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- [00:02]
A
You're listening to asbo international's school business insider. I'm your host, john brucato. Each week on School Business Insider, I sit down with school business officials and industry experts from around the world to share their stories and explore the topics that matter most to you. Find out what it means to be a school business official and get your insider pass on all things school business. Hello everyone, and welcome back to School Business Insider. Health care costs have long been a significant expense for school districts, but recent increases are creating new challenges for school business officials across the country. Today I'm joined by Elica Yost and Jim Roan from ASBO International to discuss a groundbreaking new report released jointly by ASBO International and and aasa, Rising Premiums, Falling Opportunities, the Budgetary Impact of Healthcare Costs on School Districts. The findings are eye opening. Nearly every district surveyed reported that healthcare costs are having a measurable impact on their budgets, forcing difficult decisions about staffing, instructional investments, technology facilities, and even student programming. We'll explore what the data tells us, why healthcare costs are rising so dramatically, what school business officials are doing to respond, and and what policymakers need to understand about growing financial pressures facing public schools. Jim and Elica, welcome back to the podcast. So happy to see you.
- [01:32]
B
Thank you so much for having us.
- [01:34]
A
So, yeah, let's kick it off. What prompted both organizations to really undertake this research? And in your view, why was it important to really quantify why districts have been experiencing these rising costs in healthcare?
- [01:48]
B
Yeah, so, I mean, school business officials and superintendents, they really have been raising this issue for both ASA and ASBA International for several years. But I think just given how significant of an increase we've been hearing from members with health insurance premiums, how much they've skyrocketed in recent years, it really has just reached kind of a boiling point. Also, you know, when you consider that all that ESSRA aid that districts had, you know, during COVID that stuff is gone. You're dealing with declining enrollment, birth rates, and a lot of other trends that are happening at the same time that are negatively affecting school budgets. I think these rising costs are just putting our members and their districts in a really difficult spot. You know, as far as just the timing of what, you know, why now while healthcare costs, you know, are increasing for everybody, we really wanted to show that districts are not immune or exempt from this, you know, broader trend. And, you know, when you consider the significant role that healthcare benefits play in recruiting educators, retaining high quality educators, anything that really takes away that ability for districts to offer competitive Compensation, when that's at risk, it's definitely going to be something that's of concern to our members. I would say personally that this, this project was definitely a labor of love for both me and my colleague Sasha Podelski at ASA to put this together. We really just started, you know, reading the tea leaves from this data and we're seeing that this is becoming a huge crisis for K12 education. It's not, you know, getting a whole lot of national attention compared to, you know, some of the other things that might be causing budgetary pressures on districts. And we actually got a lot of outreach from members thanking us for doing this survey. Usually we feel like we're bothering people by trying to survey for data or information. So to actually hear people say thank you. About time. We really wanted to see this come together was great. But Jim, I'm sure this is definitely something you've been hearing from members too.
- [03:42]
C
Yeah, absolutely. From a practitioner standpoint, we've been dealing and managing healthcare costs for years. You know, it's typically salaries and benefits are your largest cost in the school system. And every time those renewals come about, you're trying to anticipate what that increase is going to be. But I think what's good about this is it allows us to take this data in this report and it helps us to communicate the urgency to policymakers. You know, it comes up with some common language and data to help explain what's happening inside those districts. And, you know, because this is no longer a secondary cost, it's really a driver of financial decisions we're going to make and how are we going to continue to manage that healthcare cost. And I'm sure as we go on through this podcast, we're gonna have more conversation around ways to reduce costs, ways to anticipate some of those increases. But the challenges ahead are pretty steep.
- [04:35]
A
You know, I think healthcare has really been a perennial issue and it just to elica your point has just been getting compounded in terms of its, its difficulty in terms of fitting into the budget. So what makes this report a little bit different than maybe some of the previous discussions around employee benefits or some previous reporting and data that has come out.
