Retiree Benefits Strain School Finances in Calif.

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Scores of California school districts are facing major cuts as they try to pay for their retired employees' lifetime health benefits. A look at the impact in the West Contra Costa school district, which estimates it's facing a $1 billion obligation.


In California, dozens of school districts are being squeezed by past promises to provide their teachers with lifetime health benefits. It'll cost the schools billions of dollars to live up to those promises, and most say they can't afford it. But as NPR's Richard Gonzalez reports, teachers say they cannot afford for those benefits to go away.

(Soundbite of ticking clock)


The ticking clock in the modest hillside home of Pat Burke is a memento of her early days as a teacher in Richmond, California, a working-class city just east of San Francisco. The clock was purchased with her initial paycheck back in 1967. Now the veteran special ed teacher suffers from rheumatoid arthritis, which has left her on crutches. She hopes to retire soon, but she'll need the health benefits the district promised her.

Ms. PAT BURKE (Teacher): And in fact, it's really very scary because Richmond is one of the poorest paid districts in the state. One thing we have had that they've maintained are lifetime health benefits for retirees.

GONZALEZ: But now the West Contra Costa School District says it can no longer afford those benefits. It proposes a cap for incoming teachers and new retirees, such as Burke would be, and that would put her in a potential catch-22. If she goes out now, at age 58, she can still qualify for lifetime health benefits, but her state teacher's pension would be reduced, yet she's not sure she can take a chance and retire in a couple of years when the cap might be on.

Ms. BURKE: If I were to go out then, without the security of the lifetime health benefits, the question is, could I make it on the money that I'm going to be receiving and cover those health costs? And I have some serious health issues.

GONZALEZ: The superintendent of West Contra Costa Schools, Gloria Johnston, is sympathetic to her teachers, but she says maintaining lifetime health benefits will cost the district close to a billion dollars. That's three times its current annual budget.

Ms. GLORIA JOHNSTON (Superintendent, West Contra Costa Schools): If we have to keep increasing the millions of dollars to pay for our medical benefits, we're going to have to go into our personnel and our programs and make cuts to be able to pay for those medical benefits. We cannot continue to be that generous.

GONZALEZ: And Johnston's district isn't alone. Seventy California school districts provide retirees with lifetime health benefits. Another 80 offer partial benefits for life. In Fresno, for example, the cost is estimated at $1.1 billion. In Los Angeles, it ranges upwards of $5 billion. Under a proposal by Democratic Assemblyman Juan Arambula of Fresno, districts would have to set up a 30-year plan to deal with their liability.

Assemblyman JUAN ARAMBULA (Fresno, California): With the huge increases we have seen in the cost of health benefits over the last couple of years, it's becoming more and more clear, and they're going to take a significant chunk out of school budgets. We should know in the beginning what it is that we're getting into. We cannot afford to stick our heads in the sand.

GONZALEZ: Arambula says he wants to keep districts from expecting that the state will rescue them in the form of a bailout. The West Contra Costa School District was already bailed out back in the early '90s. At the time, teachers got to keep their health benefits but only after taking a 9 percent pay cut. Now they're being told they'll have to start paying for their health insurance, which is currently free. Jeff Cloutier is the head of the Richmond teachers union.

Mr. JEFF CLOUTIER (Richmond Teachers Union): Is there a crisis in health care in America? Of course there is. Does forcing employees to pay for their health benefits in the West Contra Costa School District change that? No. I believe that Congress needs to deal with it, but the teachers rolling over and paying their health insurance out of their meager salaries is not the answer.

GONZALEZ: The issue of who pays for employee health benefits has roiled labor relations in California for many months. The betting here is that a teacher strike in this troubled school district could be a likely outcome of this battle. Richard Gonzalez, NPR News.

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