Health costs continue to stress local finances
Health care costs continue to cripple municipal finances, according to results of the MMA’s latest Municipal Health Care Cost Survey.
Municipal health care costs are soaking up a growing share of local budgets and contributing to greater pressure on the property tax. As a result, residents feel they are paying more in property taxes and yet getting less in services.
The latest health cost survey, covering fiscal 2006 and 2007 for nearly 10 percent of the state’s cities and towns, looks at municipal health care costs in the same 32 communities that participated in a survey covering fiscal 2001 through 2005 (conducted in cooperation with the Massachusetts Taxpayers Foundation).
Survey data show that employee health care costs as a share of total municipal budgets jumped from 7.4 percent in 2001 to 10.5 percent in 2005 to 11.6 percent in 2007.
The taxpayer-funded costs of providing health coverage to municipal employees grew 22.1 percent in just the past two years.
Municipal health care costs rose by a total of 99 percent during the six years from 2001 to 2007 – nearly four times greater than the growth in local budgets (28 percent) over the same period. The overall growth in employee health care costs in the survey communities over the past six years ranged from 45 percent (more than two times the rate of inflation) to as much as 200 percent.
Even as employee health care costs have surged and municipal officials struggle to manage this budget-buster with limited tools, local officials have worked hard to hold total municipal budget growth to only modest increases. The average annual increase in employee health care appropriations during 2006 and 2007 was 10.5 percent, while municipal budgets grew an average of only 5.4 percent annually. During the six years from 2001 to 2007, municipal health care costs grew an average of 12.2 percent annually, while local officials managed municipal budget growth to average annual increases of just 4.1 percent.
As the pressure on municipal finances from employee health costs intensifies, it precludes cities and towns from spending on other essential programs and services.
In 2006 and 2007, health cost increases in the survey communities consumed approximately three-quarters of the 2.5 percent annual growth in taxes on existing properties allowed under Proposition 2 1/2. In several of the years since 2001, health cost increases consumed as much as 80 percent of allowable tax growth on existing property, crowding out the maintenance of other public benefits.
The MMA 2007 Municipal Health Care survey update (covering fiscal 2006 and 2007) and the original 2005 MMA/MTF Municipal Health Care Survey (covering 2001-2005) posed a series of detailed questions about trends in health coverage – including budgetary costs, premiums, deductibles, co-pays, and other plan changes – offered to local employees and retirees in 32 communities.
The communities were selected specifically to reflect the broad range of population, geographic diversity, and wealth of the state’s municipalities. They encompass approximately one-fourth of the state’s population, are drawn from every region, and account for almost 30 percent of local revenues and spending.
Written by Pam Kocher
