Five Recommendations to Solve LAUSD’s Looming Fiscal Crisis

These recommendations are excerpted from the policy study “A 2018 Evaluation of LAUSD’s Fiscal Outlook.” 

LAUSD school busFrom the Independent Financial Review Panel’s report of Los Angeles Unified School District emerges a dire picture that should alarm parents, educators and community stakeholders alike. It found that maintaining the status quo would grow the budget deficit to about $600 million by 2019–2020, concluding that failure to act would have real ramifications for the district’s 550,000 students including financial insolvency and even state takeover. For years district officials have avoided substantive reforms, but the warnings of distant fiscal calamity have now become a reality that leaders must address head-on. While the path ahead involves many difficult decisions and political headwinds, the process of right-sizing LAUSD presents an opportunity to lay the foundation for a 21st-century education system that’s productive, agile, and responsive to the needs of students and communities. In other words, right-sizing isn’t about budget cuts and layoffs, but rather optimizing all facets of operations with the goal of providing high-quality options to all students at a cost that aligns with revenues. To do this, LAUSD leaders should focus on five key reforms.

#1 OVERHAUL LONG-TERM DEBT OBLIGATIONS

LAUSD has little control over rising pension contributions because reducing these obligations requires state-level reforms. However, general staffing surges that are not supported by enrollment can increase pension costs, since the district must make pension contributions for each new hire.

Further, LAUSD does have discretion over OPEB costs as well as health and welfare benefits for active employees. The district has several significant cost-saving options available to it, ranging from ending retiree health care benefits altogether to engaging in a variety of cost-sharing and cost-reducing strategies.

At its August 2017 board retreat on reducing health care costs, LAUSD staff presented five cost-saving options, as shown in Table 20.

Ultimately the board upheld the status quo for health care benefits for another three years at an annual cost approaching $1 billion.

#2 GO AFTER LOW-HANGING FRUIT

It should come as no surprise that LAUSD can become more efficient, but what’s less obvious is how relatively minor changes in operations can result in substantial savings that can put a dent in the district’s budget deficit. In fact, the Independent Financial Review Panel’s report found over $143 million in potential savings outside of staffing and long-term obligations, including:

Improve student attendance ($45 million): Because the state of California provides revenue based on Average Daily Attendance, LAUSD loses money with every student absence from school. Increasing the district’s attendance to just the statewide average—a relatively low bar to achieve—would generate an additional $45 million per year. Of course, this would not only help boost LAUSD’s bottom-line but also improve academic outcomes such as graduation rates and college and career readiness. In 2009–2010, Long Beach Unified shifted 10 of its social workers and counselors to working with campuses on truancy issues to increase student attendance. The chronic absence rate in Long Beach Unified dropped from 19.8 percent in 2011 to 10 percent by 2014. By 2015, the school district’s overall attendance rate was 96.17 percent up from 96.01 percent in 2014 and above the state average.

Improve staff attendance ($15 million): Currently, only 75 percent of LAUSD staff members have strong attendance as defined by the district. Bolstering this number to 90 percent would save about $15 million on substitute teachers while also providing students with more stable classroom environments. To save even more money, LAUSD could require select administrators to substitute teach five days per year, a policy that saved Scottsdale, Arizona about 7 percent of their substitute budget and also allowed district staff to stay connected to the classroom.

#3 INITIATE STAFF REDUCTIONS AND STRATEGIC SCHOOL CLOSURES

The reality is that LAUSD’s financial quagmire requires district leaders to make substantive cutbacks in both staffing and schools. Even though its declining enrollment has necessitated a reduction of about 10,000 staff, LAUSD has actually increased staffing levels in recent years while seeing costs associated with salaries and benefits also rise. This problem will only magnify if projected enrollment declines continue to hold true.

To start, LAUSD must recognize that the lion’s share of new hires have been administrative staff, even during declining enrollment. Therefore, district officials should first evaluate every central office staff position as part of its school finance overhaul.

Next, teacher layoffs are unavoidable but LAUSD can approach them in a manner that will help increase student outcomes even as overall staffing levels decrease. Importantly, district and union officials should work together to review and renegotiate factors that hamstring flexibility and do nothing to further student achievement, such as automatic pay increases, rigid staffing requirements, and termination provisions that favor costly teachers with seniority. For example, Boston Public Schools replaced a seniority-driven system by renegotiating its collective bargaining contract to give more autonomy over staffing to school leaders, and Hartford Public Schools’ contract now provides principals with more flexibility over things such as scheduling. Increasing district and school-level flexibility will not only minimize staff reductions and protect against future layoffs, but also help ensure that the district retains its highest-performing talent in the process. LAUSD should also follow the Independent Financial Review Panel’s guidance by offering early retirement incentives to senior staff and help reduce the percentage of teachers who have reached the maximum salary level, which is currently 10 percent higher than the state-wide average.

Lastly, underutilized schools are costly for districts to maintain as fixed costs such as facilities, school administration, and custodial services increase per-pupil expenses as enrollment declines. This means that schools that are at or near capacity—which are often higher-performing—essentially subsidize schools with declining enrollment and have less funding to expand programs, services and enrollment as a result. Undoubtedly, closing schools is a difficult yet necessary process for LAUSD to undertake, but district officials should prioritize closing underperforming schools and proactively engage communities throughout the process in order to maximize transparency and build understanding. Kansas City Public Schools closed 26 schools and laid off about 1,000 staff members in 2010, which ultimately helped the district close its budget deficit, improve academically, and reverse enrollment declines, as students transferred to higher performing schools. According to Superintendent R. Stephen Green, “When you close a number of facilities, it creates a bit of disruption, but it was a much-needed process to go through, given the financial stability that was needed for the district.”

