South Windsor Town, School Board Reach Agreement on $700,000 Insurance Shortfall

The South Windsor town manager and superintendent of schools appear to have resolved their disagreement over a $700,000 shortfall in the town’s employees’ self insurance fund.

In a proposed resolution that the school board will review at its regular meeting Tuesday, the school district will transfer $700,000 from its health care reserves to the town’s. The transfer will occur in two $350,000 installments - one that will occur immediately to help cover the 2012-13 fiscal year’s shortfall, and another during the 2013-14 fiscal year to help alleviate anticipated rises in costs.

The second installment, according to the resolution, will enable the town to reduce its 2013-14 budget request.

In an interview in January, Galligan said that the town converted to a self-funded insurance pool about eight years ago, which has resulted in saving taxpayers “millions of dollars” during that time.

According to Galligan, the 1,000 or so South Windsor employees - both on the town and the school sides - are pooled together for insurance purposes. Instead of paying insurance premiums to a private company, the town sets aside the cost of workers’ anticipated claims for each year, then pays only for employees’ actual usage.

This year, the town’s employees - i.e. Town Hall, public works and police officers - accounted for more than their normal share of claims against the fund, while the schools have had a lower than expected number of claims.

The town and the schools each have a reserve fund for their insurance claims. The dispute lies in how those reserve accounts are used in the event one encounters a shortfall.

In the past, according to Galligan, in the the event of a shortfall, the schools would just pay out of its reserve fund the additional claims that were generated from the town side. And, if the situation was in reverse, the town would cover the schools’ claims out of the town’s reserve fund, Galligan said.

But the school district had taken the position that any additional claims that were made by the town employees should be covered by the town through its self-insurance reserve, not from the school’s reserve account. But according to the resolution, the town’s self-insurance reserve is empty due to the high volume of claims.