One reason why Wisconsin needed union reform: captive benefits

posted at 12:15 pm on February 26, 2011 by Ed Morrissey

The standoff in Wisconsin will stretch into its third week, and the fleebaggers in the state Senate still refuse to return to vote on the bill passed in the Assembly on Friday morning.  Legislators say they will remain out of state as long as the bill is on the table, and demand that Governor Scott Walker pull it back.  Walker, for his part, has refused to do so, and will have to announce layoffs during Tuesday’s budget address if the budget-repair bill remains stalled in the legislature.

Some have called for Walker to reconsider his push to remove pensions and benefits from collective bargaining with public-employee unions as a compromise, but Gary Gross recalls a Patrick McIlheran column from December that explains exactly why Wisconsin needs to push for PEU reform now.   The MSJ columnist wrote about the big stake that the Wisconsin Education Association has in forcing individual school districts to negotiate benefits — because they can demand that their own WEA Trust have a monopoly on health insurance:

Districts that buy WEA Trust plans average $1,665 a month for family premiums, according to their state association, while those choosing other carriers average $1,466. The difference is greatest where taxpayers cover the whole premium.

Milton was paying $48,301 more in premiums for every month that it couldn’t switch from WEA Trust to a pair of plans from Madison-based Dean Health and Janesville-based MercyCare that it said were comparable. The district already had switched its administrative staff, said Nikolay, and while the union objected that the new plans would restrict choices, most teachers already used doctors at Dean or MercyCare clinics, Nikolay noted. “That made it less problematic for a lot of our families.”

And it saved a bundle for a district saddled with “bleak local economic conditions,” as its arbitration case put it. It is losing students and, thus, state aid. The area is losing population. The district needed to control premiums, and the arbitrator agreed.

The question is why it had to go to arbitration at all. The answer is that in Wisconsin, school districts can’t change health carriers – even if they keep benefits the same – without negotiating. And teachers unions have been very partial to keeping WEA Trust.

This may be changing. If unions won’t agree to dump WEA Trust plans, a district could always get an arbitrator to side with them. But districts were loath to use arbitration, which they could lose badly, so long as they had the old qualified economic offer law in place.

That guarantee of no arbitration in exchange for a certain compensation hike got killed, however, by Democrats last year.

When Walker says that the PEU reforms will allow counties, cities, and school districts more latitude in budget cuts, this is what he means.  The protesters in Madison have avoided this particular point, perhaps because it exposes one of the real stakes in the fight.  The WEA, perhaps the most powerful union in the state, makes a fortune off of selling its insurance at inflated prices to districts around the state.  Milton, for instance, saved $382 per month per employee when it got an arbitrator to agree to end the WEA Trust concession.  Spread that around to the thousands of teachers in Wisconsin, and taxpayers can get a pretty good idea what PEU reform might mean in reducing stressed budgets at every level of government in Wisconsin.

The Wall Street Journal noticed this yesterday as well:

Under the current collective- bargaining agreements, the school district pays the entire premium for medical and vision benefits, and over half the cost of dental coverage. These plans are extremely expensive.

This is partly because of Wisconsin’s unique arrangement under which the teachers union is the sponsor of the group health-insurance plans. Not surprisingly, benefits are generous. The district’s contributions for health insurance of active employees total 38.8% of wages. For private-sector workers nationwide, the average is 10.7%.

No doubt the WEA gets a good deal for its members, but it’s getting a better deal for itself.

Gary says this heretofore overlooked context explains why unions are bitterly opposing the changes, and why they are so important to defend:

That the union opposed the switch from WEA Trust to a more taxpayer-friendly insurance plan says everything about the teachers union’s priorities. That $1,000,000 in savings could’ve gone towards hiring more teachers to lower class sizes. It could’ve been used to get better equipment in science labs. It could’ve just been saved. It could’ve been used for a combination of those options.

This isn’t a tiny consideration. It’s gigantic in impact.

The refusal to collect union dues probably fuels the union opposition most, as it will strangle their political operation in Wisconsin.  But for the WEA in particular, the loss of their near-monopoly on health insurance in the public sector will do the next-highest level of damage to union finances.  Just remember that when people tell you that the cause for which they’re fighting isn’t about money, it usually is.


