Myrtle Beach city council addresses $1.5 million deficit in health insurance fund

The Myrtle Beach city council is in favor of a "wind-up ordinance" to cover a nearly $1.5 million deficit in the health insurance fund on Wednesday, Nov. 12.

The city's leaders unanimously approved adjusting the FY26 budget by reallocating $1.5 million from the general fund to the health insurance fund in the first reading of the ordinance.

Chief Financial Officer Michelle Shumpert addressed council and said it was discussed at the budget retreat earlier this year that health insurance claims were running about 30% higher than expected and a $2.9 million deficit at the end of 2025 was expected.

"Fortunately, those claims did slow down and the deficit was only about $1.5 million," she said. "We have adjusted those rates for [fiscal year] 26 to hope to prevent that from happening again. Right now, the first quarter of the year, the numbers are running in line with the budget. They are up, but they're still in line with the budget we've presented."

The ordinance cites total health care costs for fiscal year 2025 were 14.1% higher than fiscal year 2024 and health insurance premiums for fiscal year 2026 were increased by 10% due to rise in medical costs.

An alternative to using general funds would be to increase health insurance premiums mid-year for employees, retirees and dependents, according to the ordinance.

Shumpert said a wind-up ordinance is standard for council to address changes that may be necessary if revenues and expenditures vary from what was anticipated when the budget was adopted.

"Our budget also includes statutory language that allows us to change the budget based on those things that are driven by a statutory formula," Shumpert said. "For example, your accommodations tax, when the money comes in more, perhaps, than what we budgeted, we are allowed to go ahead and amend the budget to match what originally came in as well as the TDF because it is statutorily driven."

She added that a little over $50 million will remain in the general fund after covering the deficit, about 40% of recurring expenses. She said business licensing fees are beginning to slow down, but they expected a decrease sooner.

"We never wanted to rely on those peak revenues throughout," Shumpert said. "So, by budgeting conservatively for those, we've been able to grow our fund balance to a point that it's going to offer us some comfort and insurance if and when the numbers do begin to actually stabilize back to pre-pandemic numbers or somewhere near that."

Council member Gregg Smith clarified that the General Fund balance acts as a savings account for emergency needs.

"So, when we say we have 40% in the fund balance that means that we have enough money in savings to operate the city for 40% of the year, at the current levels, if there is no additional income," Gregg Smith said.

Council member Debbie Conner confirmed the health insurance deficit is the only deficit in the budget.