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Howard County Times
Howard County

Howard school system officially eliminates health fund deficit, which peaked at $40 million in 2019

The Howard County Public School System’s health fund deficit has been eliminated, according to officials, capping a years-long effort to remove a major financial burden on the system’s operating budget.

In its fiscal 2022 audit report released last month, the school system announced a health fund balance of $5.95 million as of June 30, a sharp contrast to years of negative balances, including a peak deficit of nearly $40 million in fiscal 2019.

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“The audited financial reports represent a significant milestone, reflecting our steadfast focus on improving the financial management of our school system,” Superintendent Michael Martirano told the Howard school board on Nov. 17. “The historical health and dental fund deficit no longer exists on our books.”

In 2011, HCPSS began pulling from its employee health and dental fund to pay for other major school system expenses, including salary increases and a countywide prekindergarten program, resulting in a negative fund balance of $16.5 million by fiscal 2016. When Martirano began his tenure in 2017, the deficit was projected to grow to more than $50 million.

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“I can still recall the conversations with the County Council in those early days about the importance of fixing the structural deficit in order to ensure that we take care of our employees’ health care and restore credibility,” Martirano said.

Under its self-insured system, the school system pays for 84-86% of health care premiums, depending on an employee’s start date, while employees cover the remaining percentage. HCPSS relies on its general fund to cover the bulk of its share.

Each year, HCPSS uses an actuary to estimate insurance claim costs for the coming year, but as the deficit grew the school system failed to cover the projections, particularly from fiscal 2015 to 2018. Health care costs ballooned over the same period, according to HCPSS chief administrative officer Jahantab Siddiqui, pushing the deficit to $39.2 million in fiscal 2019.

In October 2019, the school system received a rare adverse opinion on an audit conducted by New York-based accounting firm CohnReznick due its inability to reduce the deficit or create a cohesive plan to combat it.

“The adverse audit opinion really was an outside entity telling us that this was a real problem that we needed to address,” Siddiqui said. “It helped us to then be able to communicate publicly as well.”

In the following months, Siddiqui led the development of a deficit elimination plan that helped reverse the adverse audit opinion in fiscal 2020. In May 2020, the County Council voted unanimously to appropriate $7.2 million from the school system’s unassigned fund balance to address the deficit, and in April 2021 County Executive Calvin Ball announced a one-time county contribution of $10 million to further pay down the deficit.

Through savings, the one-time contribution and lower-than-expected health claims during the coronavirus pandemic, the school system was able to achieve a positive fund balance of $5.95 million this past fiscal year.

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“Officially eliminating our school system’s health fund deficit from the books is a testament to our fiscally responsible approach to governance over the past four years,” Ball said in an email Thursday. “Our success today demonstrates our shared commitment to being responsible stewards of taxpayer dollars and preserving the fiscal health of our school system.”

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The deficit’s elimination also opens up new funding opportunities for Martirano’s proposed 2023-2024 operating budget, which the superintendent will present on Jan. 12.

“For five years, every budget conversation that we’ve had has been shadowed by the looming deficit,” Siddiqui said. “We haven’t been able to talk about new programs and expansion and incentives and other things when we had this structural deficit that we needed to address.”

Program needs like pandemic recovery support and special education will no longer have to compete against one-time deficit funding.

“There’s nothing better than, and I mean this lovingly, having a very boring audit report like this,” said board member Christina Delmont-Small after the November presentation. “We want more of them.”

Siddiqui says the school system is committed to sustaining the health fund balance and that effective management of benefits is critical to attracting staff amid the nationwide teacher shortage.

“We have a billion dollars of taxpayer funds,” Siddiqui said. “As a school system, Dr. Martirano talks about how we must take care of our kids, but we must also take care of those who take care of our kids.”


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