Please provide information regarding the rising costs of health care noted in the overview of the Recommended FY 2023 Operating Budget. Why did the system have a surplus not long ago that is now being reported as a deficit?

Question#: 12


At the start of Fiscal Year (FY) 2021, the first full fiscal and school year that we operated during the COVID-19 pandemic, the Montgomery County Public Schools (MCPS) Employee Benefits Plan for active and retired employees had a fund balance of $62.4 million.

MCPS provides to the Board a status report on the Employee Benefits Plan in each monthly financial statement.  At the end of FY 2021, the MCPS Employee Benefits Plan had a fund balance of $56.9 million. Overall, the fund balance for the plan decreased by $5.5 million during FY 2021. We notified the County Council’s Education Committee on May 4, 2021, that we intended to transfer $22 million in surplus funding within State Category 12 into the Employee Benefits Plan to essentially maintain the fund balance close to what it was at the start of FY 2021. This is important for budgeting purposes as we want to maintain a fund balance of approximately $25–$27 million in the Employee Benefits Plan to support unexpected increases in health care costs.

MCPS utilizes the services of a health benefits consultant, Aon, to advise MCPS on trends in health care and to assist us in projecting future health care costs.  Individuals have deferred less critical medical procedures as a result of the effects of the pandemic and the original stay-at-home orders. For FY 2022, we are projecting that health care costs will increase due to deferred medical procedures being performed and increasing general costs which will impact our fund balance.

By the end of FY 2022, MCPS projects that its Employee Benefits Plan will have a fund balance of $27.6 million. This decrease in fund balance during FY 2022, considering that $15,366,219 was added to the budget, reflects the projected increased health care expenditures for the remainder of this fiscal year.