Los Angeles also has declining enrollment without ensuring that all school sites are self-sustaining. While many other large urban districts with significant enrollment declines have worked to close and realign some schools to save money, LAUSD continues to keep under-enrolled schools open, even as it has opened many new schools over the last decade. In some areas of the district where school sites are very close to one another, the older schools have lost enrollment to newer schools. The district has not released a transparent recent report about the current capacity from one school to another or identified which schools may be under-enrolled and subsidized by the district.

The key question is to examine whether a school has enough enrollment to sustain the cost of running the school. In 2008, the district estimated that its schools would have a 16 percent vacancy rate by 2012. It predicted it would have the capacity to seat 670,000 students, but only 560,000 were expected to enroll. A Los Angeles Times analysis in 2008 noted that “the district plans to build campuses that will take hundreds of students from those schools, further reducing their enrollment. By the time the building program is completed in 2012, there will be tens of thousands of empty seats at dozens of once-crowded schools.”

If we assume that LAUSD still has the capacity for 670,000 seats, then the current enrollment level of 500,000 students means that it is past time for the district to do a transparent audit of school capacity and how it might save money by closing the most under-enrolled schools. Independent charter schools have used some of this excess capacity for their students, but a transparent examination would ensure that the district can accurately assess all its financial options. In addition, evidence shows that closing the lowest performing and most under-enrolled schools can improve the quality of education for the most disadvantaged students.

A growing body of research indicates that school closure increases educational opportunity so long as students have access to better schools. Closure students who attended better schools tended to make greater academic gains than did their peers from low-performing schools in the same sector that remained open.

A new report on LAUSD’s real estate assets by the LAUSD Advisory Task Force calls for the district to “analyze the current occupancy of core District assets to determine whether consolidation of and/or relocation of certain tenants to more optimal locations could create savings, maximize revenue, and/or reduce functional obsolescence.” With a more thoughtful approach to managing individual school sites and vacant property, the district could actually raise money with long-term leases to charter operators or with other commercial or community uses of their underutilized real estate assets. In addition, school consolidation could help ensure every school has more qualified staff, rather than distributing LAUSD’s scarce resources over too many school sites.

When LAUSD keeps open schools that are under-capacity, district-wide personnel may continue to grow while individual school communities feel staff shortages at the school level. This is because each school, independent of enrollment, requires a certain fixed number of staff positions, some of which may be vacant as enrollment shrinks. As the Los Angeles School Report noted in a May 2016 feature, former Superintendent Michelle King cited feedback from a principals’ survey she received that “showed principals expressing frustration with a lack of clerical staff, a lack of time to complete tasks and limited opportunities for instructional training. ‘Principals say there are not enough hours in the day to get everything they need done and improve teaching and learning due to a lack of sufficient personnel,’ King said.” In this way, the district can have too many employees that are unsustainable given the current level of enrollment and district revenue, while individual schools can also be under-staffed and stretched thin.

But when schools consolidate, fewer fixed staff positions are needed and are more likely to be filled. The district is staffing too many schools at an inadequate level and could increase staff and school support at individual schools by consolidating and closing some schools. LAUSD needs to make a transparent accounting of site-based enrollment, spending, and revenue based on the students who are enrolled at each site, examine how each school uses resources, and determine how that impacts the district as a whole. Until that is accomplished, the district will continue to have too many staff members that are not effectively deployed to best serve the needs of students.

#4 MITIGATE ENROLLMENT DECLINES BY FOCUSING ON QUALITY OPTIONS

Over a six-year period, LAUSD’s enrollment fell by nearly 100,000 students, about half of which is due to families choosing charter schools, with many others opting to enroll in traditional public schools outside of the district. With forecasted student attrition of 2.8 percent per year and lackluster outcomes in many of LAUSD’s schools, fundamental changes within classrooms are clearly in order. The Independent Financial Review Panel found that “there may be lessons to be learned from the migration of students to charter schools” and “it is very important that the District carefully analyze charter programs and focus on which students are leaving and why” so that LAUSD can ultimately improve its programmatic offerings for families. More bluntly, the days of district monopoly and residential assignment are coming to an end, and if LAUSD is going to attract and retain students then officials must be more responsive to parent needs. Fortunately, numerous districts across the U.S. have already undertaken substantive reforms to adapt to this new operating environment, and LAUSD has much to learn from them. One prominent example is Denver Public Schools (DPS).

DPS has adopted “portfolio management,” a model in which a district’s primary role is to approve operators, provide support, and evaluate school outcomes. Portfolio management is based on the belief that school-level autonomy drives performance by allowing school leaders and teachers to more effectively meet student needs. While traditional districts tend to prescribe a one-size-fits-all model by mandating inputs (e.g. staffing ratios, curriculum, etc.) portfolio management recognizes that each school has unique challenges and is thus more concerned with holding educators accountable for outcomes rather than how they operate. Ultimately, this helps to promote a diverse supply of schools that, when combined with a strong intra-district choice policy, can give parents more meaningful options that in turn help improve overall satisfaction and retention. As part of its strategic roadmap, The Denver Plan 2020, DPS is striving to have 80 percent of its students attending a high-performing school by 2020.

