Los Angeles Unified School District Unfunded Retiree Health Benefit Liability Nears $15 Billion

Los Angeles Unified School District has $15 billion in unfunded retiree health care obligations, amounting to over $30,000 per student, according to a new actuarial report commissioned by the district and obtained by Reason. The cost of servicing this large “Other Post-Employment Benefit’ or OPEB liability significantly reduces funds available for instruction in the nation’s second-largest school district.

. . . As I previously reported in the Orange County Register, LAUSD’s OPEB costs per student are much higher than several other large California school districts. For the 2016 school year, LAUSD paid $525 per student for OPEBs compared to $81 at Irvine Unified, $29 at San Diego Unified and $0 at Oakland Unified, which does not subsidize retiree health insurance coverage at all.

LAUSD’s high OPEB cost burden is partially a function of declining enrollment. As the student population decreases, less state funding is available to spread across the system’s 38,000 retirees – most of whom served a larger student body. But a bigger driver of the gap between LAUSD and many other large districts is the level of benefits.

Whereas many districts only offer fixed premium subsidies or end benefits once retirees become Medicare eligible, LAUSD offers full medical, dental and vision coverage to all eligible retirees and their spouses. Costs for an individual beneficiary range up to about $20,000 annually.

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