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District projects future deficit

Published March 27. 2013 05:02PM

The good news projected revenues for the Tamaqua Area School District will steadily increase beginning with the current school year (2012-2013) and through 2015/16.

The bad news projected expenses for the same time period also steadily increase, and at a higher rate. By the 2015-16 school year, the projected deficit is $2.8 million.

The district's school board met Tuesday to discuss the long-term budget. President Larry Wittig said that the biggest challenges the district faces are funding the escalating costs of health care for employees and rate increases for PSERS (the Public School Employees Retirement System).

In the projected budgets to span the time period, the district would have to set aside about $2.7 million from the district's fund balance to cover expected PSERS rate increases, business manager Connie Ligenza explained. At the end of the 2012-2013 school year, the district's fund balance will be $4.7 million.

The district would also have to find a way to cover a projected $510,000 "excise tax" imposed on its present health care plan. A health benefits excise tax has been passed into law as part of health care reform. Sometimes called a "Cadillac tax," it was designed to encourage employers to move from offering high-cost insurance policies to offering less-expensive plans.

The district's employees are self-insured through Capital Blue Cross. At Tuesday's meeting, Jim Murphy, Capital Blue Cross senior account executive, Harrisburg, told the school board about several options it could take to reduce the amount of excise tax it has to pay.

"The Cadillac Tax is a tool for the federal government to raise money to pay for the underinsured or uninsured," Murphy said. "They (the federal government) have bills to pay and they don't have any money.

"I want to explain some tools you have to try to mitigate the effects of the excise tax, and get well-positioned for the future."

Murphy's presentation focused on revamping the district's current policy, which he termed "traditional," into a consumer-directed health care plan. In the consumer-directed plan, the consumer chooses from preferred providers, and also has the opportunity to comparison shop, pricewise, for services.

Two important components of the consumer-directed health care plan, Murphy said, are a higher deductible and a health savings account. The two components are directly related, he said.

"Although the consumer has a high deductible, the deductible doesn't apply to preventive care," he said. "The school district saves money on the health care plan because of the higher deductibles, and can return the savings to help fund the employees' individual health savings accounts."

"The employee can cover the deductible cost by drawing from his health savings account, which negates the high deductible."

Murphy said that he's helped several school districts and a number of large employers make such changes to their health care plans, as a necessary step to reduce a big chunk of their operating costs. Businesses which are unable to take such measures may find themselves making cuts in other areas, he said, and that sentiment was echoed by Superintendent Carol Makuta.

"We'd have to cover the deficit with tax increases," she said. "Or if there were no tax increases, we'd have to look at furloughing employees, or making changes in the configuration of our properties."

Murphy said that the district should take steps incrementally to begin to change the way it delivers a health-care plan for employees.

"The steel workers fought and fought to keep zero-dollar deductibles, and look where that got them," Murphy said. "You have to teach your plan members to be better consumers.

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