The state’s spending over the past two decades has shifted away from education and social services to debt service and state employee health insurance, a report released Thursday found.
Connecticut Voices for Children’s Fiscal Policy Center released its analysis of state budget policies that show spending on K-12 education fell more than 25 percent and spending on higher education fell more than 50 percent at the state universities, community colleges, and the University of Connecticut.
Human services, which accounts for one of the largest portions of the state budget, dropped 33.4 percent to 30.9 percent over the past two decades, while Medicaid spending has increased. However, the state spent 27 percent less per Medicaid enrollee in the last 10 years than it did a decade previous.
Conversely from 1992 to 2012, retired state employee health care spending increased 239.1 percent and general fund debt service increased 50.3 percent.
“As a consequence of fiscal pressures and budget decisions over the past two decades, the state’s debt has more than doubled in inflation-adjusted dollars, increasing by 142 percent,” the report concludes.
The largest increase in debt service occurred between fiscal years 1992 and 1994, when aggregate indebtedness jumped 100.3 percent. The aggregate debt has grown at a slower rate, increasing 21 percent, between 1994 and 2008.
“As a result of this steady growth, Connecticut’s debt per capita is currently among the highest in the nation,” the report concludes.
Over the past 10 years alone, the number of retirees participating in the State Employee Retirement System has increased by more than 30 percent, from 32,101 in 2000 to 41,782 in 2010. On top of this substantial increase in the number of retired beneficiaries, the cost of providing health services to these retirees has also grown.
Adjusted for inflation, the per capita cost of retiree health care increased some 54 percent between 2000 and 2010, from about $7,500 per retiree at the beginning of the decade to more than $11,500 in 2010. For current employees, health costs have increased from 13 percent to 22 percent of payroll from 2000 to 2010 – an increase of 63 percent.
“The state budget is an expression of our values and priorities,” Wade Gibson, co-author of the report and senior policy fellow at the Fiscal Policy Center, said. “We need to make sure that we make forward-looking budget decisions that maintain investments in the future while fulfilling our obligations to our most vulnerable populations – young and old alike.”
Gibson suggests changing the state’s education cost sharing formula, building on cost-containment efforts to reduce health care costs, and avoid “borrowing to cover operating expenses.”
Office of Policy and Management Secretary Ben Barnes said he doesn’t necessarily disagree with Gibson’s conclusion that budget’s reflect priorities. However, “budgets are reflections of values and they’re also a reflection of the environment in which they were created,“ he said. The later of which is not inconsequential.
Barnes said he would like to spend less on employee health care and pensions and more on K-12 education, but first the state needs a functioning formula to distribute the education grants to cities and towns.
Once it has a better way of determining how the money should be spent he’s not necessarily sure more money will be necessary, if the money it has is being spent appropriately. Barnes is a member of the task force that will make recommendations regarding the Education Cost Sharing formula to Gov. Dannel P. Malloy in November.
As for the rising cost of health insurance, state Comptroller Kevin Lembo said the state has worked hard over the past two years to negotiate a deal with the state employees which will increase prevention and decrease the cost of health care for the state.
“In both 2011 and 2012, employee health care spending as a percentage of the total general fund has been reduced,” Lembo said. “While public, private and non-profit employers across the country experienced employee health care cost increases of 8 percent or more, Connecticut’s rates stabilized with a zero increase per employee.”
An aging population and workforce, the fast-rising cost of healthcare, and the ripple effects of previous decades’ policy choices, combined with three recessions has caused healthcare to consume a larger portion of a tighter state budget at a time when the costs of these services are rapidly increasing, the report found.
“The changes made in the last two years alone have already moved the needle in the right direction,“ Lembo said. “Those changes include implementation of the Health Enhancement Program, patient-centered medical homes and other sensible improvements to health care management. We need to build on those efforts.”
He applauded the report for drawing attention to the issue.