Updated: LAUSD agrees to issue $500 million in bonds to settle sexual abuse claims

The Los Angeles Unified School District board has quietly authorized issuing a half-billion dollars in bonds to settle decades-old sexual abuse cases involving former students.

And that will likely not be enough to settle all the claims the nation’s second-largest school district is facing under 2019 legislation that allows victims of abuse by school employees to seek damages for incidents dating back to the 1970s. District spokesperson Britt Vaughan would not say how many claims the district faces, the number that have been settled and what they have cost to date.

Board members approved the expenditure on June 3 without comment or a public presentation, agreeing to borrow up to $500 million through judgment obligation bonds. Unlike bonds for school construction, they did not require voter approval. The claims are not covered by insurance carriers.

The scant information in the meeting agenda estimated the total cost of the bonds, including principal and interest, at $899 million. It assumed a now outdated 6.10% interest rate, documents show (see page 3).

On Monday, the district lowered its estimate. It said it would issue initially $303 million in 15-year bonds, instead of 20-year bonds, at the current interest rate of 5.6%. At that rate, the total cost of $500 million in bonds would be $765 million.

“The board has been talking about judgment obligation bonds for, I would say, about a year and a half,” board member Tanya Ortiz Franklin said in an interview. Spreading out the payments means “the district’s current students aren’t punished by depleting resources,” she said.

No public hearings were held. Board members were briefed about the matter in small groups, she said. “We also had several conversations in closed sessions, as we typically do with legal cases.” She did not disclose the number of claims made against the district or how many were settled.

The district administration will likely ask the board to approve more borrowing next year to settle additional claims, Ortiz Franklin said.

The district is far from alone in facing massive payouts to victims who have filed claims under the legislation, Assembly Bill 218, which experts say is impacting local public agencies throughout the state.

Los Angeles County alone is facing $4 billion in settlements involving formerly incarcerated juveniles and foster youth.

By taking on long-term debt to deal with the AB 218 cases, LAUSD is “lessening any potential impacts to (its) core education programs in the near term,” by spreading out the settlement costs, supporting documents provided to board members stated. Nonetheless, issuing $500 million in bonds would reduce spending on students by tens of millions of dollars annually from the district’s general fund during the years it takes to pay off the bonds.

AB 218, brought by then-Assemblymember Lorena Gonzalez, rolled back the statute of limitations for abuse claims involving public employees like teachers to “22 years from the date the plaintiff” becomes an adult “or within 5 years of the date the plaintiff discovers or reasonably should have discovered that the psychological injury or illness occurring after” reaching adulthood was caused by sexual assault. Gov. Gavin Newsom signed the bill on Oct. 13, 2019.

Messages left at Gonzalez’s office were not returned.

Legislative records show that proponents of AB 218 argued that sexual assault scandals involving the Catholic Church and the Boy Scouts showed that victims of child sexual abuse sometimes took years to come forward, often after the statute of limitations to seek damages had expired.

“Victims who are ready to come forward today deserve an opportunity to expose their perpetrators and those who covered up the abuse,” members of the Washington, D.C.-based nonprofit Victim Policy Institute told lawmakers, records show.

Opponents of the bill, including the California Association of School Business Officials and other groups, expressed concerns about cost.

“It will be impossible for employers to effectively defend against these claims when evidence is likely gone, witnesses have moved or passed away, and there has been a turnover of staff,” a summary of opponents’ concerns in legislative archives stated. “With these barriers, schools will be unable to adequately respond to these claims. This failure will result in diversion of funding intended to educate students and serve communities to financing increased legal costs, whether or not the claim is valid.”

A Senate staff analysis warned of “unknown, potentially major out-year costs to local entities and school districts to the extent litigation is successfully brought outside the current statute of limitations and/or the entities are liable for damages.” The bill was unanimously passed by both the Senate and the Assembly.

Last week, in an interview, an advocate for taxpayers was critical of the debts the legislation created for school districts and other agencies.

“These bonds are going to hang around the necks of school districts for decades,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “There has to be a statute of limitations,” he said. “Witnesses are probably gone. All cases have to be time-barred at some point. This is bad policy.”

School districts across the state are facing similar claims allowed by AB 218 and facing crises of how to pay for settlements, according to a January report by the state Fiscal Crisis and Management Assistance Team, or FCMAT. As the matter evolves, there is no firm number of the number of claims so far brought against districts, “but the best estimate is $2 billion to $3 billion.”

“A comprehensive analysis of claims is not available,” the report states. “But what we can conclude is that the impact is significant.”

FCMAT concluded that “the goal should be to completely eliminate childhood sexual assault in public schools” and to “increase mandated training to build awareness of, and reporting options for, childhood sexual assault.”

Other recommendations, such as creating a victim compensation fund to eliminate claims brought against individual public agencies, have received little support in the Legislature and were opposed by plaintiffs’ attorneys, the FCMAT’s chief executive officer, Michael Fine, said in an interview.

The claims and settlements, Fine said, continue to pile up. “The data changes daily.”