Last Monday’s Board of Finance meeting saw the approval of the Selectman’s budget to go to referendum and vote. The school budget was not voted on because of questions about information on a document that was sent to the BoF members on Sunday. Because School Superintendent Tom McMorran and Interim Finance Director Michael Lagas were at a meeting in Easton, neither could be reached for clarification. The Redding Board of Finance meeting was then adjourned and an additional meeting was scheduled for this Monday, April 3 at 8 pm.
The questions involved the placement of Redding schools $300,000 surplus from last fiscal year. These funds can only be placed in the Health Reserves fund or returned to the town. They did not appear on the document given to the BoF by Central Office.
Since then, Dr. McMorran has provided information to the Redding Board of Education and the chairman of the Redding Board of Finance. In addition, he will be speaking about it at Monday’s meetings.
Dr. McMorran gave hello, Redding an advance explanation.
He said that former Finance Director Peggy Sullivan analyzed the health insurance reserve fund, and used her advance knowledge of some of the anticipated needs for insurance claims to earmark $300,000 from the 2015-2016 budget for transfer into the 2016-2017 budget.
She transferred $150,000 on September 23, 2016, and held the balance for a spring transfer.
Before the spring transfer could be completed, Sullivan left the district for another position. The other $150,000 is in Redding’s bank account waiting for the transfer. Dr. McMorran will be seeking a transfer authorization from the Board now that we are in the spring. He said that he does not know why the former director wanted to do this in two chunks.
Michael Lagas has said that according to his experience, the health reserves account is extremely underfunded. Dr. McMorran reminds us that we lost a beloved member of the RES staff to cancer in the late fall, and although the community would not and should not have known about it, the Director of Finance was planning ahead to make sure there was enough in the health reserve fund.
McMorran said, “ People use the term surplus, indicating that somehow funds were excess, extra, unneeded, etc. I prefer to use the term: ‘Unspent Funds.’ There were unspent funds in many places, all for beneficial reasons to the town, low snow removal, low legal cost, few worker’s compensation claims, etc. There were also savings from other areas. The amount that was returned to the town was about $85,000.”
He explained, “Of about $600,000 there was about $100,000 for the boiler, and $300,000 for the Health Insurance Reserve Fund, and $115,000 for the special education reimbursement to the State, and that leaves the $85,000.”
Dr. McMorran supplied this information on the unspent funds for the past few years. Note that Dr.McMorran is only in his second year as School Superintendent so much of this occurred before he was involved.
- 2015-16: Amount unspent was approximately $600,000. Amount returned was $85,000
- 2014-15: Amount unspent was approximately $350,000.
- 2013-14: $88,180
- 2012-13: Nothing returned but $70,000 moved into Health Insurance Reserve
- 2011-12: Nothing returned but $21,381 moved into Health Insurance Reserve
What does being self insured mean?
Dr. McMorran supplied this explanation:
First, it is the least expensive way to insure your workforce. The Districts work with an insurance broker to determine how much cash it will need each month to cover the claims from its employees. A per employee amount is determined, and the month cost is divided between the employee who pays a percentage, 15% to 20% depending on the Contract, with the District paying the rest. The claims are processed by the insurance company which charges an administrative fee.
A self-insurance plan should be viewed over many years because there will be some years with high claims and others with lower. In years where there are lots of claims, people will ask why the District isn’t fully insured. Full insurance provides better coverage in such years, because huge costs are absorbed by the company. But that leads to higher premiums. So, what the District does to mitigate the danger of high claims is set a “stop loss” amount that caps the District’s out of pocket coverage of any one individual. E/R/9 sets that amount at $175,000. Cost per year for a person that exceeds that amount are covered by the insurance company, and that program is included in our budget.
Second, a self-insurance plan remains less expensive than joining the State’s much larger insurance group for public workers. We are monitoring this, and if/when belonging to the State’s “2.0” option appears beneficial we will consider it.
Please attend the Redding Board of Finance meeting this Monday, April 3 at 8 pm.