MANATEE -- Steps taken to rid the school district of its staggering $9.4 million health insurance deficit are working, Superintendent Tim McGonegal contends.

Revenues have started to exceed expenditures, he said. According to a new report, he said, the district’s health insurance fund deficit now is $7.3 million. The deficit hasn’t been that low for two years.

“The plan is working,” McGonegal said. “We are on the way to getting this fund back into the black where it needs to be.”

School board members have voted on at least two measures to address the deficit. They increased health insurance premiums by more than 50 percent on some plans and recently approved budget cuts worth $14 million. If the final budget for 2011-12 is approved Sept. 8, the cost savings will allow district officials to use $3 million to build a reserve for the health insurance fund as required by the state’s Office of Insurance Regulation.

“We’re going to take that additional $3 million as a one-time board contribution,” said Jim Drake, assistant superintendent and chief financial officer. “That should enable us to finish the 2012 fiscal year with a positive fund balance.”

Currently no reserve exists. Plans are to contribute another $3 million by the end of 2012 to bring the district into full compliance with state requirements.

McGonegal believes that the increased premiums will whittle away at the remaining deficit. He expects the deficit to be eliminated by June 2012.

He points to financial reports since January that show the district is taking the right steps. Since January, health insurance premiums have exceeded expenditures, he said. That’s a first. The deficit’s millions grew because claims far exceeded premiums.

“The board all along has made this a priority,” McGonegal said.

The April 30 financial report shows the deficit has decreased to $8.98 million. The updated report has not been released yet.

“From a fiscally conservative standpoint, I’m proud of the moves that they made,” local accountant Byron Shinn of Shinn & Co. LLC said. He has attended several of the school board’s meetings and budget workshops and studied the financial reports regarding the health insurance deficit.

In 2007, the fund balance took a turn from a surplus of $2.1 million in 2006 to 2007’s $700,000 deficit. From there, the deficit kept increasing. In June 2008, it was $4.1 million. Then, in June 2009, it leaped to $7 million. In June 2010, the deficit was $8.4 million.

District officials changed the benefit plan in 2008, which slowed the growing deficit from the $3 million to $4 million increases every fiscal year.

Instead, the annual increases were equivalent to $1 million to $1.4 million. In December 2010, the deficit had hit $9.4 million.

District officials and board members found themselves on the hot seat after an operational audit completed by the Florida Auditor General’s Office cited the district for not filing an annual report as a self-insurer as required by state law. Other self-insuring school districts were cited by the state Auditor General, but only Manatee County has experienced a shortfall in its health insurance fund, the auditor general’s office confirmed. It’s a problem, Shinn said, that has eroded public confidence in district officials.

“One of our biggest problems is trust,” Shinn said. “The public perception of our school district needs to be regained.”

Angeline Taylor, Herald education reporter, can be reached at 941-745-7095.