The Howard County Public School System’s looming health care deficit is now $39.2 million, and there’s no plan in place to stop it from rising further.
According to the preliminary numbers prepared for the school system’s 2019 Comprehensive Annual Financial Report, the health deficit increased from $37 million to $39.2 million.
The $39.2 million deficit is rooted in an imbalance of the school system’s employee health and dental fund, where funds were previously taken out to pay for other uses.
Under its self-insured system, Howard schools pay for 85% of each employee’s health care claims, including employees’ and retirees’ health and life insurance and voluntary benefits. Employees cover the remaining 15% of their claims.
Health care claims for fiscal 2019 were $14.2 million over the school system’s budgeted amount of $130.6 million, according to a school system memo.
The school system was able to offset all but $2.2 million of the $14.2 million by finding money in additional revenue, rebates, adjustments and surplus amounts, according to the memo.
An audit committee meeting was held Wednesday afternoon. It included Jahantab Siddiqui, chief administrative officer for the school system; David Clark, the school system’s internal auditor; school board members Chao Wu, Christina Delmont-Small, who is also the audit committee chair, and Kirsten Coombs, who is the school board vice chair; and auditors from CohnReznick, a public accounting firm headquartered in New York.
The committee members discussed the need for a plan to be implemented to tackle the health fund deficit. At this time, there is no timeline as to when a plan would need to be presented to CohnReznick.
CohnReznick is scheduled to complete the comprehensive report on Oct. 31. The audit committee will meet Nov. 4.
The audit committee will give a presentation to the entire school board Nov. 7.
“I’m looking forward to having a discussion with the full board,” Delmont-Small said after Wednesday’s meeting. “It’s important to engage all board members on this.”
Ahead of the report’s completion, Siddiqui will meet Friday with Howard County Executive Calvin Ball’s staff, County Council staff and finance department staff to discuss the deficit and next steps, including creating a plan.
During the meeting, Delmont-Small said the plan “has to be realistic and it has to do what we want it to do which is to reduce it [the deficit].”
In 2011, the health and dental fund began to shrink and, in 2016, it began showing a deficit.
For seven years, the school system pulled money from the health fund to pay for major expenses, including salary increases and a countywide prekindergarten program, the Howard County Times previously reported.
Last September, the school system announced the deficit was $37 million, reporting $13.5 million less than what had been projected. The $13.5 million reduction was found by cost-savings initiatives, close collaboration with medical vendors to provide better health care without additional costs and “strategy combining efficient management,” the school system previously said.
In June, after a contentious budget season, the school board unanimously adopted a $894.2 million operating budget for fiscal 2020. At the time, the approved operating budget was said to not increase the health care deficit.
“As we now know, we have not received any funds from the County over the last three budget years to reduce the deficit,” according to the school system memo.
Howard schools Superintendent Michael Martirano proposed in the fiscal 2020 budget to use $10 million of one-time funds from the school system’s general fund balance to reduce the deficit. However, the County Council-approved budget “used this fund to balance to pay for other expenses which are recurring,” according to the memo.
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Former County Executive Allan Kittleman had recommended a one-time payment of $11 million for the fiscal 2019 operating budget to start reducing the health fund’s red ink. The previous County Council approved the one-time payment.
The school system used the one-time funds to stop the deficit from growing, tapping it to pay the yearly health fund obligations, but not to reduce the deficit.
To be completed by the Maryland State Department, the $250,000 performance audit is expected to be paid for by the county, not the school system. The County Council is expected to vote on the payment Nov. 4.
As defined by the state’s Office of Legislative Audits, the purpose of a performance audit “is to evaluate whether an agency or program is operating in an economic, efficient and effective manner or to determine whether desired program results have been achieved.”
The school board approved conducting an internal audit of the school system in June.
Already underway, the school system fiscal 2020 audit, similar to the audit passed for fiscal 2019, is divided into four areas: individual schools, school system subjects, management assistance and board assistance.
An earlier version of this story misstated who is attending the meeting with the County. Howard schools Chief Administrative Officer Jahantab Siddiqui is attending. It has since been corrected.