Sitka Assembly members meet with the School Board at the high school library. With both bodies facing budget crunches, the tone was conciliatory. “We’ll get through this,” said assembly member Kevin Mosher. “It’s a good town with a lot of good people.” (KCAW photo/Robert Woolsey)

The Sitka School District is starting its 2020 budget process $1.3 million in the red. The administration has rolled out a couple of ideas to help make ends meet. The school board considered both in back-to-back meetings this week (January 16 & 17), including a work session with the Sitka Assembly.

Self-funded health insurance

As a way to cut costs, the Sitka School District is considering funding its own insurance plan next year.

The strategy — called “self-funding” — is already in use in many districts in the state. Of the 46 school districts in Alaska, Sitka’s is one of only five that are fully insured through a traditional plan.

Note: The Sitka School District’s “Introduction to the 2020 Budget” is available here.

The district’s insurance broker, Paula Scott with USI, met in a 90-minute work session with the Sitka School Board on Wednesday night (1-16-18).

She outlined the basic function of self-insurance.

“Group insurance plans are based on the same premise, whether they’re fully-insured or self-funded: It’s simply a matter of who holds the money, and who assumes the risk,” Scott explained. “And that’s kind of the basics of the whole thing. With the self-funded plan, you hold the claims money and the reserves for the future claims, but you assume more potential risk. But that’s why we buy the stop-loss protection for that.”

Self-funded plans are usually backed-up by regular insurance — especially when purchased with public money. “Stop-loss” is an insurance policy you buy to protect your plan from a catastrophic claim.

Although it seems counter-intuitive, Scott and her associate, Matt Lewis, said that the ties to regular insurance plans are a good thing. Teachers and other staff insured by the district will use the same cards they have now, and file claims the same as always.

“The member experience on this, self-funded vs. fully insured — they won’t know the difference,” said Lewis. “There won’t be a real difference to the consumer of healthcare. It’s behind the scenes — what’s happening financially with the plan — that’s the difference.”

The district would have to create a claims administrator for a self-funded insurance plan to work. District business manager Cassee Olin would likely serve in this role, having done so in her previous job in the Kodiak School District.

Scott and Lewis had no numbers for the school board, and could not predict cost savings. That would come next, if the board decided to pursue the idea.

Scott has brokered insurance for Sitka’s schools for 19 years. She reminded the board that the presentation was not a sales pitch: “Our job is to protect you,” she said. “We won’t recommend something we’re not comfortable with.”

The board has until July to decide whether to renew its traditional health insurance, or adopt a self-funded plan.

Ending utility payments to the city to simplify school budgeting

The Sitka School District is proposing another idea that — while it might not save actual cash — could eliminate major uncertainty over the school budget.

The Sitka School Board and the Sitka Assembly met in a joint work session Thursday night (1-17-19) to review preliminary figures for the school district.

Superintendent Mary Wegner proposed that the city and the district adjust the way schools pay for utilities, to make the process less circular.

“Every year because our utilities have gone up we come to the assembly and say, ‘Please, can you increase your contribution to us to cover our increased cost in utilities?’ And then you turn around and bill us, and we turn around and pay you back the money we advocated for.”

Utilities comprise the second-largest expense for the Sitka School District after personnel. And along with health insurance premiums, utility costs are the most variable. Over the last four years, heating expenses alone in the district have increased 26-percent. The total utility bill for the district this year is expected to be about $1-million — all of which is paid to the city-owned utility departments.

An accounting maneuver rather than actual cost savings, Wegner conceded that it would mainly serve to simplify budgeting in the district.

Only assembly members Steven Eisenbeisz, Kevin Knox, Kevin Mosher, and Richard Wein attended the work session with the school board and — as is typical at this early stage in the budgeting process — expressed an interest in seeing harder numbers as soon as they were available. At $7.1 million for the current year, the school district is among the largest city expenses.

School board member Amy Morrison was elected last October on her pro-business background. She argued that schools should remain a priority.

“As a community we’re struggling financially in a lot of areas,” said Morrision. “The whole reason I ran for the school board is because I think you can not invest in anything better than students. These are our kids. They’re our future. It sounds cliche but it’s the future. I appreciated what you pointed out about how many business people — how many teachers — came from the Sitka School District. I think the majority of the people in this room were graduates of the Sitka School District.”

School board member Elias Erickson noted that the assembly had to reckon with three major budget areas: infrastructure, the general fund, and schools. But he urged the assembly to consider the whole ecosystem, rather than just its parts. He felt the schools were more important to the community than many realized.

“When you look at what brings people — families, taxpayers if you will — to Sitka,” said Erickson, “I would say one of the number one things is the fact that we have one of the highest-quality educations to offer in this area. In Southeast Alaska, if you ask me.”

Assembly member Kevin Mosher agreed that the schools and the city had a symbiotic relationship, and he supported more meetings between their two governing bodies. “It isn’t easy but it doesn’t mean the end of the world,” Mosher said. “We’ll get through this. It’s a good town with a lot of good people.”