Public education is a labor-intensive operation, with an estimated 75 percent of its costs directly related to collective bargaining. Health benefits, in particular, represent a significant driver of school operating costs, NJSBA’s director of governmental relations told the joint legislative committee on school funding reform Tuesday.

Controlling those costs is difficult, if not impossible, for school districts that use the State Health Benefits Program (SHBP).

“The Legislature can promote savings by implementing reforms that would permit greater flexibility to negotiate within the SHBP,” said Michael Vrancik.

Flexibility Needed Regulations of the SHBP, the largest health insurance carrier among public school districts, prohibit negotiations over the most basic cost-containment measures that are available through private carrier in areas such as deductible and co-pay levels, employee contributions to premium and incentives for non-enrollment, Vrancik noted.

The result has been a decline in SHBP membership among school boards, the state program once served a wide majority of New Jersey’s school districts, today, less than 40 percent of districts secure coverage through the state plan.

For districts that find no choice but to remain in SHBP, legislative or regulatory action to loosen its rules would provide financial benefit. The effort would also make the plan more competitive with private carriers.

Millions Saved “Reducing the impact of uncontrollable and unpredictable increases in health insurance premiums would go a long way in addressing the cost of school operations and the concurrent effect on local taxpayers,” said Vrancik.

He noted one district that saved $2 million in one year by offering wavers of coverage—something not allowed under SHBP. Another district reduced its salary base by 1 percent by offering a managed-care program as its basic plan.

Shared Services Vrancik also told lawmakers that New Jersey has yet to realize its full potential to save money through shared services in transportation, special education, administration and recreation. He noted NJSBA’s support for incentive programs to help communities to identify shared services.

While shared services hold the potential for wide-scale cost savings, the financial impact of forced consolidation is not guaranteed, he explained.

Deal Breaker “Many communities have considered expanding educational and extra curricular offerings by merging with their neighbors,” he explained. “But the deal breaker has always been property taxes. When one town discovers that the merger would result in an increase in their property taxes, the measure fails to win approval.

“If the legislature is serious about encouraging consolidation of school districts, it needs to address this financial obstacle,” Vrancik noted.

NJSBA was invited to testify before the school funding reform panel, and present recommendations on how school districts could save money.

The panel is one of four set up by the Legislature to study issues and come up with viable solutions for reducing the property tax burden on residents.

NJSBA’s testimony presented to the school funding reform committee can be found on the Association's site.