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HCPSS to Report $37 Million Health Fund Deficit in Audited FY2018 Statement

September 26th, 2018

Howard County Public School System (HCPSS) will report a negative balance of $37 million in its employee Health Fund as of the end of 2017-2018 fiscal year (FY18). The deficit had been projected to grow to $50.5 million during FY18, adding nearly $28.4 million to the prior year deficit of $22.2 million. Auditors for the school system recently confirmed that FY18 closed on June 30 with a $37 million deficit, or $13.5 million less than had been previously forecasted.

Beginning in FY11, HCPSS operated for several years with a structural budget imbalance that strained its overall financial footing, accumulating a $22.2 million deficit by the end of FY17. The deficit was projected to grow by an additional $28.4 million during FY18.

Upon joining the school system in May 2018, Superintendent Dr. Michael J. Martirano, working with the Board of Education, took immediate corrective action to stabilize the Health Fund and set the system on a secure and sustainable financial course. A major priority for the Board of Education was to fully fund the Health Fund. This required additional funding supported by County Executive Allan Kittleman and the Howard County Council, as well as significant cuts to the HCPSS budget. The Board cut over $19 million in operating expenses from the budget to fully fund costs for FY19. The full funding of healthcare costs will eliminate the structural imbalance in the Health Fund, ensuring that the school system’s debt will not increase beyond the amount accrued in FY17 and FY18.

Dr. Martirano also directed staff to identify savings within the FY18 budget to reduce the projected $28.4 million addition to the deficit. The $13.5 million reduction to the deficit is the net result of a strategy combining efficient management, cost savings initiatives, and close collaboration with medical vendors to provide better health care without additional costs. Those measures remain in effect, and HCPSS budget program managers continue to look for additional savings through careful review of various programs and contracts, and by seeking efficiencies wherever possible to provide additional funding towards the deficit.