Schools Agree to Pay $400k Toward Self-Insurance Debt

I feel like I’ve written more articles about the school district’s self-insurance fund than any other single topic, except, perhaps, the budget. Soon, it may not take up as much mental space for any of us. On Monday night, at the Board of Finance (BOF) meeting, the town got a step closer to resolving this ongoing issue. 

A quick recap: The town says it has given $1.2 million to the self-insurance account to ensure it could pay claims when funds ran low. Then, earlier this year, the BOF voted to move $700,000 out of the schools’ self-insurance fund to start paying itself back and to move another $50,000 per month until the debt was fully paid. 

Stafford’s new Superintendent of Schools, Scott Sugarman, was at Monday’s meeting, and he proposed a new plan: the schools pay a lump sum of $400,000 back now, and in return, the town holds off on taking the $50,000 per month. Sugarman expressed concern that he would not be able to properly manage the fund, which includes employee contributions, if the town planned to continue taking money from it.

He also said he hoped the BOF would consider forgiving the last $100,000 owed. The issue is significantly more complicated than anyone realized, according to Sugarman. Essentially, the money the town put into the self-insurance account was an “off-the-books additional appropriation” that would normally impact the minimum budget requirement (MBR) for the schools. 

While the BOF was not yet ready to forgive the funds, it did agree to give the schools some time to come up with an alternate plan. 

Should the Board of Finance forgive the last $100,000 owed by the Board of Education?

• Yes
• No

Stafford’s CFO, Yana Abramovich, said she thought it was better if the town had a repayment plan in place before this year’s audit is done (it’s due at the end of the year). BOF Chair Steve Geryk said he did not think that was necessary. “We’ve come a long way,” he said, emphasizing that a lot of progress has been made on this issue in recent months.

A need for policies and guidelines around the usage of the money in that account was also a top concern for Sugarman. He pointed out that the schools are now budgeting more than is recommended by their insurance consultants to bring the self-insurance fund back to a healthy balance. A policy that would keep future administrations from underfunding that part of the budget could be in the stars. 

BOF member Anthony Armelin asked if there was a plan to increase the percentage that employees contribute to their healthcare. That is determined by collective bargaining, and the different units are on different schedules. Board of Education (BOE) Chair Sara Kelley said that the teachers' union contract was renegotiated last year, and that was taken into consideration. 

Harold Blake Hatch asked about the possibility of changing to a different kind of health insurance plan. Sugarman said the schools have considered alternatives, but that without a healthy reserve balance, other self-insurance plans won’t take them. According to the district’s insurance consultants, a healthy fund reserve is $1.3 million, which Stafford currently falls short of. And during the budgeting process, other options were more expensive. As of Monday, the self-insurance fund balance was reportedly about $671,000. What no one seems to point out is that if the $700,000 had not been taken from the account, the schools could have achieved the $1.3 million reserve. 

Where did the $400,000 come from?

So, after a school year marked by budget freezes and the threat of a deficit, where did this money come from? 

Due to the budget and hiring freezes, the schools had fewer employees than anticipated, which left them with money left over that was originally meant to pay for employee benefits. After the BOF took the $700,000 out of the self-insurance account, the schools tried to open a new account that was out of the town’s reach with $500,000 of the remaining budget for employee benefits. That didn’t pan out how they planned, and so the check meant to open that account remains uncashed. 

Additionally, the schools are projecting a surplus of about $133,000 (not including the $500,000) due mostly to unanticipated reimbursements from the state. So, Sugarman said the plan was to put $100,000 into the self-insurance fund to rebuild it to a healthy level, give $400,000 back to the town, and put $100,000 into the non-lapsing fund, which serves as an emergency fund for the schools. For example, if an elevator breaks, without a non-lapsing fund, the district would have no way to pay for repairs without dipping into its already tight budget. The non-lapsing fund has been the source of a lot of contention lately, but it had a zero balance when the Board of Education (BOE) filed a Freedom of Information Act request for the records.