The Kemp administration saved the state and local school districts about $235 million this month by having them skip premium payments into the health insurance plan for about 650,000 Georgia teachers, state employees, retirees and their dependents.
That was good news for state agencies and schools, and the move will make the state’s financial books look better when the fiscal year ends Sunday. But it has set off alarm bells among plan members, who remember what they called a raid on State Health Benefit Plan reserves during the Great Recession that resulted in higher premiums for employees and changes in benefits.
A May 14 memo from Gov. Brian Kemp’s Office of Planning and Budget said it was looking for ways to help the state “ensure that we end the year in good fiscal order and support the governor’s priority of strong, conservative fiscal leadership.”
The June holiday for the state and local school districts from paying into the insurance plan, the memo said, would help the state “conserve state and federal funds.”
“This holiday will provide substantial savings to the state and local school districts while maintaining a healthy and well-funded health plan for our employees,” said the memo, obtained by The Atlanta Journal-Constitution.
Gwinnett County’s Board of Education responded by giving its employees a $300 salary adjustment, but for most agencies, it was used to cut their costs for the fiscal year.
State tax collections were up slightly in May, and they improved 4.5% for the first 11 months of the fiscal year. What the state collects in June will determine whether it raises what it needs to meet its budget this year.
State officials may have expected a little stronger growth, considering a law that went into effect Jan. 1 mandating that online retailers collect taxes from their sales in Georgia. Job growth has also been relatively slow so far this year.
OPB officials said the benefit plan, or SHBP, is projected to have a surplus this year, and that the move to not pay into the plan will “make sure the state is in the strongest possible position for the end of fiscal year 2019.”
The plan has an estimated $643 million in reserves, and it is expected to put an additional $105 million into a fund for future health care expenses, OPB officials said.
The benefit plan is funded by a combination of “employer” payments — money put in by the state and school districts — and the “employee” payments that plan members make as premiums.
John Palmer, a Cobb County educator and spokesman for the group TRAGIC, said there is reason to be concerned about the governor’s move.
In 2008, as the Great Recession started hammering state finances, the state allowed agencies to skip payments into the health care plan to save money, he said, essentially raiding the plan’s surplus of about $600 million.
“This money was never replaced by the state, and insurance rates for teachers and state employees tripled and benefits were cut in order to rebuild this reserve,” Palmer said.
TRAGIC formed after the Department of Community Health came out with changes in coverage for teachers, state employees and retirees, and increased upfront costs. TRAGIC members protested the changes during the 2014 General Assembly session, and Gov. Nathan Deal and lawmakers quickly came up with extra money to respond to the complaints.
Since then, health premium increases most years for many of the plan’s members have been below what employees in the private sector have faced. Palmer said that is now at risk.
“Over the past five years, teachers and state employees have rebuilt the SHBP surplus, yet instead of reducing premiums or increasing coverage, Governor Kemp wants to run the same playbook and again raid the SHBP reserves to help balance the state budget,” Palmer said. “This will lead to another manufactured ‘crisis’ of the SHBP that will cause higher rates again for teachers and state employees, and set a precedent that reserves, built with taxpayer money, are just a piggybank that can be used to pay for more state spending.”
OPB officials said the state is not raiding reserves but using SHBP surplus money that the plan expected to have this year.
The June “holiday” from SHBP payments wasn’t the only way to beef up the state’s financial books. Even if the state didn’t raise enough tax money to pay for its spending this fiscal year, Kemp inherited a $2.5 billion “rainy day” reserve from his predecessor.
Teachers, state employees and retirees on the plan won’t know for a few months what they will have to pay in premiums in 2020. The Department of Community Health board typically sets the rates in August.
Earlier this month, the board approved a new, lower rate of premiums, or contributions, that state agencies and school districts will pay into the system for the upcoming year.
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