New health-care cost savings to lessen cuts to Duluth schools

/ 6 April 2012 / jennifer

Jana Hollingsworth, Duluth News Tribune, April 6, 2012 –

For the second year in a row, the Duluth school district’s deficit has been trimmed by a drop in the cost of providing health-care coverage to employees — a development that bodes well for class sizes.

Costs are expected to decrease by 5 percent, reducing the deficit by $1.3 million. That means the district must make $3.5 million in cuts instead of $4.8 million.

The School Board has made clear that class sizes are a priority, Superintendent Bill Gronseth said, so the savings will probably be directed toward maintaining them. Class size becomes more of an issue each year as budget cuts have meant fewer teachers and more students in classrooms. The remaining savings would be spread throughout other areas meant for reduction, and they haven’t been determined yet.

The district learned about the savings this week.

“Last year we were surprised by savings in insurance, and I am thrilled we have another reduction,” Gronseth said.

The savings are attributed to the district’s switch to the Public Employees Insurance Program in 2010. The group includes 46 school districts, which means lower fixed costs, higher negotiated discounts and risk spread among more people. Last year, the district expected a 6.5 percent increase in costs but had an 8 percent reduction. Under its previous insurer, costs were expected to increase by 15 percent.

The savings “won’t cure the problem,” said Frank Wanner, president of the Duluth Federation of Teachers. “But when talking about a $1.3 million shift from what had been budgeted … that will go a long way to help us maintain programs and class size. Clearly, the winners in this situation are our students.”

Under the new insurance plan, employees have a lump sum put into individual health reimbursement accounts to spend on prescription and other medical costs. By handling payments for these costs, employees are more conscious of the price of items such as name-brand prescriptions, Wanner said.

“People are much more aware of what health services actually cost and have to deal with these costs,” he said, when they spend from that account. “They’re encouraged to maximize use of this funding.”

The budget deficit was $3.8 million, but the district also must cut $1 million to reflect the expiration of a special property tax levy and the loss of a one-time gain in state aid for enrollment when the district lost fewer students than anticipated. The extra enrollment money was used to hire teachers and deans of students.