- [04:54]
B
So, I mean, as far as I'm aware, this really is the first national level perspective or study of its kind with how healthcare costs are affecting K12 education. Like school districts, usually when there are reports on healthcare, it is much more broad or is about impact on school specific individuals and families, maybe on, you know, rural localities, not something that really has that education or school finance lens to it. And I would say that this report doesn't just talk about the healthcare impact or healthcare policy solutions. It really leans heavy into the education and operations side of things. Those tough budgeting decisions and trade offs that school business officials and superintendents are having to make as a result of this, what that impact trickles down and looks like for staff students, as well as the specific programs and services that districts are able to offer.
- [05:47]
C
Yeah, I would echo that. I think it goes beyond cost increases. It talks about what districts are sacrificing and how decisions are being forced and what's at risk. So it's not just about those rising premiums, but it's really about fewer opportunities for students. The more money we put into healthcare, the less opportunities we have for student learning.
- [06:06]
A
Yeah, I mean, it's such a significant portion of the budget. I mean, we are a people industry. So I mean, the fact that we have to now concentrate more of our budgetary allocations to health and benefits, when Jim, to your point, could be stripping away some programmatic enhancements, is incredibly problematic. But to that end, Elica, maybe you can walk us through some of the most significant findings from this joint effort.
- [06:30]
B
Yeah, sure, and I'm certain we'll dig into some of these more individually. But I mean, just looking at this from the high level, we surveyed over 760 school business officials and superintendents across 42 states. The vast majority, 98%, said that, you know, rising health care costs are really starting to impact their budgets. And it's very Rare to see 98% of any group agree on anything. So I think that that just flags like how, how significant this crisis really is. We've seen a vast majority of districts, over 90% spending up to 30% of their operating budgets just on insurance benefits alone. Those costs are going up for, you know, a variety of reasons. You know, increasing prescription drug costs, more expensive treatments. We heard high cost drugs like GLP1s playing a huge role. Just kind of as a pervasive theme throughout the survey feedback we got and then to what Jim was discussing earlier, you know, the biggest finding was the trade offs that districts are having to make to navigate this untenable situation. So whether it's tapping reserves, modifying benefits, delaying hiring, or even cutting spending on curricula and technology that supports student programs and learning like this is really a big concern. But driving this to the bottom line is what we're seeing is as healthcare costs increase, employee benefits are still eroding. So districts are paying more for less, and that creates Those real negative opportunity costs that affect students.
- [08:04]
C
Yeah. And I think just bringing awareness to the fact that this is one of our largest expenses we manage outside of salaries. And, you know, when nearly a third of your operating budget is committed, it does limit your flexibility. What are we going to do about staffing? How are we going to provide instructional resources and student support? So the opportunity cost is real because every dollar we spend in healthc is dollars that we don't have available in the classrooms.
- [08:29]
A
Well, to follow that up, one of the most significant data points in the report is that I believe it was about 92% of districts reported that 30% of their spend is on insurance and benefits. What does that mean in practical terms, Jim, in terms of just not only being able to assemble a budget, but making sure that the budget is meeting the needs of the kids in the classroom?
- [08:49]
C
Well, yeah, when 30% of your general fund is being used for insurance benefits and you look at the remaining 70%, you have to take into consider, you know, teacher salaries. You take into consideration what it just costs to operate the building. We've seen a significant increase in fuel cost, so you really get down to very minimal dollars left to invest in your program. If you're looking to do textbook adoptions or capital improvement changes, it's really going to impact how much money is available. So it's really forcing a lot of districts to make the decision to either go into operating reserves to fund these increases. And the problem is that healthcare is going to be an ongoing reoccurring expense. So you can't continue to return to the reserve pile every year or you're going to find yourself upside down. So trying to find ways to manage health care costs are going to be critical. I think we'll talk a little bit about through this. Some of the experiences that I've had when I was in the school system, things that we did to try to drive down cost, but it's a real concern. And not every district out there is going to have all the tools available to them to drive down that cost.
- [10:00]
A
And to that end, maybe you both can speak to maybe the primary drivers behind these cost increases. Elica, you gave a little bit of an overview in terms of what was found in the a summary of the report. So if there's anything else you can add to that, I would love to hear it. And then, Jim, to your end, you know, from a practitioner standpoint, what have you maybe experienced specifically in the state of Ohio?
