COEUR d'ALENE - The cost of employee health insurance was pushed front and center Monday during teacher contract negotiations in Coeur d'Alene, along with a warning that without a dramatic reduction in insurance expenses, some deep budget cuts will have to occur.

Superintendent Hazel Bauman, chief negotiator for the district, and Wendell Wardell, the district's chief operating officer, offered members of the Coeur d'Alene Education Association's negotiating team, a proposal that would raise the base insurance plan's deductible from $200 to $2,000; drop the co-insurance from 90 percent to 70 percent; and save the district $2.6 million in premiums.

The increased health care costs to employees would be offset by a health savings account the district would set up for each participating employee, with a deposit of $1,000 this year, and again next year. The savings to the district, after distributing the HSA funds, would be $1.8 million per year.

Before presenting the proposal, Bauman told the teachers union negotiators that she knows they have their own proposals, and the district plans to give those proposals their "due diligence."

"But we really believe there are a couple of elephants in the room," Bauman said.

The district still faces a $3 million budget shortfall that has grown to $3.2 million because of a requirement for increased employer contributions into PERSI (Public Retirement System of Idaho.)

"That is without the projected increases in Blue Cross premiums," Bauman said.

District budget planners are anticipating a 13 percent hike in the insurance premium, a number they expect to have firmed up by Blue Cross on Thursday. The hike will raise the district's annual health insurance budget from $6 million to $6.8 million.

Salary and benefit costs now represent 87.7 percent of the district's general fund. With the insurance cost increase, that will go up to 89.3 percent.

The costs are not sustainable for the district, Wardell said.

"If we were not able to successfully negotiate a reduction in health care costs, we still have to deal with the shortfall, and so we've got a list of things that we can do that don't require negotiation, because if we're not successful in negotiating any reduction in the health care costs, we may also not be successful in negotiating anything," Bauman said.

The number of teachers, support staff and principals could be reduced, she said. Teacher pay increases based on education level and experience could be affected, and another $400,000 in cuts could dig into school building budgets and student activity funds, Bauman said.

"Frankly, privatizing transportation is one of those things," she said.

Since December, Wardell has been working on a plan to dissolve the district's transportation department and replace it with a private bus company. The trustees have not approved the measure, and have been waiting to review bid proposals before making a decision. Wardell estimated the move would save the district $1.1 million annually.

The drivers now employed by the district oppose the plan, saying it will change the nature of the district's student bus service, making it less personal and safe for children.

"We have bus drivers whose lives have been hanging in the balance," Bauman said. "It's their jobs and their benefits that have been hanging in the balance."

Bauman said the board and administration doesn't want to have to fill the shortfall with those kinds of budget cuts.

Members of the CEA negotiating team said they needed more information before they could comment on the proposal, which was not on the meeting agenda. It was listed as a budget presentation.

Tim Sanford, the teachers' chief negotiator, said the teachers have accepted changes in their insurance coverage each year for the past few years. Five years ago, the teachers had no health insurance deductible, he said.

"We all know that the real elephant in the room is a Legislature that won't properly fund education," Sanford said.

Kristi Milan, president of the CEA, told Bauman she didn't think it was fair for the administration and board to "hang the bus drivers on us."

Milan said that in the past, when lists of items that could be cut have been given during negotiations, the teachers have also been given the costs of those things.

"We need to see the whole picture," Milan said.

Both teams of negotiators agreed to meet again April 24 from 4:30 to 7:30 p.m. at Woodland Middle School.

"When we look at the health insurance, what we see is a tiger that we're going to have to keep feeding, and that's a problem we're trying to solve, so when there is $1.5 or $1.6 or $1.8 million on the table, we can talk about things that are beneficial to our teachers and our kids, rather than dumping that into Blue Cross' pocket," board chair Tom Hamilton said.