I keep the $0.30 before it reaches Yolanda, and I keep the $7.30 that Laticia earns for me on the school contract I own. You paid the taxes that were supposed to secure their futures; I bill you for the lunches, the classrooms, and the empty seats. God confirms the posting. Let me show you how a district becomes insolvent and I become efficient. Allysia Finley reports in the Wall Street Journal that Los Angeles schools are running out of other people’s money: $1.13 billion in union contracts, a $877 million shortfall, 49,600 education jobs gone from the July payroll, and a county warning that the district may receive a “Lack of Going Concern” designation. She’s alarmed by the red ink. I’m grateful for it.
Laticia is a food-service body on the contract I own across 14 schools. She plates 1,400 lunches a day across the east side of the district. Your children eat what her hands plate. The district pays me $18.10 an hour for the food-service or custodial position. I pay Laticia $10.80. That leaves $7.30 an hour for me.
Her knees buckle by the sixth hour. She wraps them with tape from the supply closet and finishes the hallway. The insoles cost $4.25 a pair.
I don’t buy them.
Good. You’re beginning to count.
Yolanda is a credentialed unit on the credit-recovery line I own in Los Angeles. She spent 31 years as a first-grade teacher. Now she supervises adults who failed their way into a lab, and I bill the district for every seat whether the screen is ever read. The district once set aside $0.30 toward her pension for every dollar of compensation. You helped tax that money. I keep it now, before the promise matures.
The $0.30 never leaves my ledger.
That’s the whole lesson, if you’ll let me teach it properly. Yolanda paid into the pension for her entire working life. The district paid the equivalent of $55 an hour for her, pension and health included. She makes $28 an hour with me. The $27 is mine. Her reading glasses cost $12.
She buys them.
I decline the $12.
I want you to understand the distinction. Laticia’s knees are not a moral event. They’re a maintenance question. Yolanda’s eyes are not a retirement claim. They’re a personal expenditure. I call them biological units because “women who spent their lives keeping children fed and literate” makes the cost column sentimental, and sentiment is how a promise gets mistaken for an asset.
My contract clears. The children have eaten. The floor is clean. That is a going-concern statement in terms the county cannot use.
The district served 727,000 students and now serves 408,000. The union contracts were written against a headcount that no longer shows up. When 200 students disappear, the district cuts the expensive line first: the teaching credential, the union card, the person whose retirement was somebody else’s obligation. The building still needs cleaning. The remaining children still eat. My line survives.
That’s where most people get lost. They see fewer students and imagine less work. No. Fewer students mean fewer teachers. Fewer teachers mean the custodial and food-service line becomes more necessary relative to the payroll around it. I don’t need the district to thrive. I need the building to remain open and the contract to renew.
The district signed contracts to raise non-instructional compensation by 24% over 3 years. The county called it unaffordable. It’s very affordable to me.
At $18.10 an hour, the full phase-in produces $22.44. Laticia earns more. I collect more. The difference between the two is still mine. A public raise becomes a private spread. That’s a useful little trick, and I’m telling you about it for your own good.
Across 91 positions, the old spread produces $15,184 per worker each year, or $1,381,744 before I sharpen the bid. That figure doesn’t appear in the county letter. It doesn’t appear in the district’s budget testimony. It appears on my quarterly statement beside the contract name that reads like an inventory code.
Watch what the insolvency buys me.
Enrollment is down 47% in 20 years. The classrooms that emptied are the bodies that feed my line. The per-seat billing is unaffected by the origin of the demand, and the pipeline is full. I bill the district whether the screen is read or not. The contract renews. The margin holds.
Yolanda’s rent is $2,600, exactly as it was when she had a pension. Her wage no longer remembers the pension. California rent doesn’t remember what she used to be worth. She moves. The district loses another body from the rolls. I don’t need to touch your pension. I only need to keep emptying the rolls that feed it, and the thinning compounds.
Lift your eyes off the one body for a moment.
The pension was never a savings account. It was a contract with a future that had not yet been priced. Each generation was supposed to pay in so the generation ahead could collect. That future depended on bodies arriving on schedule: teachers, cooks, custodians, taxpayers, children becoming taxpayers. I remove the bodies from the promise and call the resulting vacancy a margin.
The arrangement is older than the factory. The old authorities understood that a promise is only as strong as the population required to honor it. I’ve improved the model. I don’t own the body, so I don’t owe it a lifetime. I rent the useful years, transfer the maintenance to the public, and retain the yield.
The text has governed the question for 2,000 years:
“And in the same house remain, eating and drinking such things as they give: for the labourer is worthy of his hire.”
— Luke 10:7
You’ll notice what the verse does not specify. It does not specify $28. It does not specify $55. It does not specify a pension, a pair of insoles, or $12 reading glasses. The labourer is worthy of her hire; the rate is whatever I post. God provides the children. I provide the tray.
I have spent 30 years teaching this arithmetic at Warden University’s College of Business and Economics, where I hold the Hayek-Friedman Chair and serve as Dean of Instruction. My students arrive believing a promise is a promise. By October, they understand a promise is an unfunded liability with a sympathetic face. By spring, they can price the face before I finish the sentence.
They now run the firms, districts, contractors, and payroll offices that set your wage. One of them priced Yolanda’s retirement. Another priced Laticia’s knees. A third wrote the contract that made the pension optional and the screen mandatory. I’m proud of them. A good teacher should want his students to surpass him.
Here is the system they learned: the public keeps the building open, the taxpayer maintains the body, the district carries the promise, and I collect the difference. The body plates the lunch. The body reads the script. The body leaves before the pension matures.
Laticia’s knees buckle by the sixth hour. Yolanda reads from the screen now. Her glasses are new; she bought them. The seat is billed. The $0.30 is banked.
Your check will arrive.
For now.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.