Retirement Systems of Alabama CEO David Bronner said Tuesday the Legislature faces hard decisions on education funding in 2026 because of rising health insurance costs and other pressing needs.
Bronner, head of the RSA since 1973, said tax cuts passed in the last couple of years and the new program that allows parents to use taxpayer dollars to pay for private school will add pressure on the budget.
“What the Legislature is facing for the first time in years is much more demand than they’ve got money,” Bronner said.
State budgets were boosted for several years by the influx of billions in federal dollars that Congress sent to state because of the pandemic.
But revenues have leveled off.
Bronner spoke at the quarterly meeting of the Public Education Employees’ Health Insurance Plan (PEEHIP) Board of Control.
PEEHIP is an important part of the state education budget because it provides health insurance for about 350,000 people, including education employees, dependents, and retirees.
PEEHIP is requesting a $380 million funding increase from the Legislature in fiscal year 2027, which begins Oct. 1, 2026. That’s a 33% increase over the current fiscal year, to $1.5 billion.
The state pays about two-thirds of the cost of the program, while employees pay most of the rest.
Major factors in the increased cost of PEEHIP include the costs for members with Medicare Advantage plans and for hospital and medical costs for active employees, said Neah Scott, legislative counsel for the RSA.
The increase requested for 2027 follows an increase of $130 million, or 13%, for fiscal year 2026.
PEEHIP Director Dave Wales said last year that federal changes had increased the cost for Medicare Advantage plans.
The two years of increases for the insurance program come after years of stable funding. PEEHIP’s funding request per active employee remained at $800 per month from 2017 through 2025.
The health insurance costs will be a factor in whether lawmakers are able to fund a pay raise for teachers in the fiscal year 2027 budget.
One of the charts included in the packet for Tuesday’s PEEHIP board meeting shows projected increases in medical and pharmaceutical costs of more than $100 million annually over several years, reaching a projected total of $2 billion in 2028.
Bronner said that is worrisome because he does not expect the Legislature to approve any new revenue sources.
“When you start balancing the factor that this is going up $100 (million) to $150 million over four years, that’ll bring tears to your eyes,” Bronner said.
The CHOOSE Act, a priority for Gov. Kay Ivey and the Republican majority in the Legislature, enables parents to use of up $7,000 in taxpayer funds for private schools.
Almost 24,000 students are participating this year, the first year of the program. About three-fourths of those were already in private schools or were homeschooled.
Bronner said the program will hurt public school systems that were underfunded.
Bronner said good things are happening in public schools.
He said State Superintendent Eric Mackey might be the best superintendent of his lifetime and said community colleges are doing important work in workforce development, including dual enrollment programs for high school students.
“There’s a lot of good things going on,” Bronner said. “But we have a financial problem.”
The legislative session starts Jan. 13.
RSA chief David Bronner: Alabama’s tough education funding decisions will ‘bring tears to your eyes’
