Declining enrollment and benefit costs challenge LEAs

Declining enrollment and benefit costs challenge LEAs

(Calif.) While the fiscal outlook for California public schools remains positive, declining enrollment and pension costs will continue to pose significant challenges for many districts statewide.

Last spring, when local educational agencies formally reported on their ability to meet all financial obligations, just 25 submitted a “qualified” report—meaning that there was a question about meeting demands for both the current year and the next two.

And only four received a “negative” rating, which means that those LEAs cannot cover all required spending in the current year and the next.

During the recession and the aftermath, as many as 160 LEAs fell into the qualified category and 14 were listed negative.

Since that time, Proposition 98 spending has increased about $4,600 per pupil, or almost $20 billion overall.

A report out last week from the nonpartisan Legislative Analyst suggested that state support for schools could grow by another $10 billion through the 2022-23 fiscal year, assuming there is not another recession.

While that’s good news, the LAO also noted in the same review that district money managers must be careful as cost pressures grow.

School attendance grew at an average annual rate of almost 2.5 percent during the 1980s through 2000 and then remained mostly flat until 2013-14. In each of the past four years, enrollment has fallen at least 0.1 percent, and as much as 0.2 percent.

The LAO said much of the decline has taken place in the state’s most populated areas, including the Bay Area and portions of Northern California. Some of the biggest declines have come in Los Angeles County and Orange County.

School enrollment has increased in other parts of the state, especially the Central Valley and some inland and southern regions, including Kern, San Joaquin, Sacramento, Fresno, Riverside and San Diego counties.

While the number of students has fallen, schools have been on a hiring spree. LEAs added almost 300,000 teachers last year, which represented an 8 percent increase since 2012-13.

As a result, the LAO said, the student-to-teacher ratio has improved to 21-to-one, which is close to pre-recession highs.

Meanwhile, the cost of retirement benefits continue to escalate. The LAO estimated that during the current fiscal year, school districts will need to provide $5.7 billion as their share of pension expenses—an increase of $3.4 billion since the Legislature passed a full funding plan in 2014.

For the next two years, the LAO said, district pension contributions will continue increasing: about $900 million in 2019-20 and another $600 million in 2020-21. Expectations are that districts’ share would drop to 18 percent in 2021 through 2023.

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