New data by the advocacy group Parent Revolution show that 234 LA Unified schools scored in the bottom two levels — orange or red — for both English and math on the California accountability dashboard. In the 2016–2017 school year, 155,779 students were enrolled in those 234 schools. LAUSD has 34 schools that are red in both English and math. Last year those schools enrolled 26,400 students. At a minimum, 30 percent of LAUSD students could use a higher-performing school.

#5 MODERNIZE THE DISTRICT’S SCHOOL FINANCE SYSTEM

Currently, LAUSD employs an antiquated school finance system. Instead of providing principals with actual dollars based on students, it allocates staffing positions that are determined using rigid ratios and district-wide average salaries. As Marguerite Roza of Georgetown University’s Edunomics Lab explains, “The district sends out teachers, principals, administrative assistants, lunchroom staff, librarians, and the like, and pays the bills out of the district coffers. Schools do not have their own bank accounts, nor do they receive reports that show the true costs of the resources that land in their buildings.” As well, according to Harvard researcher and former LAUSD budget director Jon Fullerton, the district’s budgeting systems “do not connect automatically with accounting systems, and both may be isolated from the human-resources systems that track who is hired, when, and for how much.” As a result, funding is delivered to schools in a manner that is non-transparent, inequitable, and less responsive to enrollment changes. This makes it difficult to provide leaders with valuable data that could help the district become more productive with its education dollars.

STUDENT-BASED BUDGETING

To modernize its school finance system, LAUSD should allocate dollars on a per-pupil basis by adopting student-based budgeting, a funding portability framework that sends dollars to schools rather than staffing positions. This not only promotes equity and portability across schools within the district, but it also empowers principals to have more decision-making authority over how dollars are ultimately spent. Allocating funding to schools in per-pupil terms would promote greater efficiency by allowing dollars to grow and contract in direct proportion to student needs. In this way, student-based budgeting would allow principals to make their schools more responsive to parents’ needs, increasing the likelihood of higher enrollment and potentially generating new revenue at the school level.

Moreover, when money goes directly to schools on a per-pupil basis, it becomes clear which schools are unable to financially sustain themselves and which schools may be candidates for consolidation to avoid insolvency. As part of this shift, LAUSD can also empower principals to purchase certain services from either the district or external vendors to optimize pricing and quality, which are often constrained by district contracts. This allows school leaders to make better use of their budgeted dollars while also helping to address central office bloat. Given LAUSD’s financial position and need to reduce personnel, student-based budgeting would allow school-level staffing based on the funding resources generated by the students in the school.

Student-based budgeting is based on five key principles:

  1. Funding systems should be as simple and transparent as possible.
  2. Per-pupil funding should be based on the needs of each student.
  3. Per-pupil funding should follow the student to the public school of their choice.
  4. Principals should receive actual dollars—not staffing positions or other allotments—to spend flexibly based on school needs.
  5. Funding allocation principles should apply to all sources of education revenue.

It requires a shift in mindset from top-down compliance to supporting autonomous school leaders, and some roles will fundamentally change or become obsolete in this new environment as a result. As one educator who participated in an Education Resource Strategies summit on school-level budgeting explained:

There has been a philosophical change: the principal is the CEO of the school. The central office is there to support them. We inverted the pyramid so that the principal is on top, telling the central office what they need, rather than on the bottom. That’s required a cultural change and huge structural changes in the district.

LAUSD has already laid the foundation for this reform by piloting autonomous schools through its Belmont Pilot Schools Network, which started in the 2007–2008 school year. In the 2017–2018 academic year LAUSD allocates $46 million to 83 schools that receive their resources based on a per-pupil formula that is allocated directly to schools. In these schools, principals have more autonomy to purchase school-based staffing and differentiated district support. LAUSD should take the next step by adopting a district-wide program as numerous districts such as Boston Public Schools, Houston Independent School District, and New York City Department of Education have already done.

THE CHANGING ROLE OF THE DISTRICT

Under a student-based budgeting system, the district itself still monitors school performance and makes big-picture decisions about which schools may need to be closed or consolidated based on enrollment and academic performance. The district’s new role would be to hold individual schools accountable for district-wide student goals, such as improving graduation rates or increasing proficiency in 3rd-grade reading. The district would not mandate how a principal and school community use their resources to meet district-wide instructional
goals, but would instead set the benchmarks and goals for the district.

In order to measure progress and monitor performance, LAUSD should revamp its knowledge infrastructure to better integrate key information systems. This means going beyond merging budgeting, accounting and human resource data by ensuring that student enrollment and achievement data are also readily available for cross-referencing analysis. This would ensure that individual school leaders and district leaders have the tools necessary to make sound financial decisions that are driven by academic strategy and outcomes.

For example, district leaders should know not only exactly how much is spent on each school but also how dollars are allocated across classrooms and courses. Disaggregating data to per-pupil terms at the classroom-level would help school leaders and district administrators assess the alignment of funding with strategic instructional intent and student outcomes, and more effectively consider trade-offs in how money is spent. This is especially important since research has shown that districts allocate funding in a manner that doesn’t align with stated priorities such as focusing on low-achieving students, a fact that leaders are often unaware of given antiquated accounting and budgeting practices. For example, a district may say its goal is to improve 3rd-grade reading and then spend all of its resources on high school AP classes. Without attaching school- and classroom-level expenditures to instructional priorities, school leaders, and districts have little information about how they are targeting resources to instructional priorities.