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But districts were loath to use arbitration, which they could lose badly, so long as they had the old qualified economic offer law in place.

That guarantee of no arbitration in exchange for a certain compensation hike got killed, however, by Democrats last year.

The “qualified economic offer law” capped the combination of salary and benefit increases to 3.8%. The repeal of this law means that (a) there is no longer a negotiation cap, and (b) the choice of “pricey” insurance like WEA Trust could be made by the various Districts without economic harm. Many districts probably chose WEA Trust partly because their elected representatives had been placed there by the unions, and the board members’ union allegiances trumped their oath to serve the People.

See here.

After reading that, one can easily see why the new law proposes that compensation be capped at the rate of inflation. That places the union, at negotiation time, of choosing either to put more money directly into the pockets of their members, or choosing to keep giving that money to the WEA Trust.

unclesmrgol on February 27, 2011 at 2:23 AM

I screwed up in the second sentence. It should read:

The repeal of this law means that (a) there is no longer a negotiation cap, and (b) the choice of “pricey” insurance like WEA Trust can no longer be made by the various Districts without economic harm.

unclesmrgol on February 27, 2011 at 2:25 AM

The Teamsters showing civility today in Sacramento

mizflame98 on February 26, 2011 at 10:38 PM

The Tea Partiers would be excoriated by the LSM as violent if they dared to retaliate. But people have a right to defend themselves…or at least it used to be that way. Wonder if this story will make the morning news shows on the alphabet channels?

Dr. ZhivBlago on February 27, 2011 at 2:46 AM

Always follow the money. The unions are getting rich off the backs of the teachers through this insurance scam. The dues are just chump change that passes through to the dems. The teachers need to open their eyes and see what they are supporting before allowing themselves to get so worked up into a frenzy against the governor. They’ve been had by the union bosses.

Kissmygrits on February 27, 2011 at 8:26 AM

I still have yet to see anyone explain wny teachers need to be able to collectively bargain in order to be effective teachers.

ladyingray on February 27, 2011 at 8:54 AM

To complicate matters more for school districts, the state caps how much money they can spend on each student. It’s based on enrollment, plus an arbitrary cap.

Right now, our school district estimates that the state will change the per-student allowance between +200 and -500. Yup, a $700 swing. The administrators are trying to figure out what they’ll do next year, and they don’t even knonw how much money they’ll have.

WI law requires that teachers be pink slipped by March 1 if they’ll be laid off. If the budget repair bill passes, schools will be able to fire ineffective teachers, if it doesn’t, they’ll lay off by senority.

My district is anticipating a $1,000,000 shortfall (and we’re in great shape). The insurance change ALONE would save us $1,700,000 without removing any benefits! (Now imagine if we went to a policy that had – gasp – co pays!)

Daisy_WI on February 27, 2011 at 8:59 AM

I still have yet to see anyone explain wny teachers need to be able to collectively bargain in order to be effective teachers.

ladyingray on February 27, 2011 at 8:54 AM

Well according to ernesto, our resident Che! wannabe … you’ll have “de facto corporate governance” or something if they can’t employ collective bargaining.

What you call for, then, is de facto corporate governance.

ernesto on February 26, 2011 at 7:55 PM

darwin on February 27, 2011 at 8:59 AM

My district is anticipating a $1,000,000 shortfall (and we’re in great shape). The insurance change ALONE would save us $1,700,000 without removing any benefits! (Now imagine if we went to a policy that had – gasp – co pays!)

Daisy_WI on February 27, 2011 at 8:59 AM

I see … and how does this help the children? According to Union Manifesto policy WI-54-08, only collective bargaining and WEA Trust health insurance can help the children. Isn’t it time you start thinking about them?

darwin on February 27, 2011 at 9:03 AM

That the taxpayers in question are not receiving the pensions and health coverage that unionized employees are receiving is their fault, no one else’s. They should have joined a union and negotiated for better benefits.

ernesto on February 26, 2011 at 2:15 PM

Now THAT is stunningly idiotic. It can be altered in sooooo many ways:

“That the taxpayers uninsured in question are not receiving the pensions and health coverage that unionized employees are receiving is their fault, no one else’s.”

