Janesville75.8°

School district's insurance costs questioned

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FRANK J. SCHULTZ
August 16, 2008
— Here’s a job: Predict the health care, drug and dental costs of one the county’s biggest employers.

That’s an annual task for the Janesville School District, which self-funds its own health insurance for employees and retirees.


The district actually farms that task out to a consulting firm.


Dismal and drab, right? But consider that without this estimate, officials can’t answer three of the most basic questions the school board faces:


-- How much money do we spend on education?


-- How much will taxpayers pay?


-- How much money should go to teacher salaries?


The bigger the insurance estimate, the less money budgeted for students and teachers.


Health care is a big chunk of the budget—about 15 percent of last year’s $110 million operating expenses.


The estimate for last year’s health claims was $16.36 million. That was $3.35 million more than what was needed.


That’s the worst overestimate in 10 years. The district has overestimated its health-care needs by more than $8 million in past six years combined.


Where should the extra money go? Now, it’s plowed back into the operating fund balance, allowing the school board to use it for emergencies, to avoid short-term cash-flow borrowing among other purposes. It also could be used as revenue in the following year to soften the tax impact, something the board is considering for 2008-09.


Teachers have claimed that a lot of the money should go to them. Their argument: State law requires their compensation be bargained as a package—benefits and salaries combined. Benefits must be paid for first. Leftover money goes to salaries.


So the higher the insurance estimate, the less money left to pay teachers.


If the estimate had been more accurate over the past six years, teachers could have seen bigger pay increases.


Teachers say it’s not just the money but the fact that Janesville’s teacher pay is lower than similarly sized school districts, and that mean’s it’s harder to recruit and retain good teachers.


District officials counter that they’re not seeing an exodus of teachers looking for better pay. And the district says it needs to budget enough money for health care so that it isn’t caught short, as it was to the tune of nearly $5 million from 1999 to 2002.


The insurance issue has soured and prolonged negotiations for the last two teachers contracts. Teachers have questioned whether the district is inflating the insurance cost, and that question has eroded trust that is needed to reach a settlement.


“How can it be over that much, year after year?” said teacher Dave Parr, who helped negotiate the recent contracts. “Clearly there’s something broken that needs to be fixed.”


School board member Tim Cullen recently spoke out on the issue. Cullen said the question that teachers raise needs to be answered, or it will keep causing friction between teachers and district leadership.


Cullen’s comments apparently spurred a school board study session Tuesday, at which the district’s consultants will explain how they project health care costs.


“The board, teachers, taxpayers—everybody needs to know and be sure the calculations have been done to the best of their ability at the time they were made and understand why costs coming in lower,” Cullen said.


Angel Tullar, manager of employee relations for the district, said part of the consultant’s explanation will be that, for unknown reasons, people aren’t getting sick as often as in the past.


Even if the consultant can satisfy everyone’s concerns about how the estimate is made, Tullar said, she expects the issue will continue to crop up, until the health budget starts showing a deficit instead of a surplus.


“Until we can all agree whose money it is, ... I’m not sure ever able to agree,” Tullar said.


STORYLINE

The dispute: Teacher trust in district leaders has eroded as the district continues to overestimate the cost of employee health insurance. Taxpayers and parents also have a stake in the multimillion-dollar process.


What’s new: The district’s estimate of the cost of health coverage missed the mark again last year. The $3 million overestimate was the largest in 10 years.


What’s next: The school board will hold a study session on the topic at 4 p.m. Tuesday at the Educational Services Center, 527 S. Franklin St., Janesville. Representatives of insurance consulting company Mortenson, Matzelle & Meldrum are slated to explain how they estimate the district’s health insurance costs.



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