- [10:21]
B
Yeah. So the only other thing I'd flag, aside from, you know, those Kind of key trends I mentioned earlier with, you know, the higher cost prescription drugs, treatments, GLP1s, that sort of thing is to take a step back and think about the broader systemic pressures that we're seeing on the US health care system. So just since the pandemic there's been an increased demand in services, additional uptake in surgeries and costlier treatments. Following the pandemic we also are seeing an increasingly aging and chronically ill population in our country. So you have these broader trends that are also just driving up costs as a whole. I think this report specifically just zones in on what were those identified cost drivers based off our members perspective. Jim, did you have anything you wanted to add based off your experience in Ohio?
- [11:08]
C
Yeah, I mean it's typically that increased utilization, higher provider costs, pharmaceutical cost is always a big factor. You know, just an observation and you just wonder what impact this has. If you, if you drive around this country, we are seeing these health centers popping up everywhere. It's like apartment complexes that are just shooting up through the roof. So you wonder with all the additional capital investment that are being invested throughout the country in these new ad hoc hospital branches, how much of that is driving healthcare cost up? I mean it's crazy, but from a practitioner's perspective, it's really about managing that cost. And I've been in school districts that have been part of pools. I've been involved in school districts that are self insured. At the end of the day it's all about the claims. You're going to have some standard inflation. I think back then they expected to have somewhere between 8 to 10%, just inflationary cost on an annual basis. And then you look at your claims trend and if you have a lot of claims, that's also going to tack onto what those premium increases are. So there's only so much you can do as a school district to try to manage those costs. A lot of districts are looking at their plan design, trying to change the way their benefits are being offered. Maybe not offer everything. Higher deductibles, higher co pays, those are the only tools that the districts have right now to manage that cost.
- [12:40]
A
Are you seeing any kind of increase or maybe cost mitigation from pushing telemedicine? I mean to your point, there's been a lot of those ad hoc facilities popping up. I certainly see them around my area. But I'm also noticing that in order to maybe curb some of those in person visits, telemedicine seems to be kind of ramping up as well. Are you experiencing or have you seen that as well?
- [13:03]
C
So in one of my districts we did have telemedicine and the utilization was okay. At that point in time I was fairly new and did not see a lot of participation. Quite frankly, I'm not in the field right now, so I don't know how it's impacting our members, whether we're starting to see an uptick and telemedication. But it would seem to me that that would be a tool to try to drive down cost. There's also a lot of districts that have been talking about collaborating with their local communities on community health centers that would allow the local governments and the schools to actually use these local health centers to try to drive down cost. Generic generic drugs office obviously also contribute to that. But what I find fascinating, even in my own insurance plan, when I go to the pharmacy to refill a script, I have it priced out based on my medical plan and the discount card that they offer. And nine out of 10 times I can cut my, my cost in half by using their discount card that's not even tied to my health care program. I can get a 90 day script fill versus a 30 day script. Now that's what I don't understand. You know, I'm paying into premiums for my healthcare program, but yet I'm not utilizing that benefit because I'm getting a much better deal through a discount card. Those are some of the questions that need to be asked is how's that possible?
- [14:30]
A
Yeah, yeah, I've witnessed the same thing as well. And I mean that we're part of a health consortium in my school district with surrounding districts and we're looking at just preventative care too, like looking at musculoskeleter programs that are virtual and things just to try and be preemptive about all of these costs because we're seeing these come up in our experience on the plan, but we're being reactionary just isn't, isn't working. Right. So we're trying to implement something that's going to allow us to maybe be proactive. And although there arguably is an upfront cost long term, hopefully if we can do some preventative care, we'll see some reductions on some of those costs on the healthcare plan. But that data remains to be seen in terms of its effectiveness. But we're at the point where we're trying anything because just it's just getting out of control in terms of being able to kind of manage those costs year over year.