“That the taxpayers unemployed in question are not receiving the pensions and health coverage that unionized employees employed people are receiving is their fault, no one else’s.”

ddrintn on February 27, 2011 at 9:21 AM

the top 1% don’t have our money

right4life on February 26, 2011 at 2:30 PM

Oh yes they do. Their share of national income has skyrocketed.

ernesto on February 26, 2011 at 2:33 PM

And that is YOUR money how, exactly?

ddrintn on February 27, 2011 at 9:23 AM

I like numbers (despite my horrible experience in 8th grade)… so let’s play: (for those playing along at home, the $350 is the excess premium that the district pays for WEA Trust over identical insurance from, say, Humana).

98,000 WEAC member in Wisconsin – this does NOT include Milwaukee teachers who have a union of their own.

98K x $80/mo dues * 12 = $ 94 mill/ year
98K * $350/mo ins * 12 = $411.6 mill/year

Total: 505.6 mill to ONE union each year from the taxpayers of Wisconsin. That’s half a BILLION.

Oh yeah, it’s the money.

Daisy_WI on February 27, 2011 at 9:35 AM

Total: 505.6 mill to ONE union each year from the taxpayers of Wisconsin. That’s half a BILLION.

Oh yeah, it’s the money.

Daisy_WI on February 27, 2011 at 9:35 AM

No wonder the unions are fighting tooth and nail.

darwin on February 27, 2011 at 9:38 AM

And that is YOUR money how, exactly?

ddrintn on February 27, 2011 at 9:23 AM

It’s the classic Zero Sum Fallacy…a belief that is at the core of the Progressive ideology, Modern Liberalism, Leftism in general, etc.

The Left believes that there is a fixed amount of wealth. When the rich get richer, that must mean that the poor (or “middle class”) must be then getting poorer.

Leftists do not understand that wealth is created. There is not, nor has there ever been, nor will there ever be, a fixed, static amount of wealth to be distributed like pie slices.

visions on February 27, 2011 at 9:40 AM

Uh OH, bad note taking (or reading)

The 1.7 million savings is from teachers paying their share. The switch in insurance would save an additional amount. There’s some overlap…but the total savings, for my little district, is just south of 4 million, or about $2000/ student.

Hmmm… that would bring back our gifted program, German, French, writing workshop, increase the STEM (Science, Technology, Engineering and Math) program, maybe 4K kindergarten…….

If you extrapolate that out, there’s nearly a billion dollars going to WEAC and WEA Trust. That can’t be right, can it?

Daisy_WI on February 27, 2011 at 9:57 AM

Nope,it’s not right – half of that money is just savings…

Daisy_WI on February 27, 2011 at 10:20 AM

Have all the twenty something fun and games at the State House in Madison wound down yet? I’m still wondering how that young college girl who turned the place into a hostel got away with it. It’s going to be tough getting them out of there. They are having too good a time. It’s no longer(if it ever was)a cause with these kids, it’s winter break. I also see the retired there. Can’t imagine what’s in it for them. They already have their pensions.(yes, I know I sound cynical and I don’t care)

jeanie on February 27, 2011 at 10:44 AM

Daisy_WI on February 27, 2011 at 10:20 AM

You’re numbers are quite frightening…

ladyingray on February 27, 2011 at 11:17 AM

jeanie on February 27, 2011 at 10:44 AM

Perhaps they will continue providing video fodder for next year’s campaign circus.

