No efficiency savings compounds budget challenge

The chairman of the House K-12 Education Budget Committee says the state will not realize $47.2 million in savings from consolidating school district procurement and health insurance next year, but the state should continue to seek efficiencies in those areas.

However, the Governor’s budget proposal for Fiscal Year 2018 has already cut school district aid by that amount, and reduces school aid by $89 million in FY 2019. That means the Legislature will have to find a way to restore that funding or district aid will be reduced even with a plan to cut costs.

K-12 Budget Committee Chair Larry Campbell, R-Olathe, reported to the full House Appropriations Committee Monday that Kansas Secretary of Administration Sara Shipman had convened a group of stakeholders to review bills concerning procurement and health insurance. Bills were introduced earlier this session to implement recommendations from the 2016 state and school district efficiency study conducted by Alvarez and Marsal.

One bill would require school districts to purchase certain items through the state department of administration; the second would require districts to participate in a single state-operated health insurance plan.

On Monday, Rep. Campbell said the stakeholders – and his committee – had a number of concerns about the procurement bill, including lack of capacity by the state Department of Administration to handle school district purchases, the existence of similar or better purchasing arrangements already developed by school districts and services centers; and the desire by some school boards to support local vendors who provide other services to districts.

Campbell told the Appropriations Committee his budget committee did not believe the $7.2 million in savings included in the Governor’s budget for next year was possible, but he expected to offer a proviso to the budget bill  asking the Department of Administration, school districts and others to continue looking for  possible savings, and report to the 2018 Legislature.

A report on the health insurance issue will be presented to the Appropriations Committee tomorrow. The A&M study suggested a savings of $40 million in the first year and $80 million in the second year by placing all school districts’ employees in a single plan. A separate study the Legislature Post Audit Division indicated only about $63 million in savings, and a large portion of that reduction would be lowering employing benefits, rather than reducing administrative costs. Some school districts have questioned the accuracy of those estimates. The LPA report also suggested there were alternatives to the A&M proposal.

The stakeholders group and House K-12 Budget Committee agreed that no savings would be possible in FY 2018. Further study would be required to determine whether some type of consolidated school district plan could save money without reducing benefits.

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