Posts Tagged ‘Labor Unions’

Analysis of Milwaukee Public Schools’ Retiree Health Care Obligations

Milwaukee taxpayers are on the hook for nearly $2.4 billion in unfunded liabilities thanks to their school district’s retirement programs – and that doesn’t even include the cost of providing pensions for MPS retirees.

In 2004, the Government Accounting Standards Board imposed regulations forcing local governments, including school districts, to provide full transparency of their future health care liabilities. As a result, these units of government were forced to provide accountable reports detailing where and how health care funds were being spent and where the money was coming from to foot the bill.

An analysis of data provided by Milwaukee Public Schools paints a bleak picture for Wisconsin’s largest school district.

A report issued this week by actuaries at Gabriel Roeder Smith & Company shed light on a $2.398 billion unfunded liability when it came to Other Post-Employment Benefits (OPEB) in Milwaukee Public Schools. These funds, which cover items like health and life insurance, are applicable to thousands of retirees who won’t set foot in the classroom this year, and thousands more candidates who never have.

MPS’s actuarial liability, the unfunded debt created through providing OPEB funds, is growing at an alarming rate as well. From July 2007 to July 2009, this shortfall increased from $2,222.7 million to the current figure we have today – a gain of nearly $175 million in just two years. While retirees are making use of their benefits, the District is failing to cover the bill, instead deferring much of the cost for future payment because of budgetary concerns. While this removes the problem from the spotlight in the short term, it creates a looming cloud of debt that may cripple MPS in the future.

However, these benefits, which cost hundreds of millions of dollars annually, don’t exclusively go to teachers. The wide scope of OPEB reaches to spouses, secretaries, mechanics, lunchroom workers, custodians, and even board members – who need just eight years of service to qualify for full benefits. While 12,143 active and retired teachers (and their spouses) claimed benefits, 5,030 of the individuals served by Milwaukee’s OPEB have never taught a class in MPS.

At an average annual cost of $10,939.71, these non-educators covered by MPS’s pension benefits added over $55 million to the district’s burden between 2009 and 2010 alone.

This obligation comes from a funding disparity that allows OPEB costs to be set aside and accumulate debt, essentially creating a larger burden for future generations to deal with. Employer contributions to this fund have historically fallen way short of annual OPEB costs, covering only 29.8% of the actual price of insuring retirees over the past three years. These obligations, which hover between $175m and $200m annually, present a major burden on educational budgeting, and each year that the full cost is not met shifts a greater expense to be paid at a future date. As a result, approximately $388 million in obligations have added up in the past three years alone.

Essentially, as this liability continues to be left to fester, it creates a growing shadow over the future of Milwaukee’s education. GRS projections predict that this accrued liability will hit nearly $5 billion by 2017, and is projected to continue to grow at a steady rate.  If the current, pay-as-you-go funding system is left in place, a best-case scenario prediction accounts for  just $57 million in assets in that same year, leaving a liability that is only 1.4% funded.

As retirees increase and the number of active teachers remains relatively static, this is a problem that will only continue to grow unless drastic measures are taken. This annual actuarial liability must be reduced, while at the same time the employer contributions must increase in order to make a dent in MPS’s enormous obligation. This is a problem that stands to slowly suffocate public school funding in Milwaukee, taking funding from areas like teacher recruitment, facilities upgrades, and adopting new technology. This OPEB liability is the $2.4 billion elephant in the room, and it must finally be addressed.

By Christian D’Andrea
MacIver Institute Educational Policy Analyst


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Posted in Featured, mi reports | August 26, 2010 | | No Comments

Son of a Stimulus Advances!

We hate to say we told you so, but we told you so.

Back in June, The MacIver Institute warned taxpayers that a second stimulus package was making its way through Congress.  At the time, the media was reporting that the package had “failed to gain the necessary support” to pass the Senate.

We suggested taxpayers might still want to hold on tightly to their wallets.

Wednesday, The Wall Street Journal is reported that the Senate voted to end debate on the bill to “provide $26 billion in emergency aid to state and local governments to expand Medicaid and avoid teacher layoffs.”

The bill provides approximately $16 billion in funding to states to help cover their rising costs due to an expansion of the Medicaid program and $10 billion to school districts to avoid the layoffs of teachers this fall.   Democrats believe the bill will save 140,000 teacher jobs.

