By Adam Pagnucco.
One of the biggest priorities in MCPS Superintendent Thomas Taylor’s first recommended operating budget was plugging a growing hole in the district’s health insurance program. For years, the school system had seen a growing gap in budgeted revenues for health insurance and actual claims. Taylor was determined to stop the trend before it became unsustainable.
That is going to be a challenge.
MCPS’s Employee Benefit Plan (EBP) has two components: active employee group insurance and retiree group insurance. MCPS spends much more on active employees than retirees. In February 2024, the county council reviewed information showing that revenues for the two components together had fallen short of claim amounts by $5.6 million in FY21, $21.7 million in FY22 and $35.8 million in FY23. At the time, the shortfall for FY24 was projected to exceed $25 million.
Taylor, who was hired last year, saw where this trend was headed and tried to remedy it in his first operating budget. His approach was to request more money from the county, seek concessions from the unions and close the gap over two years.
Taylor successfully obtained help from the unions. The teachers, support staff and administrators all agreed to pay two more points towards health insurance over the next two years. Those contract amendments were approved by the school board in March.
Now to the budgets. In his recommended budget, Taylor requested an increase in MCPS’s benefits line item (Category 12/Fixed Charges) from $752 million in FY25 to $841 million in FY26, an increase of $89 million. The county council ultimately funded $811 million for fixed charges, an increase of $60 million. Taylor didn’t get everything he wanted, but he got most of it.
That may not be enough.
In a letter to Council President Kate Stewart on September 30, Board of Education President Julie Yang provided an update on the Employee Benefit Plan’s condition. The active group fund started FY25 with a deficit of $31 million and ended FY25 with a deficit of $61 million. The retiree group fund started FY25 with a deficit of $4 million and ended FY25 with a surplus of $3 million. That’s a positive swing among retirees but it has a huge asterisk. The letter stated, “However, the additional contribution from the OPEB Trust Fund is the main driver in the ability to close the gap between expenditures that exceeded revenues for the year, and ultimately restore the Retiree Group Fund to a positive balance.” In other words, MCPS used a one-time maneuver approved by the county council to make progress on this measure. The combined deficit of the active and retiree groups totaled $58 million as of June 30, 2025.
For purposes of comparison, the county government budgeted $65 million for recreation, $53 million for public libraries and $46 million for environmental protection in FY25. MCPS’s benefit fund deficit is now the equivalent of a sizeable department of county government.
This is a looming problem for taxpayers, who will no doubt be expected to kick in more money if these deficits continue. It may also be a problem for MCPS employees, who have already agreed to pay a larger percentage of health care premiums and may be asked to do more.
Getting this issue under control will be a critical task for Taylor and his leadership team.
Yang’s letter to Stewart can be downloaded below.