MERSD FY19 Budget Update

Rising Health Care Costs - A Persistent Problem

January is budget month for the MERSD School Committee and balancing the FY19 Budget presents a challenging task.  Over the next few weeks, the School Committee and district team will continue to work collaboratively with the towns of Essex and Manchester to refine the numbers and reach a final budget request.  The challenge before us is addressing back-to-back double digit increases in health care.

As we outlined at the Tentative Budget Public Hearing on December 13, 2017, the district is facing a projected $735,000 (16%) increase in health care costs.  This increase follows a 28% increase in fiscal year 2018, for a total increase of $1.5 million dollars in two years.  The cause of the increase is not due to changes in plan design but rather a significant and atypical increase in catastrophic cases.  The increased cost of health care will exceed available funds under a level services budget, leaving no additional funds to manage annual increased costs and program investments.  Our current fiscal situation will require us to make some difficult choices going forward.  In the short-term, to manage the FY19 budget, we are looking at efficiencies in the areas of services, fees, staffing and program. Long-term we will be looking at the structure and sustainability of the current health care benefits plan.

Health care costs are an annual challenge.  Here’s what we have been doing to manage this difficult issue.

• Established a joint school-towns budget collaboration team.
• Worked collaboratively with the Manchester Essex Teachers’ Association to
• Reorganize health care benefits and establish an OPEB (Other Post -Employment Benefits) Trust Fund to fund state mandated retiree health care obligations.
• Introduce higher co-pays and deductibles for insurance plans
• Reduce employer contribution rates based on standards in comparable districts
• Negotiate annually with multiple insurance providers.  Prior to 2018, the average increase per year in health insurance rates for MERSD was just 3.3% over six years.
• Require all eligible retirees to migrate to Medicare as their primary insurer instead of MERSD’s plan.
• Outsourced services in non-academic areas such as custodial and cafeteria services.

Although we continue to seek internal efficiencies in order to maintain class size and program offerings, we will have some difficult choices to make in the coming months.  Shifting enrollment is working in our favor. Although we are still managing a cohort of students with record high class sizes, these students are now at the secondary level and entering elementary class enrollments have declined due to a demographic decline in school age children.  This population shift has allowed us to reduce classroom sections at the elementary level while maintaining class size benchmarks and shift resources to the secondary level to address the larger cohort.

Serving our students well is the driving force behind our budget development process. The communities of Manchester and Essex have long had a reputation of excellent academic achievement, high quality faculty, a commitment to small class size, and strong academic and co-curricular programs. Our program is well respected, as are our communities.

We encourage you to visit the MERSD Budget page (www.mersd.org – Quick Link: Budget) to review our presentations and to learn more about the goals and the challenges we are facing.  We also hope that you will consider increasing your involvement with the schools.  We welcome your participation and input as we work to address our challenges.

FY 19 Tentative Budget At a Glance

FY19 Tentative Budget = $25.2 million 3.18% ($777K) spending increase from FY18 budget Includes $354K cut to level services staffing via attrition/known retirements Relies upon $550K of yet‐to‐be‐identified spending efficiencies FY19 Operating Assessment = 3.29% Measures cost increase to towns after deducting “Other Revenue” (e.g., State Aid) from spending needs In line with recent year assessment increases of 3.32% (FY17) and 3.20% (FY18), following override/revenue correction from Towns FY19 Capital Budget = $2.108 million Pays for MS/HS project debt service Decrease of $48K (2.2%) vs. FY18

A great way to join the conversation and learn about what's going on is to attend a School Committee meeting.   Here’s a look at the topics being addressed in the next month.

Upcoming Meetings - MERSD School Committee
Date/Time/Location	Presentation Topics
January 30 /  7:00pm / Essex Elem.	Public Hearing - FY19 Budget
February 6  /  6:00pm / MERMHS LC	Adoption FY19 Budget
February 13  /  7:00pm / MERMHS LC	Joint Board Meeting w/ Memorial Building Committee  Approval of Preferred Option

   MERMHS LC = Middle High School Learning Commons – 2^nd Floor