- [15:21]
C
And I think the other thing. Just real quick, John, just some other Things that the districts can consider is, you know, there's a lot of steerage toward high deductible health plans because it's more of a consumer driven concept where me as the consumer, I have to think twice as to whether am I sick enough that I just want to go to the doctor and pay my $15 copay or do I stay at home because I just, you know, I've got this money going into my health savings account. I don't really want to spend it for a common cold. So I think decisions like that are contributing to helping to offset some of that cost. Obviously, like I said before, higher deductibles, but just looking at things a little differently on how you procure health care can make a difference.
- [16:01]
A
Sure, sure. I'm curious too. Is there anything that stood out to you that was surprising in terms of the findings in the report?
- [16:09]
B
I would say, you know, there were two things. So. So the first thing that was surprising to me was just how many districts are tapping their reserves to navigate rising costs because again, like that, that is not an ideal situation to be in in the long term. If we were talking about this was a one time thing, you have to tap into reserves just because maybe you just were a little off in your budget projections for that particular school year, but you know, have a way to easily replenish it. That's not such a common concern. But to Jim's point when he was talking about this earlier, is that reserves, they're not designed to be handling rising recurring costs like healthcare obligations if the district doesn't have a strategy, you know, kind of out of, of relying on reserves. The second thing that was pretty surprising to me was just how commonly GLP1s kept getting brought up in member survey feedback as a cost driver. Because we didn't have a question in our survey that directly asked about GLP1s. There was more, just like an open end. Is there anything else you want to tell us? And that's where that information really started coming in. So there were a couple districts in Ohio that were saying that the GLP1s were just killing their district as far as being able to plan or absorb these costs. And they actually had to forego giving some of their staff raises to pay for it.
- [17:32]
A
And on the GLP1 subject, I mean, that's something that I think all of us who are involved in healthcare plans are experiencing and you know, in my area as well, some consortiums, some health plans are looking to no longer support those and no longer pay for those GLP1 medications. Some are. There's different theories around why you and why you shouldn't. But why do you think these are having such a significant impact on these health plans?
- [18:02]
C
Like I said before, any excessive utilization of any particular pharmaceutical that's going to drive claims cost is going to increase that premium. If you're seeing an influx of utilization GLP1s and I don't know much about the drug, I don't know what the cost of the drug is, but any, like I said earlier, claims is going to drive healthcare costs. So as long as you're seeing increased claims, whether it's GLP1s or other types of treatment options, it's going to definitely contribute. Which kind of goes back to the concept of plan design. It's really forcing a lot of these healthcare consortiums and self insured pools to look at their plan design to see to what extent they're going to cover some of these expenses and are they going to cover it dollar for dollar or are they going to implement higher deductibles or higher co pays to try to offset that cost? Plan design is never an easy conversation to have in the education world, but it has become almost expected because you can't afford those 20 and 25% increases annually.
- [19:01]
B
Yeah, the only other thing that I would add is, I mean GLP1s I think were the little bit that I'm aware with this medication is they were predominantly used for diabetes, like specifically. And I think that the use of the medication has vastly expanded. It's now been considered like just a general weight loss treatment. And they've been releasing new studies seeing that these type of medications are helpful for a whole bunch of different issues. So I think the broader trend with these medications in general is they've almost become viral. Like they're just really, really popular. You see, you know, ads form everywhere, at least in my community. You know, then there's all sorts of options of like, well, if your insurance doesn't cover it, ask us about, you know, how you can finance and pay for this. So it could just be a broader like popularity trend with, with marketing these drugs that are encouraging more employees to look at is this a medication I want and then to check with their insurance plan if they can.
- [20:01]
A
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- [21:08]
B
So for the broad trends, I'll just recover, cover those real quick and then, Jim, turn it over to you. So the, the first trade off was that tapping of reserves. So there's the opportunity cost of that. Usually reserves are used for emergencies. Let's say you have a big storm come through, tears up a roof and in, you know, when your buildings and you need cash up front to make those repairs while you're waiting on reimbursements from like FEMA or wherever else. It's a lot harder for a district to respond to emergency. If your reserves are already being eaten up by healthcare costs, it puts districts in a difficult situation. We heard a lot of feedback from members in the survey about having to defer facility maintenance in particular because the reserves were being used for healthcare instead of what they normally would go toward. Other trade offs involved modifying benefits packages, delaying hiring or investing in like staff raises, that sort of thing, cutting investments in curricula and technology and just scaling back overall healthcare coverage for family insurance plans in particular. But Jim, if you want to go ahead and chime in as well, would welcome your input.