The Son of a Stimulus package will supposedly be paid for with an $11 billion dollar tax increase on corporations, the repeal of the “advanced earned-income tax credit” and $12 billion dollars in cuts to food stamp benefits.  The food stamp benefit cuts are not scheduled to go in to effect until 2014.

This new spending bill passed despite estimates from the National Debt Commission that “the nation’s federal debt next year is expected to exceed $14 trillion — about $47,000 for every U.S. resident.”

We would do our “I told you so” dance if our exploding debt wasn’t such a serious threat to the future of our country.

Read our original prediction here.  Click here for the latest Washington update from The Hill.

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Posted in mi perspectives | August 4, 2010 | | No Comments

When it comes to $$$, WEAC Sees Little Difference Between Carrot and Stick

Is it any wonder many teachers have a hard time managing bad behavior in their classrooms or why some don’t like to issue grades? Their union can’t understand the difference between incentives and punishment and can’t handle real standards.

Before any beleaguered teachers inundate me with email, I’m kidding.

But WEAC wasn’t joking recently when they chimed in on new standards and incentives for excellence in education. And when it comes to their treatment of students as commodities with dollars attached to them, it’s really not funny.

The No Child Left Behind Act was never very popular among the education establishment. It set high standards and punished schools that could not live up to them. Educators argued it set schools into a downward spiral, where struggling students would not receive the resources needed to improve. Many educators hoped Barack Obama would overturn NCLB after he became president. Instead, after more than a year, he’s changing the name and focus, but he insists high standards will remain.

On Monday the Department of Education described NCLB as “the most recent reauthorization of the Elementary and Secondary Education Act of 1965 (ESEA).” The department is now going with the name “ESEA.”

Also, where President Bush’s education policy focused on the “stick,” President Obama claims he’s trying the “carrot.”

He wants to reward schools that are succeeding. Note: Let’s set aside the timid nature of Obama’s attempt at reform used here and focus on the concept of incentivizing excellence.

Although the Department of Education officially unveiled his education reform plans on Monday, President Obama has been giving indications of his intentions for months.

We’ll dig into the details in the weeks head, but the battle lines have already been drawn between the union-dominated education establishment and the seemingly reform-minded Education Secretary Arne Duncan.

As always, it all comes down to money.

In Madison back in November, Obama announced Race to the Top, a grant program that rewards innovation and improvement. (We’ve written at length about the program and how Wisconsin fell short).

“This is not normally how federal dollars work,” said Obama in Madison last year. “But because of [Secretary of Education Arne Duncan's] tenacity and our commitment to make sure that reform happens, that’s how we’ve structured it. We’re saying to states, if you are committed to real change in the way you educate your children, if you’re willing to hold yourselves more accountable, and if you develop a strong plan to improve the quality of education in your state, then we’ll offer you a big grant to help you make that plan a reality.”

The Department of Education explained under ESEA, “The accountability system also will recognize and reward high-poverty schools and districts that are showing improvement getting their students on this path, using measures of progress and growth.”

In an interview with Madison’s WKOW-TV on Monday, The Wisconsin Educators Association Council (WEAC) revealed it doesn’t care for a reward-based system anymore than it was in favor of the stick-based system.

Mary Bell, WEAC president, said “It continues the idea that somehow schools need to compete for federal dollars when we know that there are communities and schools that are in desperate need of federal assistance to deal with particular challenges.”

In other words, by rewarding some schools, you’re punishing those schools you don’t reward, and that is unforgivable.

The carrot is just as bad as the stick, if not everyone gets a carrot.

Standards? How contemptible.

WKOW-TV reports that WEAC supports much of the president’s plan. It is in favor of high standards, they insist.

“It isn’t that we don’t want to be accountable, but we want the accountability to measure what matters,” Bell said.

Of course, she never explained what it is that matters.

As we reported and discussed here, Bell and WEAC were instrumental in watering down an education reform bill in Wisconsin last year.

WEAC and the president are at odds over empowering school districts to fire bad teachers.

“This has caused some controversy in some places, but it shouldn’t be controversial. Any state that has a so-called firewall law will have to remove them. Now, here’s what a firewall law is: It basically says that you can’t factor in the performance of students when you’re evaluating teachers. That is not a good message in terms of accountability. So we said, if you’ve got one of those laws, if you want to compete for these grants you got to get rid of that law,” Obama said in Madison, referring to the Race to the Top grants.

