Wednesday, December 16, 2009

MPS "Denializing"

It's not really news, but Don Bezruki has done an excellent report on MPS' unfunded liability for retiree health care for the Wisconsin Policy Research Institute.* Over at One Wisconsin Now (where they've apparently moved on from threatening the livelihood of lawyers based on the pro bono clients they represent), Scot Ross is in a state of denial. He characterizes the report as saying simply that "[h]ealth care costs for retirees in Milwaukee Public Schools are going to increase." We should get the health insurance companies to charge less, maybe by increasing competition.

I do feel for Scot. There is really no good way for the public employee unions - who I suspect fund OWN and with whom I suspect Scot's sympathies genuinely lie - to respond to this. MPS's unfunded liability for retiree health care benefits currently stands at $2.6 billion and growing. Paying the health care benefits of people who no longer work for the district (and my sister is likely to be one of them) will grow to 20% of payroll costs in 2016. MPS' current burden rate (the amount spent for the inaptly named fringe benefits) is 68.7%. A generous private employer will typically have a burden rate of less than half that.

So there was no good thing for a guy like Scot to say. But what he did say is replete with irony. Here's the first. Scot thinks that WPRI's report should have called for increased competition among insurers. But competition among insurers is precisely what OWN's comrades-in-arms at WEAC have fought tooth and nail, preferring that school districts contract with its captive insurer. While I do not believe that MPS' benefits are provided by the WEA trust, competition in health care looks a bit like a new commitment and I hope that OWN will continue to push for in school districts across the state.

Of course, it won't help MPS all that much because even if increased competition can decrease costs, it is unlikely to solve much of the problem. Health care costs in Milwaukee are 9% above the Midwest average. Let's assume that some unspecified way of increasing competition (which I presume, for Scot, would not include increased deductibles that might encourage some price competition)would bring us back to the average. That unfunded liability would shrink right down to ... $ 2.3 billion. Why were we even worried?

Here's the second irony. Scot inexpiclably says that WPRI wants money to go to insurance companies rather than kids. Actually the report seems to want money to go to educating kids rather than to retirees. It would seem to be the MTEA (of which the lovely young Karra Esenberg is a member) that wants the money to go to insurance companies. But that's a nit. there is a real threat here to the provision of education in Milwaukee. That 20% that will go to paying for my sister's Cadillac health insurance while she pursues her wine business could have bought $ 130 million in education.

There is even a third irony. Scot goes after the mild-mannered and quite moderate George Lightbourn for engineering what he calls the largest state budget deficit in state history. That isn't true, but the mess in Milwaukee may wind up contributing to that state's fiscal woes. There is, I think, no way that Milwaukee can tax itself out of the problem. There just isn't room for that type of increase and current revenue limits would, in fact, prohibit it. The state is responsible for providing a uniform education throughout the state (see Art. X, sec. 3 of the state constitution)and a majority of the state Supreme Court (although not of its current members) have held that this creates a judicially enforceable right to an adequate education.

Although I don't imagine that outstate legislators will rush in to save MPS, the courts might. And here's a fourth irony. Might a court invalidate the outsized benefits to retirees because they have rendered the provision of a uniform and adequate education impossible? My sense is that it is unlikely but there are a number of possible end games here. But, at the risk of disappointing Scot, business as usual or the villification of insurance companies are not among them.

* I write - for compensation - for WPRI's journal WI Interest and have discussed several other projects with them and, yes, Mr. Foust, George Lightbourn bought me lunch - more than once I think.

9 comments:

George Mitchell said...

School Choice Wisconsin referenced the multi-billion unfunded liability more than a year ago. See http://www.schoolchoicewi.org/data/research/MPS%20Fiscal%20Report%20-%20Oct.%2030.pdf.

It is my understanding that there is a difference between pension liabilities and health care liabilities in terms of whether MPS is legally on the hook for them. If it is true that there is legal flexibility regarding future retiree health care benefits then any current teacher assuming they are covered should think twice. There is no way billions of dollars are going to be made available.

Today's Journal Sentinel editorial page gets around to acknowledging what has been clear for years: MPS is headed for bankruptcy.

John Foust said...

Thank you for the shout-out. It's always good to know who's buying lunch for who. (Have no fear; I think the WI Supremes recently decided that free lunch is just as non-influential to anyone's opinions as a million-dollar media buy.)

I'm having trouble finding the Standard Contradictory Disclaimer™ in this post, though. Is it in your suggestions to cultivate suspicion about the affiliations and motivations of web writers, and to ask which patrons they're sucking-up to, and to wonder who is supplying how much money to which shadowy interest group, be it OWN or WPRI or big insurance companies? After all, some writers are getting paid to do it, while other bloggers do it in true amateur fashion.

I would be glad to proof-read - for compensation - your posts. This one needs a second pass.

Anonymous said...

I read Foust's posts and try to understand what he's hoping to communicate, but it always ends up just hurting my brain.

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