Rising Health Costs Strain School Budgets and Staff Benefits

School districts across the United States are facing a hard choice as health costs surge, with higher health costs competing directly with spending for students. Benefits are a central part of recruiting and keeping employees, but every dollar spent on health costs is a dollar that cannot be spent on another district priority. District finance leaders raised that tension over health costs at the Association of School Business Officials International conference, where sessions on health costs drew on cases from Ohio, Illinois, Alabama, New Jersey, and Georgia.

In the Big Walnut school district in Ohio, which serves 4,500 students, 10 of the district's 336 staff members enrolled in school-sponsored health insurance have had claims exceeding $50,000 apiece this fiscal year. Scott Gooding, Big Walnut's interim treasurer, said at the conference, "Every dollar spent on healthcare is ultimately competing with one of our other district priorities that we have for our students." Gooding also said benefits are a critical part of recruiting and retaining employees, and that simply shifting costs is not necessarily the answer to a sustainable solution. A district that cuts benefits to save money can lose the staff it needs to run its schools.

How health costs hit school budgets

The 11,000-student West Aurora district in suburban Chicago spent $26 million on health costs in 2026. That figure is more than 10 percent of its annual operating budget of $215 million, and it is currently projected to grow by another $5 million next year, said Angela Smith, the district's associate superintendent for operations and its chief school business official. Smith said at a separate conference session, "There are always going to be people who get cancer and there are some things you just can't plan-design against." That point applies across districts, because a small number of large claims can change a district's health costs for a full year.

West Aurora has tried several measures to reduce the pressure. It added a new plan option for an individual with a spouse but no children, and it promoted its Health Savings Account option, which nearly doubled in enrollment in one year, from 105 participants to 207. It also changed its approach to GLP-1 drugs, keeping coverage for employees with diabetes and offering a monthly stipend for other uses, which Smith estimated would save between $750,000 and $1 million a year.

Teacher benefits and health costs in state plans

At the Big Walnut session, finance chiefs cited rising prescription drug costs and conditions like obesity and diabetes. At the same time, many schools are struggling with fewer enrollment-based dollars as K-12 student numbers drop. In a survey of school and district leaders conducted this summer by the EdWeek Research Center, nearly two-thirds of respondents said their enrollment has dropped at least a little in the last five years. Fifty-five percent of respondents said they expect at least a small decrease over the next five years, which would reduce revenue further.

State plans show the same pressure at a larger scale. Alabama's statewide health insurance plan for K-12 educators needs lawmakers to provide a $222 million year-over-year increase, but the state superintendent of education said at a plan board meeting last month that he expects lawmakers won't be able to do it, leaving districts or their employees to make up the difference. New Jersey's state-level school health insurance plan, which roughly 200 districts use, was on the verge of collapse earlier this year when members of its governance panel deadlocked over whether to hike premiums by 34 percent starting in January. They ultimately approved that increase last month, but state lawmakers are now considering a broader overhaul.

In Georgia, the state requires districts to cover 100 percent of monthly health premiums for its certified staff members, but districts can only offer their employees coverage through the state plan. Some district leaders have lobbied for permission to team up with each other and seek out more cost-effective health care plans, but so far they have not succeeded, said Masana Mailliard, chief financial officer for the Gwinnett County school district. Mailliard said, "Our hands are tied until the state modifies the statutes." Steve Algozino, a health insurance broker who manages plans for the West Aurora district, said during the conference session, "It's very scary right now for insurers and underwriters. There are going to be some huge claims." For school districts, health costs are likely to keep pressing on school budgets and teacher benefits in the year ahead.