Health costs eating away at school budgets

As health care costs continue to drain school budgets of resources for classrooms, the pressure on the legislature to strike a compromise with organized labor on insurance plan design and Group Insurance Commission enrollment criteria will mount next session with a push from the business community, the State House News Service reported last week.

A new report from The Boston Foundation and the Massachusetts Business Alliance for Education released Thursday documented how soaring health care costs are crippling local school departments, consuming greater proportions of local taxes and state aid that have reduced available funding for other expenditures that directly affect students in the classroom.

Vineyard superintendent of schools James Weiss said this week that Island schools already have taken steps to keep healthcare costs down. “Health insurance is a very significant cost to Vineyard towns and schools,” Mr. Weiss said. “We have worked carefully to move our staff from the high cost indemnity plans to less costly programs, we require our staff to sign up for Medicare and we belong to the Cape Cod Municipal Health Group [CCMHG] which is made up of towns and school districts.” Mr. Weiss serves as one of the Island’s representatives to the CCMHG, along with Dukes County treasurer Noreen Flanders and Oak Bluffs town administrator Michael Dutton.

Weak economy a challenge

As the state continues to deal with a weak economic recovery, finding ways to control health care costs at the state and municipal level will be critical to fulfilling the goals laid out by the state’s landmark 1993 education reform law, state and business leaders said Thursday.

“The rise in health care spending is literally crowding out other necessary and important investment,” said Paul Grogan, president and CEO of the Boston Foundation, during a panel discussion to unveil the findings of the new report.

Grogan also called it “unconscionable” that more municipal managers have not forced retirees to sign up for Medicare, a step that could be taken immediately to save money at the local level without requiring legislative action.

Efforts at state level

The Boston Foundation intends to join the efforts of a growing coalition of business and nonprofit organizations led by the Massachusetts Taxpayers Foundation and Associated Industries of Massachusetts to support plan design for municipalities and permit communities to join the state’s GIC without collective bargaining. The coalition now includes approximately 30 groups, according to Taxpayer Foundation director Michael Widmer.

Both initiatives hit political roadblocks in the legislature over the past few years with lawmakers unable to find a compromise that would balance labor’s collective bargaining rights with local managers’ desires to pursue health care reforms.

The deadline passed earlier this month for municipalities to sign up to join the GIC starting in fiscal 2012 without a single new community indicating that they intended to join. The lack of new participation signaled the stalling of one of Gov. Deval Patrick’s signature efforts to help cities and towns save on health care.

Ann Clarke, the executive director of the Massachusetts Teachers Association, said labor will have two priorities when it sits down at the bargaining table to discuss possible legislation.

“The employees need to have fair and impactful involvement in decision making. The unions will be looking for meaningful involvement in decision-making around health insurance,” Clarke said. She also said it will be important to maintain the “concept” of insurance and not force users into “paying an unfair share” of premium, co-pay, and deductible increases.

Patrick has proposed lowering the threshold that requires municipal leaders to round up support from 70 percent of local unions to join the GIC. He has called for the level to be reduced to 50 percent.

Clarke, however, offered an alternative view of why municipal signups for the GIC have stalled; she suggests the reason was not just that labor unions were simply obstinate to change.

“The idea that you sign up for an insurance plan that changes on you in the middle of the year is one that in my estimation really contributed to people not going in this year,” Clarke said, noting mid-year increases to GIC co-pays and deductibles that concerned employee unions.

She also identified the lack of health reimbursement accounts in the GIC as a “systemic problem” that has discouraged employee unions from agreeing to join the state’s health plan.

“The GIC without HRAs for municipalities is going to continue to be a difficult proposition,” Clarke said.

Health reimbursement accounts are programs offered to employers through the Internal Revenue Service that allow companies to set aside money to reimburse employees for specific medical procedures and expenses as a benefit for workers that also lowers the company’s tax liability.

Costs rise by $1 billion

The research for the report was done by Ed Moscovitch, an economist and one of the authors of the original Chapter 70 funding formula. Moscovitch found that from 2000 to 2007 health care costs in school budgets grew by $1 billion in schools, while Chapter 70 aid increased by only $700 million.

During that time, inflation driven by health care increases not reimbursed through the school funding formula has created a $1.7 billion shortfall in foundation funding anticipated under the original 1993 law.

Spending on books fell by more than 50 percent from 2000 to 2007, according to report, while spending on teacher training dropped 25 percent.

“All of the gains, all of the increases in state aid, are being eaten by health care, and the result is cutting down things that directly impact students. That is the real takeaway from this report,” said Linda Noonan, executive director of the Massachusetts Business Alliance for Education.

The report showed that in 2000 the state’s neediest districts were receiving 3 percent less than promised under education reform, a gap that widened to 16 percent this year. Education Secretary Paul Reville, however, said the state still has a “negative equity gap” spending more in less affluent communities than those with the resources to better fund education on their own.

“We have to acknowledge we’ve made exceptional progress in terms of student achievement and have among the nation’s most progressive education finance reform,” Reville said.

Patrick’s education chief went on to say that beyond health care cost control, the state needs to think about how better to spend the education resources it has. While the report noted that student-teacher ratios were significantly less favorable now than a decade ago, Reville said investing in smaller class sizes across the board “would cost a fortune.”

He suggested more targeted investments in reducing class sizes for younger students would pay greater dividends.

“While these problems are real, this health care problem is a top priority for this administration,” Reville said. “You can’t argue with the numbers. It’s sopping up a lot in the way of resources that could be going toward more effective use in education.”

The MBAE said it plans to publish two follow-up reports early next year that will take a look at potential areas for cost-cutting, such as regionalization, and alternative funding mechanisms for public education.