Such transparency would help LAUSD’s current measurement of progress, as the district doesn’t track or publicly report its allocations at the school level based on student characteristics. As a result, education stakeholders and policymakers cannot easily determine if the new LCFF revenue, which the California Legislature intended to help high-needs students, is boosting spending in the schools these students attend. As Marguerite Roza noted in a recent report evaluating California’s LCFF revenue, “this lack of financial transparency makes it difficult to assess the degree to which LCFF is delivering—or not delivering—on the state’s pledge to drive resources to the highest-need students.” A more transparent student-based system would allow district leaders to track these dollars and make more informed decisions about how best to use the district’s scarce resources to improve student outcomes.

Student-based budgeting has helped other districts determine which schools should be closed or consolidated and which schools should be expanded or replicated. For example, after adopting student-based budgeting, the Denver school board approved the closing of eight schools that were under-enrolled and low-performing. The board projected that the realignment of students from these schools to higher performing schools would achieve projected yearly operating savings of $3.5 million. Those resources were used to improve the education of students who were affected by the school closures, delivering additional resources to under-performing schools, and creating funding opportunities for new schools and new programs. In addition to the standard per-pupil revenue that followed students to their new schools, the district reinvested $2 million, or 60 percent of the savings from school closures, into the schools of reassignment. In this way, a student-based budgeting funding system is an important modern financial tool that can help right-size LAUSD’s financial ship.

Full Study: A 2018 Evaluation of LAUSD’s Fiscal Outlook: Revisiting the Findings of the 2015 Independent Financial Review Panel

This article was originally published by the Reason Foundation

School Choice Matters: Teachers unions still trying to deny parental choice

shocked-kid-apIn March, six months after Hurricane Maria devastated Puerto Rico, the island’s lawmakers approved a bill that offered parents school choice options, including vouchers and charter schools. Hardly radical, the voucher program was capped at 3 percent of total student enrollment and charters could not exceed 10 percent of all public schools.

As day follows night, the teachers union in Puerto Rico filed a lawsuit arguing that it is unconstitutional to use public funds for private schools. And then in April, another bit of devastation hit the tiny island: Hurricane Randi blew in. American Federation of Teachers president Randi Weingarten, still aglow after teacher strikes had crippled the educational process in West Virginia and Oklahoma, decided to direct Puerto Rican educators follow suit.

Weingarten was overheard on a train plotting a shutdown strategy, but the union boss wanted to make sure that it was not called a strike, claiming they never use the “S” word. Instead, she said the public should be told “We are a human shield for the kids … teachers are doing this in the stead of parents and kids.”

On August 10, Puerto Rico’s Supreme Court threw out the lawsuit, allowing the two small choice programs to go on as planned. And as night follows day, the union called a strike to protest the choice law and a few other policy changes. The good news is that it was a one-day walkout which began and ended on August 15.

Meanwhile, in Los Angeles, it’s no secret that the teachers union is in conflict with the school district, and a strike in October could follow. One bone of contention is the staffing of magnet schools, which are public schools of choice with specialized themes – performing arts, science and math, those aimed at gifted students, et al. These schools can draw students from outside the normal zip-code mandated boundaries, are very successful, popular with parents in Los Angeles, and are rapidly expanding.

Since magnet schools offer a specialized curriculum, they need teachers who are well-versed in certain subject areas. So what’s the big deal? The United Teachers of Los Angeles is demanding that if a school or part of a school is to be converted from a traditional program to a magnet program, “certificated bargaining unit employees at the school shall have a right to assignment at the converted school and shall not be required to reapply for assignment to the school after conversion.” This is like saying that if you had heart palpitations, you would have to be treated by a dermatologist because the hospital couldn’t hire a cardiologist.

But of course the union is doing this for the kids!

And what would a month be without a new bogus study on school choice? The latest entry comes from the Network for Public Education, a union-friendly outfit that believes in zip code-mandated government schools über alles. The group solemnly reports that “fewer and fewer states are escaping school privatization’s reach.” I’ll save the details for another day, but for now, let’s just say the National Education Association’s reporton the study makes it sound as if privatization is the equivalent of a bubonic plague that is rapidly ravaging our educational landscape.

But a poll from earlier this year paints a very different picture. According to EdChoice, only 33 percent of parents prefer that their child go to a public school, yet nationwide 83 percent of kids actually do. While 42 percent of parents would prefer to send their child to a private school, only 10 percent do. Also, a recent American Federation for Children poll, conducted by a Democratic polling firm, showed that 63 percent of likely voters support school choice, and among those most in need, the numbers are higher, with 72 percent of Latinos and 66 percent of African Americans favoring it.

In addition to the above, the survey found that 54 percent of Democrats support school choice. In our ultra-politically polarized time, this is very important. School choice has become a truly bipartisan issue, with more and more liberals sticking up for kids and taking on the teachers unions. In an eloquent and powerful piece, Catherine Durkin Robinson, who self-identifies as a “militant advocate, organizer and member of the Democratic Party for 30 years,” has quit her party. She deplores the fact that the Dems toe the teachers union party line because the union provides hefty campaign contributions to them. “This movement has helped me look closer at my side of the aisle. I’m so very disappointed in a party that refuses to fight for the people who need it most – children struggling to break free from generational poverty. Education is the most reliable way to do that. Democrats are blocking the schoolhouse door.”

