Deal near on who owns schools health surplus

April 09, 1995|By Larry Carson | Larry Carson,Sun Staff Writer

The Baltimore County executive and school board are nearing settlement of a dispute about who owns $10.6 million in a surplus health insurance fund that the school system accumulated over a five-year period.

County Executive C. A. Dutch Ruppersberger III said Friday that the tentative agreement would return most of the disputed money to the county treasury and would lead to a merger of the school department and county health insurance systems.

School board President Paul S. Cunningham confirmed Mr. Ruppersberger's basic account but said the full board had not yet considered the deal.

"I'm waiting to hear from the superintendent and director of finance, but I'm very optimistic," he said.

The agreement, reached during the past several days, would end an acrimonious dispute over the school board's use of money it amassed without the county administration's knowledge by controlling health care costs.

Word of the agreement came as a County Council audit, released Friday, accused the school board of violating state law by concealing the existence of a fund that contained $10.6 million in February and by spending $7.2 million from the fund during the past two years without council approval.

The school board denied the charges, which involve technical interpretations of state law. The board's budget director argued that school system had properly used and accounted for the money.

The difference of opinion may highlight a conflict between state law governing budget transfers and the county's laws. "They [the school board] had always followed county law, but state law prevails," said Brian J. Rowe, the council's auditor.

The dispute began in December when Mr. Ruppersberger took office, and his auditors discovered the fund. He demanded that the school board give the money back to the county treasury.

If Mr. Ruppersberger and school officials can't settle their differences, the County Council is likely to step in next month during budget deliberations. Council Chairman Vincent J. Gardina left little doubt Friday about his plans for retribution.

"There was a breach of trust there," the Perry Hall Democrat said of the way the school board handled the money. "The way I feel is that we should make them pay. Our initiative will be to cut back on administrative staff."

The council hired an outside auditor to check the fund in February. Friday's report from the Baltimore firm of Ellin and Tucker was preliminary, with a final report due in May.

Partly in anticipation of being ordered to repay the money, school Superintendent Stuart Berger ordered principals last month to give back as much as 10 percent of their discretionary budgets, which cover supplies, field trips and other nonsalary items. But he denied Friday that stronger action is planned. "There will not be any furloughs, any layoffs," he said in response to rumors circulating among teachers.

In response to the audit, the school system asserts that the surplus fund was maintained by Blue Cross and Blue Shield and not by the school department. It traditionally was used to make up deficits in years when health care costs were higher than premiums.

But since 1990, the audit shows, health care costs declined, generating a surplus each year.

Since the fund was far larger than the amount needed to cover premiums, the school board withdrew $7.2 million from it over the past two years to pay for early retirement incentives, vacation paybacks and other costs.

The board argued the spending shift was legal under county law because the money was used within the same budget category as health insurance premiums. Under county law, the school board must ask the County Council to approve transfers only if the money is to be used in a different budget category.

But the auditors said the board violated state law because it failed to tell the council about the money, and because it was used for a different purpose than originally intended.

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