to reduce class sizes and hire more nurses and counselors. That goal is one of the remaining provisions included in the hastily negotiated contract from November 2017, which helped avert an imminent teachers strike.
That handwritten contract, brokered with the help of Sacramento Mayor Darrell Steinberg, lays out an ambitious proposal to, among other things, lower teacher-student ratios; add at least one librarian for every secondary school; and boost staffing of school nurses and psychologists to the industry-recommended levels.
Health Net lowered its rates by 6 percent in the upcoming school year, while Kaiser’s rates increased. The union said that any savings “fall squarely under the provisions of [their] contract.”
The fate of that part of the agreement may now rest with the California Public Employment Relations Board, which weighed in on a complaint lodged by the union accusing the district of refusing to meet with them to identify and redirect savings from reduced health care costs, PERB officials said.
For union officials, this final provision is another incomplete pledge. Although the contract included the word “non-binding,” they say that doesn’t apply to the staffing goals as long as there is enough saved to pay for it.
“If the dollars are not sufficient, the goals do not go away,” Borsos said in an email, “but rather the parties have to decide how to prioritize them based on the available dollars.”
The response from some rank-and-file teachers has at times run counter to the union. At a recent board meeting, Jeanine Rupert said her class size is at its maximum capacity of 33 students almost every year.
She still was not in favor of hiring more staff to lower class sizes – at least not right now.
“This plan is not only idealistic but it’s downright irresponsible at this stage in the game,” said Rupert, a teacher in the district for 18 years. “The timing is poor. Lowering class sizes will cost the district millions of dollars the first year alone in terms of new personnel, in terms of salaries, pensions and benefits.”