If Ms. Robinson is any indication, the unions’ loss in the Janus case may just be the beginning of a descent that not even Hurricane Randi will be able to manipulate.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

This article was originally published by the California Policy Center

It’s no mystery why the cost of housing is so high in California

HousingIf Sherlock Holmes was investigating the mysterious disappearance of new housing construction in California, he and Watson might be in Los Angeles County right now.

There they would have observed the county Regional Planning Commission this week as it approved the project known as Centennial, a new community of 19,000 homes on 12,500 acres in the Antelope Valley on the Tejon Ranch.

The Centennial project has been in the works for so long that a news story about the approval was accompanied by a photograph of Gov. Arnold Schwarzenegger looking over maps of the land with the developers in 2008.

Approval by the Regional Planning Commission is just one step in the process of getting the go-ahead to build the new homes. The project now goes before the L.A. County Board of Supervisors.

You really need good genes to be a housing developer in California. If the average life expectancy in your family is less than 95 years, choose another field, or another state.

Holmes and Watson might have been puzzled by the ferocious resistance to the Centennial project, as speaker after speaker voiced objections during more than two hours of public comment ahead of the Regional Planning Commission’s vote.

A representative of the Center for Biological Diversity complained that “isolated leapfrog development” was a threat to “the affordability and health of the entire metropolitan area,” when “L.A. could be an innovative leader in urban planning” by “prioritizing transit-accessible affordable housing.” The Center for Biological Diversity is unhappy that an estimated 75,000 new vehicle trips a day will be generated by the Centennial project as residents drive into Los Angeles to work. …

Click here to read the full article from the Orange County Register

Mobile Home Rent Control Measure Passed in L.A. County

Mobile HomesLos Angeles County Supervisors approved a mobile home park rent-control ordinance on Tuesday for unincorporated areas that will limit rental pad inflation to 3 percent a year — the latest sign of high housing costs in L.A.

The Los Angeles Times reported the supervisors approved the Mobilehome Rent Regulation Ordinance by a 3-to-1 vote. It initially provides a 180-day temporary limit on rent increases to maximum of 3 percent a year for annual or short term leases. The ordinance is scheduled to come back before the supervisors next month for another vote to make it permanent.

Supervisor Janice Hahn, who sponsored the rent control measure that will impact about 8,500 mobile home tenants, told Southern California Public Radio that she proposed the ordinance because skyrocketing apartment rents are spilling over to mobile home pad rentals.

Hahn argued that with 100 California communities already having passed rent control laws to protect mobile home tenants, “If we believe in affordable housing, and we believe in keeping these people from being homeless, we should really protect people who are in our mobile home parks in L.A. County.”

Hahn claimed that LA County needs an immediate temporary ordinance to stop mobile home operators from raising rents before a study is conducted to measure if tenants are rent-burdened. But the language of her ordinance states that it can be “extended or replaced by the Board of Supervisors.”

According to a June report from Apartment List, the median rental price for a two-bedroom apartment in Los Angeles was $1,750, and $1,360 for a one-bedroom unit. That was up 3.2 percent, about the same as inflation in the last 12 months, but down from the 6 percent average annual rate since 2015 that had been more than triple the rate of inflation.

Patricia Boerger of the Manufactured Housing Institute told Curbed late last year: “Mobile homes in the 1960s were for young people who were starting out and making their place in the world. Anything after 1976, though, can’t be called a mobile home.”

With the average sales price for a new manufactured home approximately $292,600 less than a site-built home, mobile homes are  a form of low-cost housing for 18 million Americans with an average income is about $28,300 a year and 13 percent on food stamps.

According to the Mobile Home Park Homeowners Allegiance, most residents own their mobile home but rent a pad from a landlord. Allegiance member Kort & Scott Mobile Home Parks, for example, is one of the largest operators in California and has 13 parks in Los Angeles County. K&S monthly pad rents in L.A. County range from a low in Carson of $398 at Laco Mobile Home Park and $420 a month in Carson Gardens Trailer Lodge, to a high of $1,700 a month at the Royal Western Mobile Home Park in Gardena.

Jarryd Gonzales, spokesperson for the Western Manufactured Housing Communities Association, told SCPR before the vote that the mobile home park owners do not believe that a crisis exists: “We’re saying take a wait-and-see approach, as opposed to rushing right in and limiting increases on rent, and going on in with a rent control ordinance.”

Gonzales argued that rent control could have unintended negative consequences, including cutting off capital improvements, or potentially causing mobile home park operators to shut down, evict the tenants, and sell their property.

This article was originally published by Breitbart.com/California

The End of the Home-Buying Frenzy

http://www.dreamstime.com/-image14115451You may have seen recent news accounts about how home sales have slowed nationwide. So I got curious: What’s going on in the San Fernando Valley area?

I looked back at the local home-sales stats we publish in the Business Journal, courtesy of Redfin. And in the Valley area, home sales have indeed slowed. In fact, they were down way more here than in the rest of the country, at least in June, which is the latest reporting period.

Nationwide, sales of existing homes in June were down 2.2 percent from June of last year. But they were down 11 percent in the portion of the Valley area that’s in Los Angeles County. In Ventura County, it’s more dramatic: Home sales were down 23 percent.

That’s a huge drop off. But then I thought: Wait a minute! There’s a housing shortage here. The sharp slowdown in sales may result from the fact that there just aren’t many homes to buy.

But that supposition appears to be wrong. Home listings – the number of homes for sale – have increased over the last year. The number of unsold homes was up 1 percent in the Los Angeles County portion of the Valley area (including the San Fernando Valley and such areas as Burbank, Calabasas, Glendale, Santa Clarita and Palmdale).