- [22:14]
C
Yeah, no, I think you hit most of the points. It's like every other conversation. When in a school district and you're having challenges with the budgets and you're starting to look at ways to reduce cost, you're always looking at those areas that are going to have that less impact on the classroom. So you know, obviously delaying staffing decisions could have an impact on class size, technology upgrades, deferred maintenance. All those things are going to catch up with you in the end. So a lot of districts don't have a lot of choice but to turn to those reserves. And you know, if it's a one year blip, that's one thing. But to have to continue to Reserve to use those reserves for these types of expenses long term is definitely going to be a disservice to the district. So I think you hit most of those areas elica, that you're going to trade off and salaries and fringe benefits. And it's such a personal decision, an impact so personally that it impacts all the staff, which is really important as to why you have those benefits committees and you're collaborating, you're building that team of trusted advisors so that you're jointly working together to find ways to address this. I've been in districts where becomes a top down decision and it does not sit well with the employee groups. So having that benefits committee to help talk through some of those issues because they want pay raises, they want additional teachers in the classroom. So trying to find some common ground to address that rising healthcare cost without having to offset some of those other expenses that's going to impact the classroom is critical.
- [23:46]
A
You know, Jim, to that point, oftentimes, I would say more often than not, these benefit packages are collectively bargained and you know, the district has to honor what was, what was negotiated. So you know, you talk about maybe addressing plan design. A lot of that would require some kind of negotiation. Are you hearing anything from members in terms of approaching plan design and negotiating but still having to pay for it somewhere else, whether it be through salary or longevity bonuses? Because I mean for, you know, if I think of a teacher's union, they're not wanting to have to give up a health benefit without something on the other end to supplement it. Are you getting anything from your membership from that kind of standpoint in terms of although we're saving on healthcare, we're still having to pay for it somewhere else, whether it be through salary or maybe additional time off or something like that.
- [24:34]
C
I mean, I haven't heard anything directly and ELICA may have seen or heard some things. But what I will say, at least my experience in Ohio when it comes to addressing plan design, typically the collective bargaining agreements have really been modified to lean on the health and benefits committee to make those decisions so that you're not having to negotiate every aspect of the insurance program every three years. So it does allow for greater flexibility when you have that structure set up. So I don't know if that's something that's in other states as well. We had a lot of success in Ohio in getting that bargain that way because of the increased cost and being able to respond quickly when we need to. Elica, have you heard anything directly from members on this?
- [25:24]
B
I mean, we Got some anecdotal feedback in the survey that really just talked to the limitations of being able to adjust these packages because of the collective bargaining, you know, just factor that districts have to deal with. I wouldn't say that we, we got anything more specific than that. There were a couple folks who said, like, their state is respons for managing their plans, so the districts have even less flexibility for being able to change those benefits. I believe Washington state was one of the ones where we heard from a lot of districts saying, it's like, it's really difficult to even figure out how to answer these questions because this is all up to our state. There's not a whole lot of agency that we have at the local level to even modify benefits in ways that could help because it's outside of our control. But, you know, to that point, with collective bargaining, you want to, as district leaders, you want to attract the best quality educators you can for your kids. And these health care benefit packages play such a large role in that. So even when a district might want to look at reexamining these benefits and scaling things back, they may hesitate to, because if they're in a very competitive area where they're fighting for the same labor poll with other neighboring districts, that's going to be a really tough decision to make to scale that back. And then in certain, like rural remote areas, you're just desperate to get whatever staff that you can attract, period. So this may not even be something that's on the table. While it was a common trade off. You know, as Jim said, not every district has access to the same tools for navigating the situation. A lot of it just depends on their local circumstances.
