This accounting change will bring into focus the stark realization that in the past little funding was saved, and now little is available for future retirements.
The new mandate also will leave less on the negotiating table.
Shortfall
When the true amount of the shortfall is made public, the Culver City School District’s self-professed frugality — described previously by Teachers Union members as "stingy" — will look rather extravagant.
It seemed easy at the time, when benefits costs were minimal, for School District negotiators to promise employees a better retirement in order to seal a labor agreement instead of giving salary increases.
But during the last ten years those minimal costs of benefits have skyrocketed. The escalating past promises are coming due. As of now, there is not enough money in a retirement fund to sustain them.
The Selling of Futures
Both the School District and its employees made demands on money that could have gone into an employees’ retirement fund but did not. This bill has been coming due for a long time. Instead of easing into it over the years, more drastic measures are needed. One response is the School District’s latest call for freezing employee retirement benefits, thus creating a two-tier retirement system.
The Teachers Union has suggested that such a system would put the District at a future disadvantage in hiring and keeping good teachers. The union assumes other local districts will remain static. These districts are under the same benefits-funding pressures as Culver City.
The union is assuming other districts will not need to adopt like policies to remain solvent.
Did teachers disregard their predecessors’ retirement? Did they demand too much for themselves today, leaving too little for their own future retirement and past retirees?
What Mielke Told Bubar
School Board member Stew Bubar said he remembers asking that very question of Union President David Mielke during the last big money crunch. When the union leadership suggested utilizing funding set aside for future retirement benefits to increase daily teacher salaries, Mr. Bubar said he asked if Mr. Mielke was actually willing to sell out their future retirees for a raise now, and Mr. Mielke replied, “yes.”
Mr. Bubar suggested that the School Board was hesitant to do so but reluctantly agreed with the union. This set up the scenario we find ourselves in today.
The Peter-Paul Shuffle
For years, both the School District and the Teachers Union took from Peter to pay Paul. Ol’ Peter is retired now. The aging Paul and his fellow baby boomers are not far behind. The piper’s bill is coming due, and not enough funds are in the coffers to pay the promised benefits.
This crisis has been on the horizon for years. Both the District and the Teachers Union are at fault for their shortsighted settlements.
If less severe measures had been agreed upon, the more painful, drastic actions now being asked would not be necessary.
Even large corporations, such as Procter & Gamble, G.M., and Ford Motor, are, for various reasons, reneging on their promises. These companies are demanding and receiving huge concessions from retired union workers on their contractual obligations to remain solvent.
What happens in private corporations generally happens later in the public sector. Why should union employees in this School District think they would beimmune from the ever-raising costs of health care benefits?
The District is limited in the ways it can hold down costs at the local level. It would be irresponsible if the District Administration and the School Board did not to try to cut the District’s future health care expenses.
Some districts have decided not to offer any benefits to their employees but to include that cost in their salaries. Ultimately, Culver City may find it necessary to implement such a drastic option. It may have to step down from the unenviable position of insurance middleman, leaving the employees’ union to fend for itself when it comes to their benefits.
With baby boomers coming into retirement, all parties the district, teachers, and retirees will need to decide the concessions each will have to make to save some promises contained in previous contracts.
The looming crisis will not go away. Unless the State Legislature addresses the problem of increasing health care costs, some concessions will be unavoidable.