Again, it’s more dramatic in Ventura County. The inventory of homes for sale in June was 3 percent higher than one year earlier.

In short, home sales were down in June while the inventory of unsold homes went up.

Can we declare that the housing shortage is over? No, but we can say that the shortage is now less severe.

Now that I think about it, this slowdown in house-buying shouldn’t be all that surprising. Mortgage interest rates have been going up, making monthly payments higher.

And have you noticed in recent months the sudden reappearance of for-sale signs? For a couple of years, for-sale signs were scarce. Whenever a home came up for sale, the broker who got the listing quickly showed it to his or her roster of home buyers, and a deal was quickly made before a sign was ever planted in the yard.

But lately, not only is there a proliferation of for-sale signs but even some open houses. Again, I don’t think we can declare the housing shortage dead. However, the buying frenzy – all-cash offers above asking price on the day the house hit the market – appears headed to the hospice.

What about prices? Since home sales drooped in June as the supply expanded, surely that means prices went down, right? Well, ahem, no.

According to our Redfin data, the median price per square foot in June was up 4.2 percent in Ventura County from the previous June, and up 7 percent in the Los Angeles County portion of the Valley area. From the previous month, prices were up in Ventura County and flat in the L.A. portion of the Valley.

The fact that prices are not going down in the face of weakening sales and higher mortgage rates seems to defy reason.

But here’s a thought: All the prices mentioned above are for June. Since then, things may have changed. After all, whenever a slowdown takes hold, the old psychology may linger. It may take a while, but reality eventually sets in and prices inevitably drop. Maybe that just had not happened yet in June.

Here’s a slight bit of anecdotal evidence: A home in my neighborhood went up for sale in April. I walked by it last week. The house still has a for-sale sign in front, although the owners apparently have moved out. According to Zillow, the seller has cut the price three times for a total of 13 percent. The sales sheet describes them as “super motivated,” which I assume means they’ll slice the price some more.

Last year, that house probably would have been snatched up quickly regardless of price. But this year, after more than three months and three price cuts, still no deal.

The housing shortage is not over. In the big picture, there are still too few houses. However, the worst of the house-buying frenzy does appear to be finished or at least abating. The price cutting will surely follow.

Charles Crumpley is editor and publisher of the Business Journal. He can be reached at ccrumpley@sfvbj.com.

This article was originally published by Fox and Hounds Daily

L.A. teachers union schedules strike authorization vote

UTLAThe Los Angeles teachers union announced Friday that it has scheduled a strike-authorization vote for later this month.

A strike would not be automatic, even if a majority of members vote yes. But such a result would give union leaders the authority to call a strike without returning to members for another vote. Having members authorize a strike is a well-established pressure tactic, and once in a while, a strike does occur.

United Teachers Los Angeles scheduled the vote after the state’s Public Employment Relations Board agreed with the union that talks were deadlocked.

Other district employee unions have reached deals that provide for about a 6% raise over three years. L.A. Unified has yet to offer that much to teachers, but that’s clearly where officials want to end up. …

Click here to read the full article from the L.A. Times

The Slower Reality of California High-Speed Rail

High speed rail constructionWhen California voters approved construction of a bullet train in 2008, they had a legal promise that passengers would be able to speed from Los Angeles to San Francisco in two hours and 40 minutes.

But over the next decade, the state rail authority made a series of political and financial compromises that slowed speeds on long stretches of the track.

The authority says it can still meet its trip time commitments, though not by much.

Computer simulations conducted earlier this year by the authority, obtained by The Times under a public records act request, show the bullet train is three minutes and 10 seconds inside the legal mandate. …

Click here to read the full article from the L.A. Times

Jonathan Gold’s Los Angeles

Los Angeles Times food critic Jonathan Gold at the Los Angeles Times Food Bowl Food for Soul at the Ace Hotel Downtown on Friday, May 5, 2017, in Los Angeles. (Photo by Dan Steinberg/Invision for Los Angeles Times Food Bowl/AP Images)

The passing this week of Jonathan Gold, Los Angeles’s Pulitzer Prize-winning restaurant critic, reminded us of why we have lived in Southern California for more than four decades. When we arrived in L.A. in the 1970s—from New York and Montreal, respectively—the city was known largely for glitter and celebrities but little else. The food scene wasn’t much to write home about, though it was better than the awful cuisine in most of the country. A newcomer was likely to be introduced to Tommy’s Burgers, or perhaps a local taco joint with a menu that hadn’t changed in decades. Fine dining was largely of the stargazing variety—Perino’s, Chasen’s, Musso and Frank—which meant generally so-so food but a bettor’s chance to spot a celebrity.

Jonathan Gold helped to change all that. He was from L.A., and he embraced his inner Angeleno while driving through this vast region in his old truck. He was no aesthete in the model of the New York Times’s Craig Claiborne, who favored fancy restaurants serving small portions. Gold embraced L.A. in its vastness, and if there was too much food on the plate—as long as it was good, hell, why not?

Yet Gold was also a discerning critic of haute cuisine. We eventually found many of our favorite splurge restaurants—Providence, the now-closed Campanile, and Angelini Osteria—through his reviews in either the LA Weeklyor the Los Angeles Times, in his book Counter Intelligence, or on KCRW’s Good Foodprogram. These restaurants also reflected L.A.’s growing sophistication as a cultural center. The big difference for Gold was that the food, not the movements of the “in” crowd, assumed the leading role.

