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Arkansas Employee Benefits director warns of future budget shortfalls

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Arkansas Legislature
Jake Bleed, director of the Employee Benefits Division of the Arkansas Department of Transformation and Shared Services, speaks with lawmakers in a legislative subcommittee meeting Wednesday.

Regulators are calling for more funding for state employee insurance plans to help avoid future budget shortfalls.

Members of the newly-created Employee Benefits Division Oversight Subcommittee of the Arkansas Legislative Council discussed a quarterly report Wednesday with Jake Bleed, director of the state Employee Benefits Division.

Bleed says the insurance program for public school employees is in good shape for now, but could get worse without action from lawmakers.

“Our surplus for 2022 is $63 million, for 2023 we’re tracking at a $25 million surplus. That’s very, very positive,” Bleed said. “From there… we start running a deficit in ’24, and in ’25 and in ’26.”

Bleed credited fund transfers from other state government departments and new dollars from the American Rescue Plan for the program’s current financial stability. Despite that, he said rising healthcare costs and other factors could see the program facing a $334 million budget deficit by 2032.

“If we never give public schools any more money than they’re currently getting, and we still continue to have a 6% increase in the number of retirees, we still have 2% increase in head count, we still have [a] 6% increase in overall costs, then 10 years from now we’ll be in a heck of a place,” Bleed said.

Without more funding from the state, Bleed says the insurance program for public school employees could begin running a deficit of $8 million by 2024. He stressed lawmakers should act proactively, since budget approval by lawmakers happens about 14 months before the start of the new fiscal year.

Republican leaders have said too much money is being spent on the state’s public education system, which they say is not adequately serving students. Governor-elect Sarah Huckabee Sanders has also called for eliminating the state’s individual income tax, which provides a large amount of funding for schools each year.

In July, the Arkansas State Board of Finance approved lowering the monthly payments made by insurance plan beneficiaries. State employees will pay $172 each month, with public school employees paying $221 monthly beginning in 2023.

Regulators earlier this year also approved a recommendation that the State of Arkansas pay 80% of the cost of health insurance premiums for employees, an increase of 15%.

Daniel Breen is a Little Rock-based reporter, anchor and producer for KUAR.