Steven Walters: Effect opf Act 10 is far from over

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Sunday, August 3, 2014

The week after the Wisconsin Supreme Court upheld Act 10, which all but eliminated collective bargaining by most public employees and raised their co-pays for health insurance and pensions, is a good time for a follow-up question.

Three years later, how much more do state employees pay for health care and pension benefits?

 Numbers last week from the state Department of Employee Trust Funds, which keeps score, could trigger a new election-year debate over that issue.

If you agree with Republican Gov. Scott Walker's 2010 statement that the fringe benefits of public employees made them “the haves” and taxpayers the “have nots,” you'll be glad to know that state employees paid $379.68 million for health care and pensions in calendar 2013—more than double the $163.81 million they paid in 2011.

In that period, what state employees pay for pensions went up the most. It tripled, rising from $81.96 million in 2011 to $249.68 million in 2013.

Unions and other Democratic groups backing Mary Burke for governor in the Nov. 4 election can argue that those numbers prove that state workers stepped up to the fiscal plate by doubling their contributions for health care and pensions.

But they didn't have a choice. Except for police officers and firefighters, Act 10 forced them to either pay more for benefits, quit or retire.

But TEA Party types may cite these new ETF numbers to argue that fringe benefits for state workers are still too generous: State workers paid 12 percent of the $1.08 billion that health care cost in 2013, for example, and 54 percent of the $555.3 million that had to be set aside for their pensions that year.

One reason that state employee unions, many of which were financially decimated by Act 10, are fighting so hard for Burke's election is a fear of new cutbacks in compensation a re-elected Walker may demand next year.

Changes Walker could still seek: abolishing the defined-benefit pension system for new employees and replacing it with a 401(k) plan; converting health care for state workers to a self-insured plan; eliminating the benefit that lets state workers convert unused sick leave into health-care premiums when they retire.

For comparison purposes, let's look at how much employees and state agencies paid for those two fringe benefits in years before and after Act 10:

-- Calendar 2013: State employees paid 23.2 percent and state agencies 76.8 percent of total health insurance and pension costs. Employees paid $379.68 million for these two benefits; state agencies, $1.25 billion.

-- Calendar 2011: State employees paid 10 percent and state agencies 89.8 percent of insurance and pension benefits costs. Employees paid $163.8 million for these two benefits and state agencies $1.43 billion.

Andrew Reschovsky, professor emeritus at UW-Madison's La Follette School of Public Affairs, reflected on what he calls the “true costs” of Act 10 on public workers.

“Many individuals willingly accept public sector jobs at lower salaries than they could otherwise earn in return for a more generous package of benefits,” he explained. “Thus, any discussion about how much we pay public employees should start by comparing total compensation, the sum of both salary and benefits.”

Reschovsky said studies have repeatedly tried to measure whether public employees are “overpaid.” But that's difficult because “a public job—for example, a firefighter—doesn't exist in the private sector.”

“The mix of occupations in the public and private sectors is far from identical,” he noted.
 Still, these studies have “generally” found that public employees are not overpaid, with this exception: “Low-skill jobs in the public sector are frequently better compensated than similar jobs in the private sector. The opposite is generally true for higher-skill jobs.”

Over a period of time, often “our most productive” public workers will quit, Reschovsky added. But “many” of them will stay—primarily to keep their pension and health care benefits.

Low compensation for years, followed by Act 10 changes requiring them to pay much more for pensions and health care, will take its toll on Wisconsin public employees, Reschovsky said.

"Morale will be reduced, and it is only human nature that many individuals will be less motivated to work hard, less innovative and less committed to their jobs,” he added.

If Republicans keep control of the Capitol next year, this debate is far from over.

Steven Walters is a senior producer for the non-profit public affairs network WisconsinEye. Contact him at stevenscwalters@gmail.com

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