¹ú²ú¸£Àû Õæʵ

At James Monroe Middle School, located in a remote part of California’s High Desert, posters commemorating teacher appreciation week were hung beside porta-potties. They were the only toilets left for faculty members after the campus’s sewage system collapsed last year.

Sierra Sands Unified School District’s inability to afford to repair the sewage system — and the subsequent decision to close the school — are the result of crimes committed decades ago, forcing officials to make a host of cuts. Its superintendent is worried about the growing risk of insolvency.

This financial crisis goes beyond Sierra Sands and threatens public entities across the most populous US state. The growing strains are tied to a 2019 California law that removed the statute of limitations on sexual abuse lawsuits against public agencies, including school districts, unleashing a flood of litigation against governments, schools and other public agencies.

Last year, Sierra Sands, which serves around 5,000 students, settled one case stemming from abuse in 1989, and its annual insurance premiums have since risen 73% over the last 3 years — some $690,000 — a big hit for a small district. It is currently negotiating with another victim, and the superintendent, April Moore, said a large settlement on the pending case could raise concerns about a potential state conservatorship.

“Victims are due their justice, their due diligence and all their protections,” said Moore. “But I am tasked with protecting and serving our students of today, and they deserve everything we have and more. And when we’re taking our limited resources away from them and their future, then I see injustice at a very large scale.”

The 2019 law — known as AB 218 — was passed because many victims of horrific abuse had never been compensated for the long term harm they suffered. The law was a product of a growing awareness that the nature of sexual abuse leads many victims to block out their trauma until years later. In one case that emerged after the law was passed, a jury found that Moreno Valley Unified School District, south of Los Angeles, had hired a teacher and kept him on staff for two decades despite a long history of complaints that he had molested other students.

Now, though, offering some measure of justice for those crimes is creating a fiscal crisis that is rippling through local government agencies – and the clients they serve. Some government agencies are going to the bond market or taking out loans to pay for the settlements, though many are dipping into savings. The lucky ones have insurance coverage. But the dollar values involved are so large that the settlements are now imperiling the public insurance programs that schools and counties rely on to protect themselves against future unexpected costs.

California isn’t the only place where public agencies are dealing with this Catch 22. Since 2017, at least 33 states have raised the statute-of-limitations on abuse cases. But unlike California, most other states cap damages against public entities, limiting their liability. This piles onto the other fiscal burdens on government agencies in the state as they deal with wildfires, pension obligations, declining enrollments and the federal immigration crackdown.

The extent of the costs became clear last year when Los Angeles County struck two settlements with thousands of victims for almost $5 billion — the first of which was the largest ever involving sexual assault claims against a public entity. Most of them are related to a physical and sexual abuse in the county’s juvenile detention and foster care programs.

The county cited the settlements – along with the costs of recent wildfires – when it cut its budget by 3% last year, making reductions to several departments. Officials also plan to tap the bond market to cover some of the costs of the settlement, with long term knock on effects for the country.

While the numbers are smaller for most counties and school districts, the government agencies dealing with them generally have smaller cushions and fewer financial resources. Montecito Union, a small district of 350 students, used nearly all of its $12 million in savings to cover a $9 million settlement.

What is most disconcerting for many officials is the possibility that the biggest costs may be yet to come. Mike Fine, the chief executive of a state agency tasked with helping school districts in financial distress, said that his most conservative forecasts put the price for his clients between $2 to $3 billion, which is much more than they have paid to date. And schools are hardly alone.

“This is not a K-12 problem, nor is it confined to L.A. County,” said Robert Berry, Executive Director of the California Debt and Investment Advisory Commission. “Fundamental statistics tell us that there will be more agencies who face a similar fate.”

San Francisco has 16 outstanding claims, according to the city attorney’s office. And Riverside County, east of Los Angeles, is facing at least 13 claims alleging that minors were sexually abused while in the county’s custody.

In many cases, the financial outlook depends in large part on the insurance coverage that the agencies carried at the time of the abuse. Porterville Unified School District, in the foothills of the Sierra Nevada mountains, resorted to a so-called insurance archaeologist to determine whether it had any coverage for an abuse lawsuit stemming from events in 1985. The district ultimately had to pay for a $2 million settlement from its general fund budget of roughly $200 million after determining that the policy it had at the time only covered $25,000 of damages.

Even places with insurance coverage have not been insulated from the fallout. As abuse claims have multiplied, payouts from shared risk pools have driven premiums sharply higher for public agencies across California. Now those risk pools are wondering how long they will even be able to offer insurance. More than half the state’s 1100 or so school districts rely on the School Excess Liability Fund, or SELF. Its chief executive, Dave George, said that many of the companies that he has used to reinsure SELF’s risks have stopped working with him.

“The insurance industry will not continue to support these claims,” said George.

Senator Ben Allen, introduced legislation last year that would have limited damages, raised the evidentiary standard and barred refiling of certain claims. It got early support but he withdrew it after lawyers representing sexual abuse victims distributed ads that labeled the bill “Ben Allen’s Predator Shield Law.”

“I was threatening their business model,” Allen said of the law firms that opposed the legislation.

Lorena Gonzalez, the author of AB 218, said that overzealous lawyers are largely responsible for the unexpected cost of the law she wrote.

“There’s a problem with people looking at cities and counties and school districts as deep pockets, and I think trial attorneys are taking advantage of that, and they’re making far too much off of taxpayer dollars,” said Gonzalez, who is no longer in the legislature.

L.A. County District Attorney Nathan Hochman said last fall that he is investigating the possibility that attorneys have encouraged clients to file fraudulent abuse claims.

In the case that Sierra Sands already settled, from 1989, the district disputed its responsibility for the abuse in question. The case involved a lifeguard on the local military base, where the school used to do swim classes. But the district ultimately decided to settle, in part because of the risks involved in taking the case to trial and in part because it had insurance to cover the settlement costs.

The case that is still pending dates back to 1974, when the district did not have any coverage, according to an insurance archaeologist the district hired. While school officials are negotiating with the victim’s lawyers, it has not determined how it will come up with the money. For now, they have 26 vacant teaching positions which they have been filling with uncertified professionals on foreign visas.

Top photo: The MacLaren Children’s Center closed in 2003. Photographer: Karla Gachet/Bloomberg.

Topics Trends California K-12