ELLICOTT CITY, MD – Today, Howard County Executive Calvin Ball announced a one-time County contribution of $10 million to pay down the Howard County Public School System’s (HCPSS) Health and Dental Fund deficit. The contribution will put the County ahead of the FY2024 target for eliminating the deficit and could potentially allow for the elimination of the deficit by the end of 2021. Photos of the event can be found here.
Shortly after taking office, we were confronted with Health Fund Deficit exceeding $39 million and an adverse audit opinion. We have since worked collaboratively with the school system to address the Health Fund Deficit, creating a multi-year plan to reduce and ultimately eliminate the deficit by 2024. Last spring, amid the fiscal uncertainty surrounding the pandemic, we were unsure we would still be able to meet our proposed timeline. Today, we are taking the next big step toward meeting this fiscal challenge head on, contributing an additional $10 million in my proposed FY2022 Operating Budget, and putting us on track toward eliminating this deficit once and for all.
Prior to fiscal year 2015, HCPSS maintained a healthy fund balance in the Employee Health and Dental Fund to account for year-to-year changes in the total amount of health claims. However, from FY 2015 through FY 2018, the employee Health and Dental Fund was underfunded to meet operating budget priorities, contributing to an accumulated deficit of $39.2 million by the end of FY2019.
"The deficit has long undermined the school system’s financial footing and has limited our ability to fund instructional priorities and student supports," said HCPSS Superintendent Dr. Michael J. Martirano. "Since becoming Superintendent nearly four years ago, eliminating the deficit and fully funding our health care obligations have been amongst my highest priorities and I am grateful for the partnership and support of the County Executive. This $10 million County contribution will bring us far closer to ultimately eliminating this financial burden on a much faster timeline than we originally deliberated in our elimination plan."
As of June 30, 2019, the HCPSS Health and Dental Fund held a deficit of $39.2 million. The Comprehensive Annual Financial Report (CAFR) for Fiscal Year End June 30, 2019, contained a modified adverse opinion for the General Fund and the Health and Dental Fund. In February 2020, County Executive Ball and Superintendent Martirano reached agreement on a multi-year plan to resolve the Health and Dental Fund Deficit by the end of FY2024. The multi-year plan proposed to pay down the deficit incrementally using HCPSS unassigned fund balance, year-end savings from HCPSS and one-time contributions from Howard County Government.
“The County’s infusion of $10 million to apply to the remaining health fund deficit will greatly help our system to remove this financial burden which has strained our budget and limited the funding available for our priorities,” said Board of Education Chair Dr. Chao Wu. “We appreciate the partnership of the County Executive and County Council in making the debt reduction a priority, much credit is also due to our school system staff who have been diligent in their efforts to find budget savings and streamline expenses.”
Later that month, the County Executive filed legislation appropriating $7.2 million of unassigned fund balance from HCPSS to begin paying down the Health and Dental Fund Deficit. By the end of FY 2020, the Health and Dental Fund Deficit had declined from $39.2 million at the end of FY2019 to $18.7 million, with the use of the $7.2 million in unassigned fund balance and savings within the Health and Dental Fund contributing to the $20.5 million deficit reduction. These measures, coupled with the establishment of a collaborative multi-year plan to eliminate the deficit, resulted in HCPSS receiving an unmodified opinion in its Comprehensive Audited Financial Report (CAFR) for FY2020.
“On behalf of the 7,000 employees we represent we are so grateful for this contribution to our health fund deficit,” said Colleen Morris, President of the Howard County Education Association. “When you come in and you find out that your school system hasn’t been funding the employee healthcare fund and you need to add 30% to the fund and eliminate the deficit, it’s an extreme challenge. Thank you to County Executive Ball, Dr. Martirano, and the Board of Education.”