Roy Rogers on February 27, 2011 at 1:23 PM

This whole thing reminds me of this MP bit:

Voice Over: and caption: ‘THERE NOW FOLLOWS AN APPEAL ON BEHALF OF EXTREMELY RICH PEOPLE WHO HAVE ABSOLUTELY NOTHING WRONG WITH THEM’

Sir Pratt: (at a large leather-topped desk with an elaborate table lamp) Hello. I’d like to talk to you tonight about a minority group of people who have no mental or physical handicaps and, who, through no fault of their own, have never been deprived, and consequently are forced to live in conditions of extreme luxury. This often ignored minority, is very rarely brought to the attention of the general public. The average man in the street scarcely gives a second thought to these extremely well-off people. He, quite simply, fails to appreciate the pressures vast quantities of money just do not bring. Have you at home, ever had to cope with this problem… (cut to a rich young yachting type surrounded by girls in bikinis) or this… (cut to a rich woman loading her chauffeur with all kinds of expensive parcels) or even this… (cut to a still of Centre Point) I know it’s only human to say, ‘Oh this will never happen to me’, and of course, it won’t. I’m asking you, please, please, send no contributions, however large, to me.

mankai on February 27, 2011 at 1:24 PM

Yes, Lady in Grey, they are. I’ve been told over at JSOnline that my figures are off….but no one on the other side has managed to come up with any sourced numbers. They have, however, come up with a thesaurus-full of insults for my intelligence, morals and the marriage status of my parents.

Here’s more info (not scary, just info). While WI teachers will be held to the rate of inflation, they can increase their pay through additional education and through seniority. If they earn a masters, their base pay goes up.

Daisy_WI on February 27, 2011 at 1:32 PM

Hey, anyone notice that Drudge gave almost no coverage to the democrats’ failure of a “50-state protest”? I bet that really pisses them off. It gave me a chuckle. They think they’re making history, and Drudge is busy reminding the world that Barry has no coherent foreign policy.

Rational Thought on February 27, 2011 at 3:25 PM

Just reading about the Portsmouth NH union folk protesting yesterday. They actually had some loud teacher from WI here. I predict that many NHerites will be mightily turned off by that. I am. Call it meddling and WI unions, you need to keep your own at home. We don’t want or need them. (sorry WI folk on here but, we really wish your teachers would mind their own business and stay out of ours–thanks)It does succeed in really making it union business though and not the high and mighty stuff the WI teachers would have you believe.

jeanie on February 27, 2011 at 4:05 PM

The teachers need to open their eyes and see what they are supporting before allowing themselves to get so worked up into a frenzy against the governor. They’ve been had by the union bosses.

Kissmygrits on February 27, 2011 at 8:26 AM

They did go off the deep end, didn’t they. But, I believe that the majority of teachers are Democrats and lean to the Left so they have a real problem understanding who ultimately pays them/us.

Our local has historically had a good relationship with out school board and one of the school board members is a former local member. Many of our administrators’ spouses are union members. One of our bargaining team members is a fellow Republican and when employees complain about health insurance costs (of which we pay the bulk for ourselves) he reminds them that that’s the same nationwide for everyone, and encourages them to opt for catastrophic insurance.

We’re in a “right to work” state, can’t strike legally and what most of us seem to want is a voice and a means of negotiating a decent contract.

Our nationals (NEA and AFT) do little to nothing for us (though they do offer something in the way of grants). We want to do more for our teachers in the way of helping us to do our jobs better and kick in some of that accumulated union wealth for the students in the classroom. Our local also donates to some local charities and takes part in drives for school supply donations for disadvantaged students. We’ve also donated money to members who have severe health problems and offer small scholarships.

The AFL-CIO does nothing for us and merely asks for handouts.

Dr. ZhivBlago on February 27, 2011 at 4:26 PM

Call it meddling and WI unions, you need to keep your own at home.

Jeanie, if Wii could keep our own at home, we wouldn’t be in this crisis.

Daisy_WI on February 27, 2011 at 9:50 PM

Jeanie, if Wii could keep our own at home, we wouldn’t be in this crisis.

Daisy_WI on February 27, 2011 at 9:50 PM

Yes, I see the error of my ways. You do have a significant problem keeping your own at home. LOL

jeanie on February 28, 2011 at 9:50 AM

The Unions are in a life-or-death struggle to protect the WEA Trust healthcare monopoly and to prevent union members from seeing the actual impact of “auto-deducted” dues. Students be damned. If you’re a high school senior intent on going to a four-year college….fogedaboudit! There’s alway community college, or, as the One says, “College isn’t for everyone!”

olesparkie on February 28, 2011 at 10:03 AM

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