L.A.'S SCHOOLS BLEED RED INK.

Byline: Naush Boghossian Staff Writer

Acknowledging that their effort will probably lead nowhere, Los Angeles Unified school board members will try again today to figure out how to pay for billions of dollars in retirement health benefits and workers' compensation costs - a burden that weighs heavily on the district's future.

The issue has intermittently appeared on board agendas for the past eight months, but the discussion has always been tabled. And board member Mike Lansing said he doubts that either the district staff or the teachers union has the resolve or motivation to tackle the issue.

``I want to make sure that this doesn't drop like an anvil all of a sudden one day and we're insolvent. I think it's something that all school districts need to address - where they build up debt and have no way to pay it off,'' Lansing said.

Lansing said he has been trying for two years to get the board and staffers to address the issue of unfunded debts: $6 billion to provide health insurance to retirees and their families, as well as half the district's $685 million in workers' compensation liability.

District Superintendent Roy Romer said he recognizes Lansing's efforts, but has been working to address unfunded debt in phases.

In June, for example, David Holmquist, director of risk management and insurance, presented the board with a plan for funding its workers' compensation program. It includes setting away about $14 million annually for the next 30 years to offset the current deficit.

Holmquist also has recommended holding a two-day retreat in early 2006 to address the more complicated issue of health-care benefits.

But the pressure to find effective solutions to the overall problem continues to mount.

A report from the state's nonpartisan Legislative Analyst's Office this year warned that soaring health care costs, generous employee contracts and the failure to earmark money for the expenses pose a serious danger.

In 2002, the LAUSD spent a record $148.5 million on workers' compensation claims, and the projected cost to pay all outstanding claims is about $627 million by June 2006.

The district pays the bulk of its workers' compensation and retiree benefits out of its $5.8 billion general fund - the same fund used to pay for teachers' salaries, textbooks and school supplies.

``That's a great concern. That obligation (health benefits) is increasing at a greater rate than the revenues, so each year that's less money available to put in the classroom,'' Holmquist said.

For example, $148 million spent on workers' compensation claims would be enough to cover the annual starting salary of 382 teachers or to build a dozen new schools.

Legally, school districts cannot deny benefits to current retirees, but they can negotiate with the unions to reduce them for new employees.

But timing has played a big role in moving forward on the issue.

District negotiators and new union leadership are getting ready for wage-contract talks for this year, and Romer did not want to jeopardize the discussions.

``Some of these issues are very contentious, and one of them is health benefits. They (union leaders) don't consider it a liability,'' Romer said.

``The issue needs to be addressed. We can't continue to ignore it. But it takes two parties willing to make a solution. We can't do it alone, and the union has refused to consider it an issue.''

United Teachers Los Angeles officials said their members will not compromise on health benefits.

``The best possibility might be (for) the federal government or the state to intercede or to give the district a long-term payment plan to make it as painless as possible,'' said Sam Kresner, executive assistant to the UTLA president.

The issue is so politically fraught that it's easier for elected officials to try to avoid it, said Jack Kyser, chief economist of the Los Angeles Economic Development Corp.

``A lot of them are looking at what office they want to run for next, and they don't want to make anybody mad because they'll want their support. You've got a real Catch-22,'' Kyser said.

``It's not going to be a pleasant subject to talk about, but they're going to have to have a discussion about it. The union needs to sit down and approach it in an adult way, because if they don't, sooner or later there could be a backlash.''

Unfunded pension and health care benefits are an issue that will come back to haunt the district as a worse problem unless addressed soon, he said.

``For people in the district, this is something they should be concerned about. When you push it off to the next generation, all it does is snowball,'' Kyser said. ``I think this is something that a lot of government entities need to be concerned about. Sooner or later, this will be a major issue for California.''

But in addition to revamping the district's relationship with the union, the district will ultimately need the help of the state to resolve its debt, Romer said.

``I don't think we'll ever solve this without state participation, just as the federal government did years ago when Fortune 500 companies hit the wall on pension benefits,'' Romer said. ``The federal government intervened and gave them some structured way to handle it. We cannot solve this as a single district.''

Naush Boghossian, [phone]

naush.boghossian(at)dailynews.com