Fond du Lac schools report budget gap; board hears plan to shore up self-funded health plan

The Fond du Lac School District reported on Sept. 22 that last fiscal year’s expenses are projected to exceed revenues by roughly $6.4 million, and district officials presented options to stabilize a newly self‑funded employee health plan.

District finance staff and benefits consultant Jay Scott of USI said the primary reason for the overage was the accounting requirement to record “incurred but not recognized” medical claims after the district moved from fully insured coverage to a self‑funded model Jan. 1, 2025. “We are projecting to have expenses exceed revenues to at at about 6,400,000.0 at this time,” Mr. Gerlach said during the budget update.

The nut of the workshop was employee benefits. The district began paying claims directly this year and retains premium dollars; Jay Scott told the board that the plan has already seen seven high‑cost claimants totaling roughly $1.7–1.8 million. “You had 7 people totaling about $1,800,000 in claims already this year,” Scott said, noting reinsurance reimbursements of about $560,000 that reduced the district’s exposure.

Why it matters: employee benefits are the district’s second‑largest budget item after wages. The finance presentation showed a projected fund balance of about $17.2 million as of June 30, 2025 (roughly 16–17% of prior‑year expenditures), but staff warned the district cannot sustain repeated high claim activity without building reserves or changing plan design.

What officials proposed

- Budget rates: Scott recommended a minimum premium‑rate increase of 7% for 2026, with a larger 11% increase if the board chooses to build reserves now. Administrators said the board’s current budget assumption of 5% is likely insufficient given claims activity; depending on the option chosen, the district faces roughly a $900,000 gap to close relative to the adopted 5% assumption.

- Benefit design changes: Scott and staff recommended exploring benefit modifications for the January 2026 plan year instead of deferring changes to 2027. They emphasized that the district’s current plan is unusually “rich” compared with benchmarks and that plan adjustments could reduce pressure on premiums while maintaining competitive employee benefits.

- Cost‑containment programs: the consultant proposed adding virtual physical therapy, targeted prescription‑drug management (Medical Rx Advisor for expensive facility‑administered drugs and infusion therapies), and better use and promotion of the district clinic to increase primary‑care engagement and preventive care. Scott said these programs require little or no upfront district investment and can reduce expensive downstream claims.

- Reinsurance market: USI marketed the district’s stop‑loss coverage to 13 carriers; most quotes showed double‑digit increases and the stop‑loss market was described as “extremely tight.” Scott warned national medical‑cost drivers — including high‑cost gene therapies and rising hospital infection/sepsis cases — were contributing to higher reinsurance pricing.

Board questions and timing

Board members asked how staff would gather employee input and whether to use a committee or survey. Scott said committees often capture only a small, unrepresentative group; he recommended district‑wide communications and targeted education tied to enrollment incentives rather than relying on a small advisory committee.

Administrators told the board they will present modeled premium and plan‑design options in writing well before the next meeting and requested the board act by Oct. 27, 2025, if it wants changes in effect for the Jan. 1 plan year. Open enrollment for employees is planned for Nov. 1, 2025.

Clarity on accounting items

Finance staff explained the accounting timing that produced the fiscal‑year 2024–25 overage: when the district moved to self‑funding, bookkeeping required an IBNR (incurred but not reported) medical‑claim accrual that shifted approximately $1.3 million of claims to the prior fiscal year; staff said a reserve of about $1.6 million is likely needed for financial stability going forward.

Public and next steps

At the end of the workshop, administrators said they will deliver detailed options to the board a week before the Oct. 13 budget hearing (the district will publish the required budget summary Sept. 28). The board will decide whether to adopt premium increases, plan design changes, or a combination of both at or before the Oct. 27 meeting so staff can run open enrollment and finalize 2026 plan documents.

Ending

Administrators framed the choices as balancing fiscal stability and competitiveness in hiring and retaining staff: keep the plan unchanged and risk further budget stress, or combine modest premium increases and targeted benefit changes to preserve long‑term stability while keeping benefits competitive.