While TRS rate drops, health costs could be next budgetary headache

by Paul Heiser

On Board Online • August 14, 2017

By Paul Heiser
Senior Research Analyst

Want to start the new school year with some good news? School districts will see a decrease in their contribution rates toward the Teachers' Retirement System (TRS) for the 2017-18 school year.

But there is bad news as well: Health insurance rates are continuing to climb.

TRS contributions and health insurance premiums are both significant components of school districts' annual budgets. Statewide, districts spent about 8 percent of their budgets on TRS and 9.5 percent on health insurance, according to data from 2015-16.

The TRS rate will drop from 11.72 percent in 2016-17 to 9.8 percent in 2017-18. That wasn't a surprise; the TRS board estimated a rate of 9.8 percent in January and formally adopted that rate this month.

"A declining trend in the TRS contribution rate, increased state aid and a slowly growing economy should help districts deal with a long list of financial challenges," said NYSSBA Executive Director Timothy G. Kremer. "On the other hand, health insurance costs are going through the roof."

Statewide, 130 school districts and BOCES participate in the New York State Health Insurance Program (NYSHIP), which is administered by the state Department of Civil Service. NYSHIP projects that both individual and family rates will increase about 9 percent in 2018. That would be higher than the 10-year average annual increase of 5.7 percent for individuals and 6.5 percent for families.

Private health insurance rates will also rise in 2018; small group insurers asked the state Department of Financial Services (DFS) for an average rate increase of 11.5 percent, while larger plans requested an average increase of 16.6 percent.

"In a tax cap environment, uncontrollable costs like health insurance and TRS contribution rates are a major concern," Kremer said. "Also, we are hearing concerns about how costs for special education are a substantial obligation for many school districts. In this environment, the Legislature and the governor must continue to improve state aid and fully fund schools per the foundation aid formula within three years."

TRS payments associated with the 2017-18 rate will be collected in the fall of 2018. The 2016-17 rate is applied to the 2016-17 TRS member payroll and will be collected this fall.

Because the employer contribution rate from 2016-17 to 2017-18 will decline, school districts will not be allowed to take pension exemptions from their 2018 tax levy limits. The exemption applies only to rate increases that are greater than 2 percentage points.

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