Requiring Teachers to Make Modest Contributions to Health and Pension Benefits Can Cut Cost of Education by Over $500 Per Student in Wisconsin, Saving School Districts Hundreds of Millions of Dollars.
By Christian D'Andrea
MacIver Institute Education Policy Analyst
First in a series
With Act 10 passed, the landscape of teacher and staff contracts in Wisconsin’s public schools has been significantly altered. As soon as it was proposed, the landscape already began to change. With the state facing a $3 billion dollar deficit, many districts turned to the tools provided by the budget adjustment bill to stay afloat. This included two major components: teacher contributions to retirement funds and their health insurance.
In short, teachers and full-time educational staff members were forced to pay portions of their benefit packages. This meant a 5.8 percent salary payment towards teacher pensions (which was matched by the state) and a 12.6 percent payment for health coverage. Many districts also turned to other tools, including wage freezes, switching to higher-deductible health plans, and adjustments in lane change salary bumps to help tighten finances in local schools.
Though the plan is still in its infancy, many districts have already undergone contract extensions that include these considerations. The results have led to a projected $154 million in savings that have helped to offset less revenue from the state and keep Wisconsin’s schools up and running. One shining example we’ve seen so far happened in the Kaukauna School District.
Kaukauna’s changes – which included concessions from employees to pay the full 12.6 percent of their health insurance and 5.8 percent of their pension contributions – helped turn a projected $400,000 deficit into a potential $1.5 million surplus. As a result, the small town’s gains have been some of the plan’s most publicized outcomes. These changes led to the cancellation of proposed layoffs and ensured that schools in the town could operate normally despite large budget cuts. In this case, teachers were able to save their own jobs – and stay in business for students – by giving back.
However, Kaukauna isn’t the only Wisconsin district that has rolled up its sleeves to save jobs. Teachers and staff members at both local districts and technical colleges statewide have adhered to Act 10’s provisions and retained savings that will mean more jobs for teachers and more support in the classroom.
|Sample Group of Districts With Updated Contracts - July 2011|
|District||Health Contribution||Pension Contribution||Projected Savings|
|Madison||up to 5% in 2011-12,
up to 10% in 2012-13
|Racine||Switch to high-deductible plan||5.80%||$19,200,000|
The chart above shows just a few of the school districts reported as having passed new contracts in 2011. By our latest estimates, 110 school districts and technical colleges have approved or are waiting to approve contracts that include the cost saving measures of Act 10 under effect. Several more are still in progress. The districts included range from some of the state’s largest cities to some of its smallest towns. This will create a projected savings of over $155 million based on current reports – and that includes less than 25 percent of all the state’s educational entities. See the compendium of data, here: TeacherContractMacIver3
Our analysis is a conservative estimate based largely on contract settlements that were agreed upon while Act 10 was being debated, and before the Supreme Court upheld its enactment. Ninety four public school districts in Wisconsin will save a projected $155 million. However, 19 of these districts don’t yet have official projections tied to the savings from these new contracts, which suggests that the overall fiscal benefit will be much higher.
Still, we come to an average savings of $2.1 million per reported district. According to 2011 head counts from the Department of Public Instruction, these changes will affect 312,567 298,711 students in Wisconsin – saving districts an average of $497.81 $517.12per student.
|# of Reported Districts||# of Students Affected||Projected Savings So Far||Savings per Student|
A preliminary estimate based on an analysis of local reports conducted by the MacIver Institute suggests that, if adopted uniformly by every district in Wisconsin, local schools would stand to save $451,076,536.32 through new staff contracts that required the additional contributions to health and retirement benefits.
This is likely a conservative estimate, as many districts have yet to report updated fiscal estimates from reported contracts, and Legislative Fiscal Bureau figures include only measures taken by increasing teacher contributions to pension and health care plans.
Many districts, such as Edgerton, Clinton, and Green Lake are having their teachers contribute less than the stipulated 12.6 percent of their health care costs. Despite smaller cuts, these schools have been able to produce significant savings that will keep their schools intact – a fiscal benefit of over $2.4 million between the towns. These school boards were able to supplement their savings through switching their health care provider, a process made easier by the increased control that local districts have with collective bargaining scrapped for public employees.
Health care has been a significant source of savings for districts across Wisconsin. We’ll cover this more in-depth as our series of reports rolls on.
In most districts the changes have been enough to save jobs and keep schools running smoothly. However, administrators in cities like La Crosse suggest that while savings are inherent from the concessions, they aren’t enough to meet their projected deficits in the coming years. La Crosse District Finance Manager Janet Rossiter suggests that the estimated savings of the budget plan won’t be enough to cover the losses from the cuts.
La Crosse’s estimates vary from the state’s. This is partially due to the fact that many teachers in the district already pay 10 percent of their health insurance. Other districts, like Holmen and Cashton, are finding similar discrepancies when it comes to savings. While it’s clear that every school board in Wisconsin stands to create savings thanks to the tools of Act 10, some districts face different challenges to meet their original projections thanks to cost saving measures that had been implemented before 2010-11. Alternative methods to meet budget restraints, such as reducing some post-retirement benefits, eliminating step increase raises for staff members, may be pressed into action in these districts.
Still, the program stands to create a net benefit in the midst of tough budgeting. In all, local school districts stand to save over $154 million dollars through these restructured contracts – and that group represents less than 18 percent of all the districts in Wisconsin. These school boards have pulled together to maintain the quality of their schools despite significant budget cuts. Many more will follow as well.
Coming soon: Part II Switching Health Care Providers or Plans Creates Savings