Calif. School Districts Struggling To Cover Lifetime Health Benefits
Many California school districts are considering scaling back their lifetime health insurance benefits for retirees because they are not prepared to absorb the growing cost of health care obligations, the Los Angeles Times reports.
Several decades ago, California school districts implemented lifetime health benefits as an alternative to pay raises.
Now, about 70 of the state's more than 1,000 school districts offer some type of lifetime health benefits. Meanwhile, hundreds more provide limited health benefits through age 65, when retirees qualify for Medicare and costs are shifted to the federal program.
Details of Unfunded Liability
Statewide, the cost for school retiree health care obligations is about $20 billion.
The costs can vary greatly between school districts. For example, the Los Angeles Unified School District has about $11 billion in unfunded retiree obligations, while Sacramento City Unified School District has about $633 million in future costs.
Many school districts have failed to set aside money for retiree health benefits. According to the Times, that is because prefunding health care obligations was not a priority for many districts amid struggles to fund educational programs.
Meanwhile, Megan Reilly, CFO for the Los Angeles Unified School District, said some districts have had to deal with declines in state funding as the result of smaller student populations and increased costs associated with retirees. In addition, school districts also must pay into the California State Teachers' Retirement System pension fund.
School Districts Likely To Reevaluate Benefits
As school districts look to stem costs, many likely will seek to scale back health care benefits, the Times reports.
Adam Tatum, research director at California Common Sense, said, "You're going to see more attempts to reduce benefits, maybe not for current employees but for new employees."
However, re-evaluating retiree health benefits could set up debates with teachers unions.
John Perez, president of retired teachers for United Teachers Los Angeles, said that "none of the unions are willing to give" up lifetime health benefits, noting that it is "one of the few benefits we have left" (Torres, Los Angeles Times, 3/7).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.