Many New Jersey school districts say they haven’t seen the cost savings promised by the state when they implemented New Jersey’s mandatory educator health plan in 2021.
The Chapter 44 plan, signed into law by Gov. Phil Murphy in 2020 and backed by the state’s powerful teachers’ union, could end up costing some districts more than the old plan. Three districts have let the state know they want to exit the new health plan, with support from seven others.
In Ridgewood, school officials said the state estimates the district will save about $4.7 million in health benefits under the new plan. While preparing the 2022/23 budget, local officials learned that the actual savings would only amount to $27,000.
The savings of $4.7 million, if materialized, along with health plan savings from other districts, are to be used to reduce the property tax burden. It would have also potentially impacted other school programs and services, Ridgewood School Board President Hyunju Kwak said.
Other districts told similar stories of inaccurately estimated savings or additional costs, contrary to what the law intended.
What is Chapter 44?
The law is the result of an agreement between former Senate Speaker Stephen Sweeney and the New Jersey Education Association. It was touted as a plan that cuts costs by removing out-of-network reimbursements and offers teachers lower premiums.
The law passed unanimously with a 34-0 vote in the state Senate in June 2020. It replaces Chapter 78, a similar health benefits law passed under the then-government. Chris Christie, who has been criticized by the New Jersey Educators Association for driving teachers out of the profession due to its high cost.
Local school officials agree that the plan reduces teachers’ contributions to their health plan, but those savings are passed on to districts and therefore taxpayers. Some district officials have called the law an unfunded state mandate that causes “significant difficulties” because it also adds layers to their negotiations with local employee unions.
State officials and the NJEA disagree with local districts’ assessment of the plan, saying providing teachers with affordable health benefits is not an “unfunded mandate.”
School districts are required to automatically enroll staff hired after July 1, 2020 in the New Jersey Employer Health Plan unless they decline coverage. Staff hired before this date should be offered the scheme which offers a contribution scale linked to a percentage of teachers’ salaries instead of a percentage of the total bonus.
Introduced 15 months ago, 2022 is the first year that savings from the new plan will trickle down to local tax levies.
A New Jersey actuary will analyze the plan and submit a report by summer 2023 on whether it saved at least $300 million per year, and if not, the law requires the state treasurer to design changes that will achieve these savings.
bear the cost
In complaints filed with the State Council on local mandates, school districts have provided documents arguing that they and, in turn, taxpayers bear the cost of the new law while the costs of health care continues to rise. They ask to be excused from offering the new health plan to staff if they do not see savings. The districts said the plan does not provide universal taxpayer relief, as it was designed to do.
In 2021, a number of school districts, the New Jersey School Boards Association, and the New Jersey Association of School Business Officials petitioned the State Board on Local Mandates to stop implementing Chapter 44. The Board, which can strike down a law if it finds the state has not provided resources to fund it, the groups’ request was denied in December.
The Lower Township in Cape May County said the new health plan will cost its school district an additional $44,000. Gloucester City in Camden County said its school district plans to spend $260,000 more than the previous plan.
The Township of Franklin in Somerset County did not offer the new plan to employees as planned, saying their cost would have increased by more than $1 million, which they could not afford without it. State aid.
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Chapter 44 “creates higher costs to individual school districts and should therefore be imposed on those districts,” the three districts and their supporters wrote to the Local Mandates Council.
Of 158 districts surveyed by the New Jersey Association of School Business Officials, 85% said Chapter 44 would cost them more. There are nearly 600 school districts in the state.
Among the districts that said Chapter 44 would increase their cost is Warren Hills School District with an increase of $197,000 per year; Bogota with an increase of $19,600; Boonton with a raise of $101,500; Hackettstown with a raise of $41,500; Hunterdon County Educational Services Commission with an increase of $56,260; Morris Plains with a raise of $2,100; and Warren County Technical Schools with $9,300.
The attorney general’s office stepped in with a motion to dismiss the districts complaints to the Board, and attorneys for the leaders of both legislative houses, Assemblyman Craig Coughlin and Sweeney filed briefs disagreeing with the school districts. The NJEA has also come out in support of the new law.
Providing teachers with affordable health benefits is not an “unfunded mandate,” the NJEA said in its written response to the Local Mandates Board. The union invoked a clause in the state constitution to support its position. He said the state must provide children with a “thorough and effective” education and that keeping teacher health expenditure low is essential to providing such an education.
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“There’s been a lot of numbers that have been thrown around over the last year and very little ability to track and substantiate claims that districts have made about the costs associated with this, or the lack of savings, because frankly, when we challenged them on that, and to kind of come to the table and show us that, they didn’t,” NJEA spokesman Steven Baker said. .
The schools argue that letting local districts negotiate contracts with teachers’ unions to offset the costs of the new plan is tantamount to not funding the law. Districts and unions don’t always agree, they said.
Districts said their hands were tied because they are not allowed to collect money to offset expenses from any source other than property taxes, according to documents provided to the Local Warrants Council.
The new health plan
The new health plan reduces the employee contribution percentage from a range of 3% to 35% to a range of 1.7% to 7.2%, leaving school districts to absorb that difference, according to legal documents submitted by school districts.
The New Jersey School Boards Association, in its letter to the Board, wrote that it warned lawmakers not to pass the law in 2020 without an opt-out for individual school districts.
The New Jersey School Boards Association said the law also exposes school boards to lawsuits for violating labor agreements if they don’t offer the new health plan to cut costs.
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In Franklin Township, the teachers’ union sued to force the council to offer the new plan to its teachers.
In response to district complaints, the council of local mandates informed them that their request had been denied because the costs they quoted were speculative and that it was too early in 2021 to comment on the matter because the districts were still negotiating contracts with their teachers’ unions.
Like Ridgewood, 98 other districts have filed documents that recalculate Chapter 44 savings, according to the state Department of Education.
On March 10, after conducting a review of district savings documents, the state Department of Education asked school districts to submit additional documents. That same day, Murphy announced the state education budget.
“Some districts may be able to demonstrate that health care savings were unrelated to Chapter 44.” the Department of Education said in a statement.
“I don’t think it’s anybody’s fault, it was a new law,” said Susan Young, who heads the Association of School Affairs Officials of New Jersey.
The state’s overstatement of the savings made through the law was understandable, and it was dealt with gently, Young said. “The law relating to these tax levy adjustments has been drafted very broadly. I don’t think anyone, whether school districts or the Department of Education, I don’t think both sides appreciated the level of detail involved in exploring the intent of the law.
The savings that districts have seen over the past two years in health insurance costs, however small, are due to Chapter 44, Baker said.
That’s not true, says Young. There are “many, many reasons why the net benefits to a school district may increase or decrease that have nothing to do with the implementation of the EHP plan.”
The law did not consider other ways the district was saving money for taxpayers, she said.
Mary Ann Koruth covers education for NorthJersey.com. To get unlimited access to the latest news about New Jersey schools and their impact on your children, please subscribe or activate your digital account today.