- [27:07]
C
I was just going to add, you know, there's some other steps you can take in auditing your plans. I've been in districts where we have implemented the spousal rule where if your spouse has coverage with their current employer, they're not allowed to come on your plan. That's just a way to try to offset some costs. Same thing with dependent eligibility. There have been times that you find that you're covering dependents that were not legitimate dependents. So those are just some steps to help mitigate some of that cost that districts could implement if necessary. Not saying it's a popular thing to do, but it is one thing that a lot of these committees are now looking at as a way to validate those that they're covering.
- [27:50]
A
You know, Jim, to your earlier point about this being personal, we have the spousal rule. So as A business officially makes sense, but as an employee, I'm like, come on.
- [27:59]
C
Right, right.
- [28:02]
A
So what are members saying more so about trade offs like, such as delaying hiring or reducing investments in technology and curriculum or even, you know, Elica, you were saying about not being able to use reserves for like, capital improvements or facilities. What are those trade offs that you're finding as part of the data coming back?
- [28:20]
B
Sure. So, you know, about a third of districts who were surveyed said that they were delaying hiring as a result of rising healthcare costs. And really just that health costs in general are increasingly influencing decisions to fill, you know, vacant positions, add new positions, increase salaries and wages, and, you know, provide more comprehensive benefits for staff. And then there is roughly another third, 31% that said they were having to cut spending on instructional materials and technology, delay any updates, or delay their adoption cycles for, you know, renewing or replacing certain devices or technology. And then when it comes to capital projects, specifically postponing, like new capital projects, not even talking about the deferred maintenance new capital projects, I believe about a quarter, around 21% of those surveyed said that rising healthcare costs were influencing those type of decisions. But I mean, to the point we, we've already talked about with tapping reserves, there is more than half of districts who said, you know, we're deferring facility maintenance, which our reserves would normally be used, you know, to pay for that. So it's a little trickier to kind of get a capture of just the extent to which it's affecting capital projects. But we saw bits and pieces, you know, through the data in this report.
- [29:47]
A
So we brushed on this a little bit earlier, towards the top of the episode. But healthcare costs are often viewed as more of an employee issue. But I think this report really makes it clear that there is a huge impact on students as well, because there are so many resources being driven towards sustaining a benefits program. So can you tell me how rising costs are affecting educational opportunities? And what happens when districts aren't able to invest in the curriculum into, into the classroom because of these things like employee benefits and, and money's being drawn away from educational opportunities.
- [30:22]
B
Right. So I mean, when, when you're talking about delaying staff investments, that has real impact on students? I mean, just point blank, you need high quality, well trained educators and staff to run the programs and services that your district offers that your students and your community relies on. Educator shortages have been a long standing challenge for districts, not just teachers, but just kind of across the board. And yet when you're having to postpone, step in salary Increases, you can't invest funds in recruitment or retention programs. You're really going to struggle to address the shortages in your community. We heard from the data that a lot of folks are converting, you know, full time roles to part time positions. They're eliminating non instructional staff and that sort of thing. But I mean ultimately the overall message is that rising healthcare costs are limiting districts ability to expand curricula to provide extra student services and support. Some of the specific trade offs that we heard mentioned was, you know, having to delay upgrading like instructional materials, books, supplies, that sort of thing for classrooms, STEM and CTE programs, supplemental special education services, mental health support, investing in school like building security and safety as well as early childhood learning programs. So I mean the impact is definitely real. These trade offs do have a true effect on our students. Jim, I don't know if there's anything else that you've been hearing from members.
- [31:56]
C
Well, I think the key is that you can make short term decisions to solve the problem, but it's going to have long impacts. And the more that you have to delay the implementation of programs or delay investments in infrastructure or technology or textbook adoption or staff additions, you might be able to get by with that on a short term basis. But from a long term perspective, if the focus is on student achievement, then you need to be allocating every possible dollar toward impacting that student achievement. So every dollar spent on healthcare, every dollar spent on utility costs due to rising cost is less money we have to spend in the classroom. So the trade off is huge. It's going to be hard to really look at it from a one year perspective, but when you think about long term and if these trends continue, you're going to see it impact in a huge way the outcomes in the classroom.
- [32:54]
A
And Jim, you had mentioned the athletic to 10% figure is kind of like a baseline. But we're obviously not in that era anymore. So when a school business official is not only putting next year's budget together, but looking to do a multi year forecast, how do rising healthcare costs really affect long range financial planning for the practitioner?
