Rising health care costs are forcing school districts across the country to make difficult tradeoffs that extend beyond employee benefits, according to a new survey from AASA, The School Superintendents Association, and the Association of School Business Officials International.
The survey of 767 superintendents and school business officials found that 98% of district leaders say rising health care costs are having a measurable impact on their budgets, with many districts delaying hiring, scaling back investments in instructional materials and technology, drawing down reserves, and reducing employee benefits to absorb escalating insurance expenses. Among the districts surveyed, 81% reported health insurance premium increases of at least 10% over the past year, while 16% experienced increases exceeding 20%.
District leaders identified increasing prescription drug costs as the leading driver of premium growth, cited by 60% of respondents. More claims for expensive treatments and increased utilization of specialty medications such as GLP-1 drugs followed closely behind, each selected by 56% of respondents.
To manage the growing financial burden, districts reported making a series of increasingly difficult budget decisions.
The most common response was tapping reserves or rainy-day funds to cover premium increases, cited by 52% of respondents. Nearly half (46%) said they had modified employee benefits packages, while 34% reported delaying or avoiding new hires. Another 31% said they had reduced spending or postponed upgrades for instructional materials and technology, and 28% reported offering less generous health insurance coverage for employees' families.
The survey also found that rising health care costs are beginning to influence staffing and compensation decisions. Respondents reported postponing salary increases, leaving positions unfilled, reducing staff through attrition and delaying plans to expand student services.
More than half of districts reported using reserves to offset costs. Health care expenses already consume a significant share of district budgets. During the 2025-26 fiscal year, 92% of districts reported spending up to 30% of their general fund budgets on employee insurance benefits, including medical, dental and vision coverage. Many school systems are limited in their ability to redesign benefits because of collective bargaining agreements, state-administered insurance programs and the need to remain competitive in recruiting and retaining educators, the report said.
According to the survey, districts are increasingly shifting costs through higher deductibles, increased employee premium contributions and higher copays. Among respondents that modified benefit plans, 40% reported offering plans with higher deductibles, while 31% increased employee premium contributions.
The report concludes that without additional funding or policy changes, health care costs will continue to crowd out investments in educational programs, staffing, technology and student support services.
"District reserves are not designed to subsidize recurring and escalating expenses such as health care obligations," the report said. "As reserves are depleted, districts face more difficult tradeoffs as health care costs crowd out other spending priorities."
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