Letter to the Editor: Healthcare costs drain school budget

It is all about healthcare.

As it relates to our school system, we can raise taxes to the max every year, use our entire “banked cap,” but we will never catch up to the increasing cost of healthcare insurance.

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Everything else in the budget is “noise.”

Managing the cost of health insurance is the most important part of our budget. Rates are going up at an astronomical rate, eating into the money available for teacher salaries and other program costs, and negatively impacting the quality of our school system.

Sadly, in all of the BOE presentations, this issue was barely mentioned, and it was never considered as an option to help make the budget work. Instead, we are left with cuts to our programs and new use fees for sports, clubs and parking.

We have a great school system. We have some phenomenal teachers who teach our children to think critically and grow. We have great parents in town, who love our schools and their children, and will do anything to make sure their children succeed. We live in a truly great community. Our home values are linked to the quality of our school system.

The healthcare crisis threatens all of the above. We need a solution, or we will be looking at a budget disaster every year. We need to change our paradigm of thinking and have the free market help us solve our problems.

Let me explain.

Let’s extrapolate the expense drivers in the budget. If salaries go up 2 percent per year, at $750,000, and healthcare goes up 15 percent each year, call it $1.5 million we are looking at an increase of $2.25 million per year, every year.

If we can only raise taxes $1.1 million, we need to cut $1.15 million each year. The takeaway here is that healthcare expenses alone are going up faster than we can raise taxes.

This is not opinion. It is fact.

In 2009, the premium for a family plan was $13,200. This year, it will cost $28,000. That is a 112 percent increase over five years.

It has taken up $4 million more in expense on our budget. This $4 million obligation now threatens even the continuation of existing programs for our students, and hampers the ability to invest in new programs. We are paying more taxes and getting fewer services. This is not sustainable.

Last year, healthcare cost $9.85 million for the district, with the employees paying in 13 percent and the district covering the rest. That was after switching from the state plan to a private sector plan from Aetna. The cost went up 5 percent, when it would have gone up 16 percent if we had stayed with the state plan.

During the negotiations process, we distinctly discussed that our biggest concern was the increase in healthcare, and clearly defined to the union what would happen if healthcare went up substantially. Our options were written on the whiteboard in the room and listed below:

  • Raise taxes more than 2 percent, and we told them that this was not a viable option
  • Look at reduction in force and programs
  • Look at outsourcing certain positions

When we asked the MEA leadership what they would do when healthcare increases and we we are faced with this crisis, they stated that we would talk at that time. We developed a framework for a committee to discuss healthcare with three members of the MEA, and three members of the BOE. In essence, we kicked the can down the road. Well, the road has come to an end. It is time to deal with the can.

The BOE will have to take drastic measures each year, and will be forced to look at the following:

  • Outsourcing employees. Do you think we can find some of these services for less than the overhead of 10 percent pension costs, and $28,000 for healthcare in the private sector?
  • Reduction in force. Even if we look at programs, which means teachers
  • The bottom line is that our quality of education will suffer.

Potential Healthcare Solutions:

  • Switch to a defined contribution plan instead of defined benefit. Meaning, we will pay some set amount per person toward a plan and the teachers, administrators and staff will pay the rest
  • Look at the whole healthcare plan, and determine if we can reduce premium costs by raising co-pays, etc. Look at the plan design as a whole
  • Consider high-deductible plans and give everyone an HSA
  • Consider capping the BOE’s contribution to healthcare, such as 25 percent of salary cost
  • Look into raising everyone’s premium to 30 percent before considering a tax increase

Here is the bottom line. We need to work out a solution for healthcare that is collaborative and sustainable for the district as a whole.

I am not willing to pay more taxes so that someone can get a $28,000 healthcare plan for $840. I have my own premium increases to worry about. The MEA, MAA and BOE have worked together in the past, and need to do so again on this vital issue.

It will not be easy, nor is it avoidable. I hope that both groups can focus on the need for addressing the real issue, and commit to working collaboratively.

Who in this town has a $28,000 healthcare plan or a 10% match on their 401-k? Let’s extrapolate healthcare expenses of 15% increase over the next 3 years. $32,200, $37,000, then $42,000 in 3 years. In aggregate, the employees take 15% ,and the taxpayers take 85% of the risk of any premium increase. This problem needs to be addressed NOW!

The bottom line is that the budget and programs, and your home values, are at risk every year until healthcare insurance has been addressed.

By the way. I already discussed this topic in the previous edition of the Moorestown Sun. Please read the July 31, 2013 edition, page 10 for the same comments.

Kevin O’Sullivan

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