Education Funding

Survey Finds Spiraling District Health-Care Costs

By Jeff Archer — August 09, 2005 4 min read

A survey of school district budget officials shows that employee health care now costs their districts nearly $900 per pupil on average, an expense that they say seriously affects their ability to pay for instructional services.

The cost of providing health-care coverage for the more than 800 districts responding jumped an average of almost 10 percent in the most recent fiscal year for which they had data, according to the poll by the Association of School Business Officials International. By contrast, the responses showed, the districts’ revenues rose an average of 2.3 percent in that time.

View the results of the health care survey from the Association of School Business Officials International.

The results, released late last month, come as many districts are struggling for a solution.

In Buffalo, N.Y., labor and management have been feuding in and out of court over a plan to save money by consolidating three health-insurance options now available to employees into one.

Anne W. Miller, the executive director of ASBO International, said her group did the poll to show how health insurance is driving overall district spending. She likened the findings to recent figures showing that General Motors Corp. spends $1,525 per vehicle on health-care coverage for its workers and retirees.

“What strikes me is that our findings are almost perfectly aligned with what manufacturers are telling the public is such a problem,” she said. “I think it’s important that the public and policymakers know that education is being likewise impacted.”

Costs Linked to Cuts

With a membership of about 6,000 worldwide, the Reston, Va.-based ASBO International represents district officials in charge of their systems’ finances. The group e-mailed its survey to its 4,500 U.S. members, of whom 867 responded. Statistically, the results are not nationally representative.

Respondents reported that their districts’ average annual cost of health care was $895 per student, out of total per-pupil spending from all sources of $9,400. More than two-thirds agreed or strongly agreed that such costs had “negatively affected” spending on academics.

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See the related item,

Chart: Competing Expenses

Asked which areas of their budgets had been cut to deal with health-care spending, 43 percent said facility maintenance, 39 percent said teaching positions, and 34 percent said technology.

Fifty-eight percent rated health-insurance costs as one of their “biggest concerns” as budget officials.

James A. Williams, the superintendent in Buffalo, agrees. He has pushed a proposal to save up to $27 million over two years by putting all employees in the 43,000-student district on one health-care plan, rather than continuing to offer three options. The alternative, he says, is major budget cuts.

“We have to find the money from someplace,” the superintendent said in a recent interview.

But the Buffalo Teachers Federation argues that the district can’t make the change without negotiating it with the union. In June, the union won an injunction on the issue. Although that order has been lifted, the BTF has asked the state labor board to intervene.

Philip Rumore, the president of the BFT, said his group doesn’t object to going to a single insurance carrier, so long as it costs the same to teachers and matches the benefits in the three options now available. Union and district officials disagree on whether that would be the case.

“To argue that teachers or the employees should pay more is missing the whole problem,” Mr. Rumore said. “You’re just asking someone else to pay for the costs that are out of control.”

Late last month, Mr. Williams announced plans to make the change despite the opposition. But he also issued layoff notices to more than 100 district employees on the chance that a labor ruling goes against him.

‘Common Ground’

District leaders elsewhere agree that health benefits are a major topic in contract talks.

Asked how much medical coverage was an issue in union negotiations, 71 percent of the respondents to the ASBO International study said to “a great extent.”

Pressed for their views on possible solutions, 70 percent said they considered shifting insurance costs to employees to be “promising.” Fifty-three percent saw merit in “wellness” programs aimed at encouraging healthier lifestyles. About half saw value in “educating employees about benefits.”

Mohsin Dada, the assistant superintendent for business services for the Schaumburg, Ill., district, says it is possible to work with employee groups to rein in costs by using multiple strategies. The school system serves approximately 15,000 students in a northwest suburb of Chicago.

Working through a benefits committee that includes the heads of the district’s employee unions, the Schaumburg system has cut its annual bill for its employer-based health insurance from $8.8 million to $7.4 million since 2003, Mr. Dada said.

Among other strategies, that meant negotiating better rates for fixed costs, such as claims handling. Staff members accepted some higher out-of-pocket expenses, including incentives to use lower-cost generic drugs. Efforts to offer on-site care, such as flu shots, at schools were expanded.

“Our objective was to sell this as financial security for the district as to our ability to give good raises and provide additional services for students,” Mr. Dada said. “So I think we had common ground to work with.”

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A version of this article appeared in the August 10, 2005 edition of Education Week as Survey Finds Spiraling District Health-Care Costs

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