Where the New School Money Really Goes

David Crane
Lecturer and Research Scholar at Stanford University and President of Govern for California

School funding in California is at record levels:

But school districts are cutting staff and holding down raises. That’s largely because they are subsidizing retirees at the expense of active employees. Eg, San Francisco Unified School District will spend >$40 million this year to subsidize health care spending by retirees and divert nearly $100 million to retirement costs in total, more than double five years ago:

$100 million is nearly half the amount SFUSD spends on active teachers. Absent reform, the diversion will grow. That’s because districts expect higher subsidies for retiree health costs:

And unfunded pension liabilities are still growing:

And school districts are adding new unfunded retirement promises every day.

But instead of attacking the diversion, school districts in San Francisco, Marin, and other California counties are seeking higher parcel taxes. They are not disclosing the truth; eg, San Francisco’s truth is buried deep in an obscure report; Pasadena does the same.

School districts should attack the real causes of financial distress. SFUSD and other school districts should (i) stop subsidizing retiree health care, a step made easier by the establishment of Covered California, the state’s health care exchange and (ii) ask the state legislature to enable school districts to reduce pensions for years not yet worked and to suspend benefit increases for retirees until pension funds are better funded.

Californians are already paying more to finance K-12 education:

But too much of that money is subsidizing retirees. The consequences have fallen disproportionately on current students and teachers, with disastrous consequences. If your school district is asking for more money, say yes only after it has taken steps to redirect existing revenues to classrooms. A parcel tax increase would cover up spending on retirees that, unless arrested, would lead to even greater cuts to classrooms.

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