Los Angeles Teachers Set to Strike in Echo of Nationwide Fights

(Bloomberg) -- More than 30,000 teachers in Los Angeles are set to walk off the job Monday after months of negotiations between their union and the second largest U.S. school district failed to resolve long-simmering disputes over pay raises, class sizes, inadequate support staffing and public funding for charter schools.

It would be the first strike in 30 years to hit the district that serves more than 600,000 students. The teachers, counselors and nurses have been working under a contract that expired more than a year ago. The union Friday rejected a last-minute offer from the district promising additional funding expected from Governor Gavin Newsom’s proposed budget.

The dispute is different from the so called "red state teachers revolt” that led to prominent strikes in Arizona, Oklahoma, West Virginia and Kentucky, where teachers challenged austerity measures pushed by Republican legislatures that crippled school budgets. In Los Angeles, the teachers are battling union-friendly Democrats.

School officials say that while they have a sizable reserve now at about $1.8 billion, that money will dwindle in the next few years because of growing pension and health-care benefit costs and that the price tag of the union’s demands would bankrupt the district.

The strike will hit a district with an overall budget of $13.7 billion and more than $10.2 billion in outstanding long-term municipal debt. So far, bond investors have shrugged at the possibility of a walkout, though they are watching to see how a new contract might impact the district’s credit down the road.

“This isn’t a strike born out of the district being in financial distress," said Tom Schuette, co-head of investment research and strategy at Gurtin Municipal Bond Management, which owns some of the district’s securities. "The district is in good shape financially."

"The bigger story will be trying to get your arms around whatever settlement they come to," he added. "When they come to an agreement, that’s something from a credit standpoint you want to dig into, in terms of the district’s funding moving forward.”

The district has offered teachers a 6 percent pay raise spread over the first two years of a three-year contract. The union wants a retroactive 6.5 percent raise that would take effect all at once. The union also wants more teachers hired to reduce class size and more nurses, librarians and counselors. They also want a limit on how much public money the district spends of private charter schools.

During a walkout students are still expected to attend school every day, with school hours and meals remaining unchanged. Students will receive instruction from administrators and substitute teachers.

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