Gold made his greatest finds not in Beverly Hills—though he appreciated Nate and Al’s, considering it near the top of the “deli hierarchy”—or on the Sunset Strip, but through his explorations into the long-neglected culinary riches of the not-so-fancy L.A. He found his muse not in dashing restauranteurs backed by big investors but among small, largely ethnic entrepreneurs who, at least initially, made their living feeding their own compatriots. Perhaps his sympathy for these self-starters meant that he didn’t write many negative reviews. Why write about a trek out to Reseda (in west San Fernando Valley) to sample a bad taco or tasteless dumpling? Gold’s knowledge came from trying many places and choosing the best among them. It seemed that he had tried every taco, Thai, and Chinese joint around in search of the perfect barbacoa, noodle, or dumpling. Then he’d tell us all about it in prose that was as much about place as about food. He made the vastness of Los Angeles not just comprehensible, but wonderful.

Gold captured not only a food movement but also a demographic wave. Until the 1960s, greater Los Angeles was an immigration afterthought, a largely white city with marginalized Latino and African-American enclaves. The food reflected the palate of the Midwest, a condition that still prevails in some areas, including near our home in northeastern Orange County. As immigration laws changed, Southern California emerged as a destination, much like New York earlier in the century, for a dazzling array of newcomers. They came from Mexico and Central America, and from the Middle East and Asia. In 1960, Los Angeles County was 80 percent white; in 2014, Caucasians made up barely 30 percent of the population, while Latinos rose to nearly half, and Asians made up nearly 15 percent. This influx turned L.A. into a gourmand’s dream. Gold guided us to restaurants mainly frequented by the natives of their local countries, many located in unglamorous parts of the city, from the San Fernando and San Gabriel Valleys to gritty streets like Pico Boulevard, on which Gold took it upon himself to visit every restaurant at least once.

Most of our favorite places to eat are places that Gold discovered for us. They include Guelaguetza, an Oaxacan restaurant as far removed from conventional mass-market Mexican food as Burger King is from a Parisian steak tartare with frites. Other favorites include Jitlada, a spicy Southern Thai-oriented place in a rundown part of Hollywood that we love to take our New York relatives to experience. More often, when we lived in the Valley, we visited other Gold discoveries such as our go-to takeout joints, Sri Siam in North Hollywood and Dos Arbolitos in North Hills.

But perhaps nothing attracted us, and Gold, more than the Asian food mecca known as the San Gabriel Valley, in the city’s eastern suburbs. Formerly a largely Taiwanese bastion known as “little Taipei,” the area now has an Asian-American population larger than those in Los Angeles proper, San Francisco, and Chicago, and it tops the Asian-American populations of 42 states. It offers a staggering array of diverse tastes. You’ll find the best noodle houses and dim sum joints, as well as high-end seafood restaurants.

When we moved to Orange County three years ago, what we missed most was Gold’s L.A., that eclectic jumble of strip malls, ethnic enclaves, markets, and restaurants of every description. Many Orange County eateries, as is common in newer areas, have all the originality of scripted sitcoms. Yet Gold helped us even here. Unlike some Angeleno sophisticates, Gold went where his truck and his nose took him. He was the journalistic equivalent of Frank Lloyd Wright, who wrote that “after all is said and done, he—the citizen—is really the city. The city is going wherever he goes.”

Orange County has also become a magnet for immigrants, many seeking single-family homes, better schools, and less-congested freeways. In fact, immigration in Southern California is basically stagnant in the old L.A. core but rising quickly in the outer suburbs. In 1960, Orange County was 90 percent white, but today it’s less than 50 percent. The Latino population has grown to more than 30 percent, while Asians now make up almost 20 percent of the population.

Gold gathered the culinary fruits of remarkable diversity in this once-homogeneous suburb. He spotted the few good European restaurants, like Marche Moderne, but had a particularly keen eye for ethnic-driven successes like Taco Maria, an innovative Mexican-influenced spot in Costa Mesa that ranked in his top ten Southern California eateries.

But Gold glittered most in the obscure places. He was our guide to the great Vietnamese strips—Bolsa, Westminster, and Magnolia— brimming with endless pho and hip Asian joints. There are some slightly more elegant restaurants, like Brodard Chateau, a magnet for fine Vietnamese food. One of the more recent discoveries, now a personal favorite, is Irenia, a Filipino eatery in Santa Ana. Here’s Gold describing its charms:

Dilis (small salty fish) is a powerful food, both metaphorically and in its unmistakable pungency, which can water your eyes from across the room. It is by no means a rarity—dilis is among the most common Filipino snacks—but it takes on a special resonance in this Santa Ana dining room, even when you give up and dump them all onto a bowl of rice. Irenia is a modern restaurant, part of the new Filipino food movement flashing through Southern California, but I suspect that the kitchen cares as much about feeding the appetites of its grandmothers and uncles as it does about making the scene. It is not an accident that Irenia is named for the chef’s grandmother.

Like all the places Gold discovered across Los Angeles, Irenia epitomizes the region’s spirit of enterprise, social mobility, and innovation. In the face of regulatory burdens, high taxes, and real estate costs, the people who run these places represent Southern California’s chances for retaining an entrepreneurial ethos.

We hope that others, including those determined to rein in our often-unsightly sprawl, will recognize that expansiveness is key to Southern California’s unique energy. If they do, they will be following in the footsteps of Jonathan Gold, who discovered it first and had a great time getting there.

