California District Moves Closer to Insolvency, Earns BBB-Minus Rating

Posted: Sep 08, 2012 12:01 AM
California District Moves Closer to Insolvency, Earns BBB-Minus Rating
The Inglewood, California school district has slipped closer to financial ruin now that S&P has downgraded its credit rating to BBB-minus.

The credit agency stated that the district could improve its status if it gets spending under control and accepts a $55 million bailout from the state. It also said the rating could worsen if the school board doesn’t act quickly.

But nobody should hold their breath waiting for the school board to take positive action. News reports indicate the board may turn down the state bailout out of fear of losing local control of the district. And the board won’t be able to get runaway labor spending under control any time soon because the teachers union collective bargaining agreement, with all of its expensive provisions, doesn’t expire until next summer.

Teachers unions generally refuse to renegotiate contracts, even in dire financial circumstances.

The school board has shown few signs in the past of taking a hard line with the union. Rather than trying to force union concessions and bring labor spending under control, the district cut 10 days from the school year in 2010-11 and 2011-12, and 5 days from the 2012-13 academic calendar. The board’s inability to curtail labor costs is directly impacting students.

There are many indication that the district cares more about coddling the teachers union than dealing with financial reality. For example, the contract
with the Inglewood Teachers Association stipulates that the district will give the union president, who is a full-time teacher, half the school year for paid release time each year to conduct union business – with the union only reimbursing the district for the cost of a substitute teacher.

The cost of that provision is peanuts compared to the district’s financial problems, but it represents an attitude of indifference toward runaway labor costs.

The district is likely pinning its hopes on revenue from a statewide tax increase that Gov. Jerry Brown wants voters to approve in November. S&P predicts voters will reject it.

Districts like Inglewood can’t recover if they nibble at the edges of out-of-control spending within a collective bargaining framework. Brown would be wise to take a page out of Wisconsin Gov. Scott Walker’s playbook and work to curtail the power of teachers unions, but he won’t, largely because he needs union money and manpower to help pass his proposed tax increase.

And politicians’ need for union support – whether at the state or school board level – is precisely why districts like Inglewood continue to slip toward bankruptcy.