California school districts once viewed lifetime healthcare coverage for employees as a cheap alternative to pay raises. That decision is coming back to haunt school leaders, and districts are scrambling to limit the lucrative benefit promised decades ago.
The price tag for retiree healthcare obligations has reached about $20 billion statewide — an amount systems are not prepared to absorb.
Many districts failed to set aside money to pay for those increasingly expensive benefits for thousands of employees. Now, the financial burden threatens to drag down credit ratings and crowd out other budget priorities.Largest among those districts is Los Angeles Unified. The unfunded debt for providing lifetime health insurance to retirees and their dependents has more than doubled since 2005, leaving the nation’s second-largest school district on the hook for nearly $11 billion in future costs. The district would have to pay $868 million annually for 30 years to fully fund retiree healthcare obligations.