Jim Purcell, executive director of the Alabama Commission on Higher Education (ACHE), speaks to legislators during a budget presentation on Feb. 5, 2025 at the Alabama Statehouse in Montgomery, Alabama. ACHE will request an increase of $148 million in funding in next year's budget in part to address rising health insurance costs. (Brian Lyman/Alabama Reflector)
Members of the Alabama Commission on Higher Education (ACHE) expressed concerns Friday about rising health care costs and the impact it could have on public college and universities’ budgets.
ACHE officials said shortfalls in the Public Education Employees’ Health Insurance Plan (PEEHIP), which provides health insurance for employees of the Alabama Community College System and three state universities, have forced the allocation of additional dollars to a fund that pays for mandatory retirement and health insurance benefits at the expense of other funding priorities.
“If PEEHIP wasn’t an issue this year, we would have probably would not put as many funds into the Mandatory Funds, we probably put have more funds into the some of these other fund groups,” said Jim Hood, deputy director of financial and information systems for the Alabama Commission on Higher Education, in an interview after the meeting.
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Board members Friday requested a $148 million increase to its budget from the Governor’s Office for the coming fiscal year that will be spread across four of its spending priorities: personnel and salaries, weighted credit hours, mandatory funds and inflationary costs.
Both PEEHIP and the State Employees Insurance Board (SEIB) are trying to address increased expenses in their insurance plans next year as health care costs increase around the country. PEEHIP has requested an additional $380 million from the state to avoid premium increases for teachers and state employees. SEIB in September withdrew funds from a reserve and authorized some cost increases to address a deficit.
Gov. Kay Ivey will submit her budget proposal to the Alabama Legislature at the start of the 2026 regular session next month. The Legislature has the final say on budgets for each state department.
According to a presentation from Hood, staff recommended increasing personnel and salaries by 1.55% over the current fiscal year; a 1.35% increase for weighted credit hours and a 1.25% increase for inflationary costs.
The recommended budget request included a 1.6% increase to the Mandatory Funds priority.
Officials said they would have recommended larger increases in those categories without the strain of health insurance expenses.
“I think all of them identified personnel and salaries as something,” said Jim Purcell, executive director of the Alabama Commission on Higher Education. “A lot of times, when their insurance changes, there is also a match that the employee pays, so they were trying to address that. And then, the mandatory fund is significant for all of them because it involves pensions. Those are the two big ones.”
PEEHIP provides health insurance for K-12 education employees. The Alabama Community College System; Alabama A&M University; Athens State University and Jacksonville State University also have employees enrolled in PEEHIP.
Hood said the universities are already starting to experience the consequences.
“You can see that their rate increases are just a little bit higher than their neighbors,” Hood said of the percent increase in the budget requests of the universities affected by PEEHIP. “That is where we have tried to address their PEEHIP needs through the recommendation. Their bump up is just a little bit more than everybody else because of PEEHIP.”
Jacksonville State University is seeking a budget increase of almost 9%, from almost $62 million to almost $67.5 million. Alabama A&M University is seeking an increase of almost 7%, from $61 million to $65 million. Athens State University is seeking an increase of almost 7% also, from $23.5 million to $25.1 million.
“While PEEHIP is specific to these campuses, the rate increases will impact the funds available for other budget needs in higher education,” Purcell said in a statement. “This issue is a statewide issue that affects all entities supported by the Education Trust Fund, including K-12 public education employers, colleges and universities, local boards, systems, and other education entities.”
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Author: Ralph Chapoco