California’s Shameful Poverty Crisis

PovertySeven years ago, the Census Bureau began calculating poverty by a new “supplemental” method, responding to criticism that the half-century-old official poverty rate was too simplistic and inaccurate.

The new method quickly gained wide acceptance as much more accurate because it included more forms of income and, most importantly, adjustments for widely varying costs of living.

Almost immediately, California achieved the dubious distinction of having the nation’s highest poverty rate, mostly because of its high costs of living, especially housing. Currently, it’s still No. 1 with a 20.4 percent poverty rate, more than twice that of No. 50 Vermont.

The Public Policy Institute of California and Stanford University’s Center on Poverty followed suit, using a similar methodology to calculate poverty rates for the state’s 58 counties.

Their California Poverty Measure currently tabs the state’s rate at 19.5 percent with Los Angeles County the highest at 24.9 percent and Placer County the lowest at 13.1 percent.

PPIC and Stanford also calculated an additional “near-poverty” rate of 19.2 percent, which implies that nearly 40 percent of Californians are coping with economic distress.

And now we have an even deeper dive into persistent economic despair in the nation’s richest state.

United Ways of California, a coalition of local organizations that raise money for charities, commissioned “Struggling to Stay Afloat,” which delves into poverty not only at the state and county levels, but right down to neighborhoods.

Moreover, the new study breaks down the data not only geographically, but by race or ethnicity, gender, occupation, marital status, education and other factors.

Overall, it found that “1 in 3 households in California, over 3.3 million families – including those with incomes well above the (official) federal poverty level – struggle every month to meet basic needs.”

Not surprisingly, Latinos have the highest poverty of any ethnic group, with 53 percent of households having incomes that fall below the “real cost measure.” The incomes deemed to be adequate vary widely from community to community, depending on local living costs.

All three of these statistical exercises are telling us the same thing – that California has an immense poverty problem rooted more in high living costs than in its family incomes. And housing is the most important cost driver.

The political response to California’s poverty crisis has been tepid, even though Democrats who dominate its politics often denounce economic disparity.

Raising minimum wages and welfare grants and offering a state tax credit to the working poor may have some impacts on the margin. However, the extra incomes they generate are quickly consumed by higher housing costs, plus the higher gas taxes, local sales taxes and energy bills being imposed to deal with other political priorities.

Poverty must be attacked at its roots, such as the ever-worsening shortage of housing, which drives its costs ever-upward, and the lack of education and training for good jobs that employers want to fill, but can’t.

Capitol politicians have sidestepped the politically difficult task of overcoming local opposition to housing construction, or reducing environmental red tape. The state Democratic Party just endorsed a ballot measure that would make local rent control ordinances easier to enact, thus discouraging new housing investment even more.

Nor has the dominant party been willing to buck the union-led education establishment and insist on more accountability for educating poor kids – more than half of the state’s 6 million K-12 students – so they can break their families’ poverty cycles.

Cowardice and tokenism cannot and will not erase California’s shameful status as the nation’s most poverty-ridden state.

This article was originally published by the San Jose Mercury News

The Bank of Los Angeles: A Blank Check for the City?

Photo courtesy of channone, flickr

Photo courtesy of channone, flickr

Last Tuesday, the Los Angeles City Council passed a Herb Wesson sponsored motion, without any discussion, that requested “the City Attorney, with the assistance of the Chief Legislative Analyst, to prepare and present the documents necessary to place on the November 2018 Ballot the necessary amendment to Section 104(g) of the City Charter to authorize the City to form a municipal bank.”

The proposed City owned Bank of Los Angeles would “provide financial services to residents, reinvestment in the City to support the development of affordable housing and local infrastructure, and banking solutions for other local businesses that are not currently served by the commercial banking industry.”  There have also been discussions about the Bank serving the unbanked, cash intensive pot industry.

Yet despite all the hype associated with the municipally owned Bank of Los Angeles, the City has not prepared a business plan or even an outline of a plan for the Bank.  Rather, the City is asking us to give the City Council and Mayor Garcetti a blank check to establish the Bank despite a well thought out report by the Chief Legislative Analyst that identified numerous problems.

These limitations include that there is no identified source of funds to capitalize the Bank (estimated to be more than $1 billion), that City funds could not be deposited in the Bank for at least three years, that the Bank would have difficulty providing adequate collateral to support the City banking requirements, that the Bank would have difficulty qualifying for deposit insurance, and that start-up costs would be “exorbitant” with no available sources of cash to cover these losses.

After listening to the February 28 meeting of the Ad Hoc Jobs Committee where the Chief Legislative Analyst’s report was discussed, it was apparent that the members of the City Council have no clue about the banking business, the need for excellent management and strong credit standards, and that loans are not grants and need to be repaid.

Rather, the members of the City Council view the Bank as a source of cash to fund their pet projects and those of their cronies. But loans, both principal and interest, need to be repaid on a timely basis if the Bank is to remain solvent.   Otherwise, the Bank is out of business, the equity capital is wiped out, and the depositors take a hit.

This was certainly the case with the Los Angeles Community Development Bank that was established after the 1992 riots with money from the Federal Government.  But this loan fund that was under the control of the City Council closed its doors in 2004 because too many of the politically connected borrowers failed to meet their obligations.

However, with the Bank of Los Angeles, it is our money, not the Washington’s, that is lost if the Bank tanks.  And it the City takes a hit, it would have an adverse impact on the already poor level of service we receive from the City.  …

Click here to read the full article from City Watch LA