Legacy costs are handicapping UConn and UConn Health Center
Many of us take great pride in the University of Connecticut. From the 8,000-plus students who will receive their degrees in just a few weeks, to the accomplishments of individual students like UConn’s first Rhodes Scholar, Wanjiku Gatheru, to the hundreds of thousands of patients from every town in the state served by UConn Health, to UConn’s 23 NCAA national championships. There is much to celebrate.
Just this past year, UConn’s Paige Bueckers was the first freshman ever to win the John R. Wooden Award for college basketball’s most outstanding player. Paige’s freshman season was unparalleled, but even she couldn’t compete at that level if she had to wear ten-pound ankle weights in competition – and UConn and UConn Health shouldn’t have to either.
The state’s unfunded pension and healthcare liabilities being charged to UConn and UConn Health is a critical problem. These legacy costs, not created or controlled by UConn or UConn Health, will cost these state institutions a combined total of $283 million in the next three years. While the state covers 100% of the salary and fringe costs for most other state agencies’ employees, UConn and UConn Health have to fully fund the salaries and fringe costs for the majority of their employees through tuition and fees, clinical and federal research grant revenue.
This is not the “fault” of any individual, institution, or generation of leaders. It is a problem that has been building for decades, which many current state elected officials recognize and want to address. We hope they do.
Because this really matters. Let us count the ways:
· Budget: Without these unfunded legacy costs, neither UConn nor UConn Health would have deficit budgets in the current fiscal year.
· Students: Annually, $850 per student goes towards paying off these legacy costs.
· Research: As a result of these legacy costs, fringe benefit rates for research grants at UConn and UConn Health are approximately 20% higher than its competitors, leading to fewer grant dollars coming to Connecticut.
· Healthcare: Fringe rates at UConn Health, due to the state’s unfunded legacy costs, are 46% more than other hospitals and providers in Connecticut – costing UConn Health over $50 million annually. No private entity could cover these costs.
The legacy cost issue is especially problematic for UConn Health, which has spent the last six years growing its services, reducing expenses by millions of dollars, and increasing its patient revenues an average of 10% per year. That self-generated clinical revenue now accounts for half of UConn Health’s budget with tuition and other non-state revenues accounting for over 25% more. As a result of the continually increasing financial performance, Pre- COVID, UConn Health would have ended last year ahead of budget, if not for the pandemic. This year UConn Health was able to achieve more than $60 million in cost reductions and revenue enhancements, and absent the state’s unfunded legacy costs, would not have projected a deficit. Because of those unfunded state liabilities, UConn Health will however, face an estimated deficit of $53.8 million.
Some have suggested the state just “sell” UConn Health. This ignores two important facts. The first is that this would not reduce the legacy costs that the state currently charges UConn Health. Rather it would simply shift i.e. add, those legacy costs to students’ tuition. It also ignores an even more important fact that UConn Health is of great value to the state. UConn Health is the state’s only public academic health system, and the only health system with a mission to educate, create knowledge, and provide access to care to all Connecticut residents regardless of their insurance type. In particular UConn Health provides a vital public service to Connecticut residents by giving access to thousands of Medicaid Specialty medical and dental patient visits annually. This vital public access-to-care mission is reflected in data that shows that UConn Health patients come from every one of the 169 towns in Connecticut.
UConn Health’s teaching hospital is integrated with its academic mission and we should be proud that UConn Health is the single largest provider of medical and dental graduates in the state of Connecticut. Put simply, UConn Health from an education, research and clinical care perspective is a public institution with a public service mission of which we can be proud.
Overall, UConn and UConn Health combine for a $5.3 billion economic impact to the state of Connecticut. This figure includes over $277 million in state and local tax revenue and $485 million impact from UConn research enterprise. They also support over 25,900 jobs, plus another 2,149 jobs involved with UConn research. It is a key engine driving the Connecticut economy.
We shouldn’t support UConn or UConn Health blindly, like we support the Huskies on the playing fields. It is right to scrutinize the decisions of the UConn Board and administration to ensure that we continue to get the most out of the state’s investment. In this case however, a fair analysis shows they don’t need a bailout, simply a level playing field.
John P. Malfettone is the chairman of UConn Proud and former chairman of the UConn Foundation. Denis Nayden is a board member of UConn Proud and former member of the UConn Board of Trustees. UConn Proud is an independent, 501(c)4 non-profit, established in 2018, to promote the connection between excellence at the University of Connecticut and its impact on the state of Connecticut.
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