- [33:13]
C
Well, you know, it's very unpredictable. Long term forecasting in general can be very unpredictable just because the new laws do policies that come down from either state or federal government. But you know, taking into consideration those capital plans, the strategic initiatives I've always built in, and I do the same thing with ASBO. I build a 15% increase in every year whether, you know, regardless of who's on the staff, regardless of, you know, we don't have the benefit of being part of a consortium. We're all self, we're all individually rated because we're a small employer. So I've got to anticipate that. Fortunately for us, I had a 15% budget for this year and we came in, I think around 6%. That's outstanding. But I think from a school business practitioner's perspective, you need to be conservative. You need to be thinking about that 15 to 20% range. And I know that's hard to do out three to five years because you don't know what it's going to be. But I always, I've always been a big believer in forecasting worst case and then hopefully you do better.
- [34:24]
B
And the other thing I would add to that is, I mean, something's got to give if your costs continue to go up and your revenues are decreasing. Like it's just not good from a financial sustainability perspective. And that's where there is a role for advocacy to communicate the challenges that, that you're facing with local, state and federal policymakers. Because it's not like, you know, you can just easily find money to fund these programs. A lot of it is, you know, is tax funded. So this requires, you know, building strong partnerships with all levels of government to find collective solutions that can, you know, help you out of this situation. This isn't something that I think any district can, can figure out and solve alone. This is something that requires a collective, multi prong solution.
- [35:09]
A
Well, it's a beautiful segue, Elica, because I wanted to focus on policy and advocacy next. So what are some of those policy changes that come up in the report and recommendations for local, state and federal levels? And there is a specific mention to IDEA and Title 1 funding mentioned. Can you kind of talk us through what role can states play in supporting those schools and what policy changes could really help alleviate some of these issues?
- [35:34]
B
Absolutely. So like I said, we recognize this is not an issue that any one district or any one level of government is able to solve on their own. We offer several recommendations in a report for policymakers at all levels regarding some of the education finance specific solutions. The reason why we note we need more robust funding for Title 1 and full funding for IDEA is because these are the largest federal revenue streams that school district districts rely on and they come with a lot of unfunded mandates that districts are currently taking on. So by providing the full funding that Congress has promised, the idea is that that will shift the current cost burden that local districts are facing, free up local funds that then they can turn around and invest in classrooms or use to pay for rising health care or use to pay, you know, higher salaries for teachers. Because right now, you know, the federal government, they are not paying the fair share that they promised that they would when IDEA was authorized and they never had. So I think that this is one area that really could alleviate some budgetary pressures and trickle down locally for districts at the state level. We make a few recommendations. Obviously, you know, states should review their school funding formulas. They need to make sure that their funding formulas actually accurately account for the real operating costs that are required to run a modern public school system. For some states, their funding formulas are terribly outdated and they may not even include funding for things like school infrastructure, which is a whole other conversation that we could have, John. But, you know, again, by providing state aid in some other areas, that frees up those local funds to be able to address some of these rising costs. Of course, if there are extraordinary circumstances outside a district's control, you know, there might be an appropriate ask for supplemental aid, you know, from the state to help districts out. And then also looking at those local policy restrictions on levy caps, millage limits, district reserves, or anything else that might constrain local, local revenue fundraising just, you know, to give districts more flexibility to pivot and adapt when they're dealing with these kind of challenges. Regarding health policy stuff, we did make a nod to the role that states, you know, can play with working with districts to, you know, establish like, statewide or public sector insurance risk pools just to provide insurance coverage and spread risk across a broader pool than what one district might be able to do. We do reference how Montana, how their school districts had banded together to advocate and establish a statewide trust that did minimize health care costs for their district. So try to at least leave with a successful case study or story, you know, that others can learn from. But Jim, I know you're, you're the health guru here, so I don't know if there's anything else that you would recommend from, from a policy perspective.
