ObamaCare Costs Hit School Districts, Employees

ObamaCare Costs Hit School Districts, Employees
June 14, 2013

Evelyn B. Stacey

Evelyn B. Stacey (ebstacey@yahoo.com) is a research assistant at the Hoover Institution. She writes... (read full bio)
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School districts across the country are digging through the details to see how the Affordable Care Act, known as ObamaCare, will impact their budgets starting January 1, 2014. The law’s mandates are causing schools to fire employees, reduce employee hours, and otherwise slash education spending.

“Since most of [school districts’] budget is people, it is likely that, absent special federal or state funding, there will be some cutbacks. The exact magnitude will be driven by the size of the cost increases—something that we will not know until they unfold over the next few years,” said Michael Shires, a professor of public finance at Pepperdine University. “One of the lessons the current federal fiscal crisis and the deficits in most states has taught us is that there really are limits to the resources available to public budgets. So, as the costs per employee rise, that money has to come from somewhere. So whether it is through larger class sizes, a smaller number of aides and support staff, or fewer books and other materials, there will likely be a decline in resources in the classrooms.”

By January, all districts with 50 or more full-time employees must provide government-approved healthcare benefits. One significant change for schools is the new definition for full-time employees: Those who work an average of 30 hours per week. Previously, part-time work meant less than 40 hours per week. School districts unable to afford healthcare benefits for part-time employees are reducing the number of hours they can work.

Several national organizations contacted for this article said they had no statistics indicating how widespread are ObamaCare’s financial effects on schools, but news articles about the trend are surfacing nationwide, most indicating significant cuts resulting from the new law.

Case Studies
Ohio’s Youngstown School District sent out letters notifying more than 300 part-time employees their hours will be cut. In Pennsylvania, part-time hours will be limited to 29.5 hours of work per week. Fort Wayne schools in Indiana recently notified all 610 part-timers they now must work no more than 25 hours a week.

Granite School District in Utah has estimated providing bigger healthcare insurance for all part-time employees in 2013-2014 will cost nearly $14 million. Its annual budget is about $500 million.

“The cost of benefits for individuals and families ranges from around $11,000 to $14,000. We currently have around 1,200 part-time hourly employees. That is how we came to the estimate of $14 million needed to provide them with benefits,” said Ben Horsley, Granite’s spokesman. To reduce these taxpayer costs, the district has sent letters to all 1,200 part-timers notifying them that in January their weekly hours must average of 29 or less.

‘Such a Hardship’
Before ObamaCare, part-time employees typically did not receive medical insurance, but they were allowed to work and earn more money per week, with “some working 32-plus hours as they chose,” said Susen Zobel, president of the Granite Education Association, a local union. “The only realistic choice our district, and other employers, is given for this employee group was to cut the number of hours they were able to work. This is such a hardship because they would like to work more hours and have offered to waive medical insurance because often they have it through the other spouse. But that is not allowed under ACA.” 

Most of these part-timers “are not career employees” like teachers, Horseley said. Instead, they are classroom aides or janitors.

Layoffs a Real Possibility
“All have the opportunity to apply for full-time contract positions, which turn over pretty regularly,” he said. But if “we were required to provide them with benefits, services at schools would be impacted and the board would have to decide how to pay for those benefits. That situation would require some layoffs.”

To temporarily ease these challenges, Utah state Rep. Melvin Brown (R-Coalville) sponsored a bill this year to provide a one-time school funding increase of $160 million for 2013-2014.

“The biggest problem facing all districts in our state is the fact that this also applies to substitute teachers,” Zobel said. “Now they can only work three-and-a-half days a week. This causes us to split subs for long-term situations, such as my friend that was diagnosed with brain cancer in January. Instead of only having to worry about one sub covering her class, she had to work with two subs to have her classes covered.”

Research shows use of more substitute teachers reduces student learning.

Higher Costs All Around
In addition to the cost of covering more employees, the ObamaCare law will increase health insurance premium costs by an estimated 13 to 23 percent, according to analyses by WellPoint Health Insurance Company, Hoover Institution Senior Fellow Daniel Kessler said.

“Employers have to pay a tax penalty because their policies do not carry sufficiently generous insurance,” likely resulting in lower wages for employees, Kessler said.

ObamaCare creates additional confusion for districts in determining whether they count as a small or large employer. The IRS requires a count of full-time employees plus the cumulative number of hours part-time employees work, which could add more full-time employee equivalents.

Many school districts have yet to decide how to deal with the issue. In the coming months, school boards will be discussing the law’s budget impacts in public meetings across the country. 

 

Image by kptice.

Evelyn B. Stacey

Evelyn B. Stacey (ebstacey@yahoo.com) is a research assistant at the Hoover Institution. She writes... (read full bio)