Georgia teachers’ fund to lose $525 million

Georgia officials plan to cut $525 million from reserves in the health insurance plan for schoolteachers and state employees to alleviate some of the severe budget crunch.

State law prevents the direct removal of reserve funds from the State Health Benefit Plan, which covers 690,000 state employees, schoolteachers, dependents and retirees.

So the board of the Department of Community Health, which runs the employee health plan, on Thursday approved a lowering of the health benefits rates charged to state agencies, local school districts and the state Department of Education.

That essentially would reduce the health plan’s projected net assets by $525 million.

“State agencies and local boards of education are facing cuts,” said Carie Summers, chief financial officer for Community Health. The lower rates “give these agencies a break.”

Bert Brantley, a spokesman for Gov. Sonny Perdue, said the $525 million “is money we are going to be able to use to soften the [spending] cuts.” He noted the money would only provide a one-time cushion for this fiscal year, which ends June 30. It won’t be available to help school systems and agencies next year, when the state’s fiscal situation may be even worse.

State employees and schoolteachers will see no change in the premiums or other costs now charged for health benefits.

Summers said the remaining assets in the state’s health plan — $137 million by June 30 — is a “reasonable balance,” representing about 5 percent of expected annual spending. Private, employer-sponsored plans typically hold a greater percentage of spending in assets, though, and Georgia’s ratio will be at the lower end of government health plans, according to Community Health.

Total spending for the State Health Benefit Plan last fiscal year was $2.5 billion.

There’s no statutory requirement for a certain level of reserves in the health plan, Summers said.

The state faces a $2 billion to $2.5 billion revenue shortfall, and as a result, agencies along with school districts confront major cuts in their budgets. Perdue’s budget plan will be unveiled next week.

Groups representing educators said Thursday that the decrease in school systems’ health contributions was a positive move to ease the budget crisis.

“The local systems are pinched badly, and they can use the relief,” said Tim Callahan, spokesman for the 75,000-member Professional Association of Georgia Educators. “It may be the prudent thing to do, but it needs to be watched carefully. It may save [school] positions and furloughs.”

Jeff Hubbard, state president of the 41,000-member Georgia Association of Educators, called the move “a belated Christmas present” for school districts. “Hopefully, it will allow our local education systems to make up their own shortfalls and lead to positions not being cut,” Hubbard said.

Under the rate reductions approved by Community Health, local boards of education and libraries will save $274.8 million; the Department of Education will save $124.4 million; and other state agencies will save $126.6 million.

Last year, the state raised rates that state agencies and local school districts pay for the health benefits plan. That’s one of the reasons, Summers said, that its surplus rose to its current level.

— Staff writer James Salzer contributed to this article.