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New Report Finds CT Spending Less On Education, More On Employee Health Care

by Christine Stuart | Oct 25, 2012 9:30am
(5) Comments | Commenting has expired
Posted to: Nonprofits, State Budget

Courtesy of CT Voices

The state’s spending over the past two decades has shifted away from education and social services to debt service and state employee health insurance, a report released Thursday found.

Connecticut Voices for Children’s Fiscal Policy Center released its analysis of state budget policies that show spending on K-12 education fell more than 25 percent and spending on higher education fell more than 50 percent at the state universities, community colleges, and the University of Connecticut.

Human services, which accounts for one of the largest portions of the state budget, dropped 33.4 percent to 30.9 percent over the past two decades, while Medicaid spending has increased. However, the state spent 27 percent less per Medicaid enrollee in the last 10 years than it did a decade previous.

Conversely from 1992 to 2012, retired state employee health care spending increased 239.1 percent and general fund debt service increased 50.3 percent.

“As a consequence of fiscal pressures and budget decisions over the past two decades, the state’s debt has more than doubled in inflation-adjusted dollars, increasing by 142 percent,” the report concludes.

The largest increase in debt service occurred between fiscal years 1992 and 1994, when aggregate indebtedness jumped 100.3 percent. The aggregate debt has grown at a slower rate, increasing 21 percent, between 1994 and 2008.

“As a result of this steady growth, Connecticut’s debt per capita is currently among the highest in the nation,” the report concludes.

Over the past 10 years alone, the number of retirees participating in the State Employee Retirement System has increased by more than 30 percent, from 32,101 in 2000 to 41,782 in 2010. On top of this substantial increase in the number of retired beneficiaries, the cost of providing health services to these retirees has also grown.

Adjusted for inflation, the per capita cost of retiree health care increased some 54 percent between 2000 and 2010, from about $7,500 per retiree at the beginning of the decade to more than $11,500 in 2010. For current employees, health costs have increased from 13 percent to 22 percent of payroll from 2000 to 2010 – an increase of 63 percent.

“The state budget is an expression of our values and priorities,” Wade Gibson, co-author of the report and senior policy fellow at the Fiscal Policy Center, said. “We need to make sure that we make forward-looking budget decisions that maintain investments in the future while fulfilling our obligations to our most vulnerable populations – young and old alike.”

Gibson suggests changing the state’s education cost sharing formula, building on cost-containment efforts to reduce health care costs, and avoid “borrowing to cover operating expenses.”

Office of Policy and Management Secretary Ben Barnes said he doesn’t necessarily disagree with Gibson’s conclusion that budget’s reflect priorities. However, “budgets are reflections of values and they’re also a reflection of the environment in which they were created,“ he said. The later of which is not inconsequential.

Barnes said he would like to spend less on employee health care and pensions and more on K-12 education, but first the state needs a functioning formula to distribute the education grants to cities and towns.

Once it has a better way of determining how the money should be spent he’s not necessarily sure more money will be necessary, if the money it has is being spent appropriately. Barnes is a member of the task force that will make recommendations regarding the Education Cost Sharing formula to Gov. Dannel P. Malloy in November.

As for the rising cost of health insurance, state Comptroller Kevin Lembo said the state has worked hard over the past two years to negotiate a deal with the state employees which will increase prevention and decrease the cost of health care for the state.

“In both 2011 and 2012, employee health care spending as a percentage of the total general fund has been reduced,” Lembo said. “While public, private and non-profit employers across the country experienced employee health care cost increases of 8 percent or more, Connecticut’s rates stabilized with a zero increase per employee.”

An aging population and workforce, the fast-rising cost of healthcare, and the ripple effects of previous decades’ policy choices, combined with three recessions has caused healthcare to consume a larger portion of a tighter state budget at a time when the costs of these services are rapidly increasing, the report found.

“The changes made in the last two years alone have already moved the needle in the right direction,“ Lembo said. “Those changes include implementation of the Health Enhancement Program, patient-centered medical homes and other sensible improvements to health care management. We need to build on those efforts.”

He applauded the report for drawing attention to the issue.

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(5) Comments

posted by: skyrocket27 | October 25, 2012  3:34pm

As the article notes, “The state’s spending over the past two decades has shifted away from education and social services to debt service and state employee health insurance.”  Interesting corresponding fact, over the past two decades Connecticut’s budget has been ruled by the Democratic (majority) leadership in the Legislative Branch.  Safe to assume that the state employees’ unions are the priority to the Connecticut Democrats, at the expense of our children’s education and the needy receiving social services.

Connecticut needs and deserves better.

posted by: JAM | October 25, 2012  7:28pm

In addition to rising employee health insurance the unfounded liabilities ( stealthy debt that will be a growing future burden ) continue to rise. Eventually the bulk of the entire state budget will be devoted to employee costs and debt.

posted by: artythesmarty | October 27, 2012  9:36am

If money is going to teachers pensions and benefits wouldn’t that be considered going to education?  With the “keep the promise” campaign a couple of years ago the CEA said thier #1 priority in education was funding the teacher’s pension.  They got what they wanted and now are saying we are shortchanging education?

posted by: perturbed | October 27, 2012  10:36am

perturbed

It’s disappointing (and perturbing) that in a news article mostly about rising CT state employee/retiree health care costs, the author never once mentions the status of the Retiree Health Care Trust Fund (OPEB). According to the report that is the primary subject of the article:

”...the state is taking steps to reduce future retiree healthcare liabilities. Thanks in large part to an agreement between state employee unions and the Malloy Administration in 2011, the most recent actuarial valuation of the state employee retirement system reduced projected future health costs by $13 billion – a development that could mark a major step towards sustained cost containment over the next several decades.9”

That footnote refers to a Malloy administration press release that touts a 43% decrease in the state’s projected unfunded actuarial accrued liability, from $31.2B to $17.9B. The 2-page press release claims $6.2B in savings—nearly half of the total—from the irrevocable trust fund provision of the SEBAC 2011 agreement alone:

”$6.20 billion reduction is attributable to multiple collaborative initiatives between the HCCCC, the Office of the State Comptroller, and the state and SEBAC to establish and fund an OPEB trust fund.”

However, a mere four months ago, the same author of this piece reported that there is no trust fund, and state employees’ on-going contributions to it are being spent on operating expenses from the common cash pool. Did anyone ever think to ask about this glaring discrepancy?

It’s becoming apparent that the 3% taken off the top of our wages for a proposed health care trust fund was really a disguised 3% wage cut. The fact that neither Barnes nor Lembo mentions it is telling. The fact that our trusty union bosses are doing their best to ignore the violation of the agreement is telling.

Here’s one part of the agreement that, in spite of the fact that it did nothing to address the 2-year budget crises as purported, had the potential to actually benefit state employees in the future and lower costs for the taxpayers. And the SEBAC/Malloy Team are violating it so they can give away millions in corporate welfare instead to the likes of CIGNA and hedge fund managers.

Too bad this little issue didn’t even get a mention.

—perturbed

PS: I highly recommend reading the full 13-page report, as it’s informative, well-written and balanced.

posted by: perturbed | October 27, 2012  10:36am

perturbed

Oh, and here’s a little nugget from the a Malloy press release:

“Later-than-average retirement ages are very likely in the future, due to additional plan design changes that will increase health insurance costs and lower pensions for early retirees. These likely later retirement ages may further reduce this liability, but those potential additional savings are not reflected in this valuation.”

Very likely indeed. angry

—perturbed