- [38:42]
C
Yeah. Before I get there, just one other thing. We've talked a lot about the general fund. And typically when you're forecasting in a district, you're forecasting general fund. You're not really, you're thinking about the other funds you manage, but really you're forecasting the general fund. The other complication with rising healthcare costs is a lot of these federal programs where you're funding staff salary and fringe benefits out of that federal program. As those costs increase, that's going to leave less money in that federal program available. Which may require increased contribution from the general fund to support those programs. So any consideration to reduce funding for Title I or IDEA is just one more element of something the district's going to have to keep in mind as they're doing those forecasts to be able to understand not only rising health care costs, but if they're under the threat of what, losing additional aid, how are they going to absorb those costs and how are they going to protect those students from the risk pools and the consortiums? The nice thing about that is if you can manage that, the larger, sometimes the better because you can strengthen that purchasing power, you get more diverse groups that help you manage the high cost of claims, depending on how the group is structured. I've seen some healthcare consortiums where the claims follow the individual district. I've seen others where they're blended and it's basically an overall increase for the group. I realize that if you're a good consumer of health care, you might be paying more than someone that's a bad consumer, but it's all about managing that risk because at some point you're going to have a bad year. And if you can mitigate some of that loss, buy those risk pools and consortiums, the better off. You also have greater negotiating power sometimes with the healthcare companies on getting better discounts, better rates on the pharmaceuticals and that type of thing. And then when we were running our self insurance program, the other thing that we often looked at is breaking our pharmacy cost out separately and looking at the pbm, which is a pharmacy benefit manager, looking at that separately. Because pharmaceutical costs can be a large portion of that budget. And you don't always have to go with the healthcare company with the pharmaceutical, especially if you're self insured, you can actually find independent PBMs if you need to do so. So those are just some other options to try to lower the cost.
- [41:10]
A
So as we wind down here, Jim, what concerns you most? If the current cost trends continue? But on the opposite end of the coin, is there any optimism layered in there?
- [41:21]
C
Sure. I think the biggest concern is just the trajectory and the cost is rising faster than revenue. So it's not sustainable. Once again, if it's a blip, that's fine, but if it's, if it's long term districts trying to get a handle on that long term cost without having to constantly eat in the reserves is going to be critical. I think the optimism is that we're growing awareness and alignment and this report is going to be a call for action. So I think just the things that we're doing to try to bring greater awareness to our members that this is a challenge and to continue the conversation around ways that we can lower healthcare cost. I think I'm somewhat optimistic about that. The fact that we're talking about this might lead to some additional understanding and options to lower our cost. Great.
- [42:13]
A
And Elica, I'll give you the final word. What do you hope school business officials really take away from this report?
- [42:18]
B
I mean, I think Jim hit the nail on the head. We wanted to raise awareness about this issue. I think, you know, school business officials, when they see this report, they're going to realize that the challenges they're facing, they're not alone in this. This is something that is happening to districts across the country. They're not alone in trying to make budgets balance and do right by their students and communities. And this report can provide that national context as school business officials engage with their policymakers to share their own district's unique story, you know, given this kind of national data to provide that backdrop for them. But, you know, one thing I would flag, you know, for optimism purposes, too, is just that because you're not alone, you have a network of peers that you can connect with, that you can collaborate with, that you can think through these challenges with and learn from each other. So, you know, asbo's network is a great place to connect and ask questions with your peers. We also have our advocacy conference coming up next week where we're going to be on the Hill talking to policymakers about this report, as well as many other issues affecting K12 education. And then we have our annual conference this fall in Pittsburgh, which is another opportunity to get together and connect and solve problems together so you don't have to do this alone. That's the lemonade I can make out of these very sour lemons.
- [43:47]
A
That's great. That's great. Well said. Well, thank you both for coming on the podcast and kind of pulling the veil back on the report, but also the collaboration with AASA on putting this report out, because, I mean, this is incredibly timely issue and there's plenty of opportunities, Alec, as you just said, to get in front of policymakers and really discuss some of the trends and the issues that are facing school districts. But with that, I thank you both again for joining me today.
- [44:10]
C
Thank you, Joan.
- [44:11]
B
Thank you. It's always fun.
- [44:14]
A
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