Report 2019-108 Recommendation 11 Responses

Report 2019-108: Sacramento City Unified School District: Because It Has Failed to Proactively Address Its Financial Challenges, It May Soon Face Insolvency (Release Date: December 2019)

Recommendation #11 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Develop a long-term funding plan to address its retiree health benefits liability. The plan should include appropriate action necessary to ensure the district will be able to meet its obligations to its employees and retirees.

6-Month Agency Response

The District is developing its plan to establish the OPEB commission, including identifying qualified individuals to serve on a "Blue Ribbon Commission" to evaluate the District's strategies and make recommendations aimed at how to best meet the District's OPEB obligations. The expectation is that individuals will be selected in the coming weeks in order to form the OPEB Commission.

Negotiations also continue with labor partners regarding increasing employee contributions to OPEB and the impact of same on the budget.

  • Estimated Completion Date: TBD
  • Response Date: June 2020

California State Auditor's Assessment of 6-Month Status: Pending

As we note in our report, Sacramento Unified has not developed a plan to address its large retiree health benefit liability, which impacts the minimum amount the district has to contribute each year to pay for current and future retiree health benefits. Therefore, any plan developed by the OPEB commission must be integrated into the district's fiscal recovery plan.

60-Day Agency Response

The District Business Office is reviewing its OPEB liability and potential funding strategies, including an evaluation of District and employee contribution amounts, fully funding the future cost for current employees, and the amortization of the unfunded liability. This includes the District's August 2, 2019 proposal to SCTA Article 13, to increase to SCTA employee OPEB contributions to a higher percentage of their salaries.

Currently, the District contributes a fixed amount per current employee that pays for current year retiree health premiums and funds our California Employees Retiree Benefit Trust account. All employee contributions are invested in the trust. The current trust value is nearly $93.5 million, which includes over $20 million in interest earnings since 2012, over $6 million in the current fiscal year. The trust earnings will eventually fund annual costs, alleviating the District contribution from current operating funds.

The District intends to form an OPEB commission to evaluate the overall plan.

  • Estimated Completion Date: July 2020
  • Response Date: February 2020

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2019-108

Agency responses received are posted verbatim.