The state legislature created a bill that would allow teachers to be evaluated based on student performance, but districts wouldn’t be able to discipline them unless it was a subject of their collective bargaining agreement for that district. Instead of tearing down one wall between evaluating teachers based on student performance, the legislature (caving to WEAC) threw up hundreds.

Bell spoke at a Senate Committee hearing in October just prior to the president’s visit. She spoke in favor of the weakened bill, saying it “acknowledges that just as a single test does not represent the sum total of a student’s abilities, a teacher’s effectiveness in the classroom cannot be judged solely on their students’ standardized test scores.”

Republican lawmakers said the bill was not what the president intended, and it would jeopardize Wisconsin’s chances of receiving Race to the Top money.

Bell disagreed. She said “Our union of educators believes the changes embodied in the proposal before you today reflect the best practices in developing and implementing comprehensive and effective teacher evaluation systems while ensuring Wisconsin’s eligibility for Race to the Top dollars.”

In the end the Republicans were right; Bell, WEAC and the education establishment were wrong. Wisconsin did not make the first cut for the Race to the Top money.

Next month, the Department of Education may release Wisconsin’s scorecard, explaining why the state did not make the cut. That could be a fascinating read.

After it was announced Wisconsin did not make the first cut for Race to the Top, Bell said in a statement, “I want to be clear that our union still supports comprehensive education reform designed for the long run, not just one race. This is the time that the state and local districts should seek the input and perspective of people who work in the classroom. Wisconsin educators stand ready to go about the important work of reforming education the right way – with everyone working together toward a common goal and with resources backing up our education system so success can be achieved.”

More money without strings attached is just fine for WEAC and the education establishment.

Things just get messy when funds are attached to actual performance in any way.

By Brian Fraley
 A MacIver Perspective

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Posted in mi perspectives | March 17, 2010 | | No Comments

UW Collective Bargaining

As State Budget Worsens, Governor and Legislature Prepare to Hike Labor Costs Throughout UW System

As you know, the State Budget is in the hole to the tune of perhaps six point five billion dollars.

New revenue estimates will be out soon that will attempt to nail down just how dire the situation is.

But that’s not stopping the Governor and some in the legislature from exacerbating the problem by moving to allow employees within the University of Wisconsin to collectively bargain, a move that puts taxpayers at increased risk for higher taxes and higher tuition in the future.

While small and large businesses alike are struggling to keep all costs DOWN in an effort to save not only jobs but entire companies, state government is considering proposals that will INCREASE labor costs.

According to the Legislative Fiscal Bureau, although represented faculty are located in a total of 31 states, a majority are located in the high-tax states of California, New Jersey, and New York.

Previous attempts to include this provision within the State Budget failed when, as has been routine, significant policy items were stripped during the legislature’s review of the Governor’s proposals.

While providing the authority to engage in collective bargaining, a move that would certainly lead to increased labor costs within the UW System, no funds were even allocated for the necessary state employees to participate in the negotiations. The Legislature anticipates it would cost the state more than $2 million a year just to establish the system–that’s before any new wage agreements are negotiated.

From the LFB:

These major additional responsibilities would have a fiscal effect for the UW System. However, the bill provides no funding or additional positions to the UW System for this purpose. In fiscal notes prepared for the 2007 session bills relating to UW collective bargaining (AB 726 and SB 353), UW System officials indicated that up to $2.2 million and 38.0 positions annually would be required for this work, assuming 30 separate collective bargaining units were organized. Although the need for positions and funding for this purpose was not discussed at the UW System’s budget briefing before the Committee, in recent material submitted by the UW System relating to the AB 75 provisions, officials now indicate that $2.2 million and 32.0 FTE positions annually may be required for this work. The estimate assumes six collective bargaining units (plus a statewide unit for academic staff supervisors, which the bill would also authorize). The $2.2 million would be compromised of approximately $1.5 million GPR and $0.7 million PR.

The Joint Finance Committee is expected to take up the UW Collective bargaining proposal tomorrow.

Source Document: http://www.legis.state.wi.us/lfb/2009-11Budget/Budget%20Papers/607.pdf

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Posted in mi fast facts | May 11, 2009 | | No Comments

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