Reality bites. Or at least it bites most of us.
Last week a report critical of the proposed 2011 Milwaukee County budget declared that there might be a $30 million “hole.” The largest part of the “hole” is $24.5 million in county employee wage and benefit concessions, much of which will have to be negotiated with the county’s employee union representation.
It was a firestorm not seen since some science fiction fans declared Larry Niven’s Ringworld to be unstable. However, there is more reason to be calm than for politically inspired panic.
Only government in these tough economic times would call wage and benefit concesssions unreal or fake. Just about everyone in the real world, the private sector has had to figure out how to get by with less income. It is the economic reality that we all live in. But then again, this report was produced by the very government workers who will be asked to take less from the taxpayers.
The proposed budget for Milwaukee County holds the line on spending, reducing the property tax levy by $1 million, $78.9 million under the tax levy cap. Milwaukee County Board analysts contend in a report that the proposed budget contains possible false revenue projections and says that critical budget decisions are put off to next year – even as it concedes that the budget maintains services.
“The external part of County government services – what most people see – appear to be untouched. The savings are derived from the internal part of County government – compensation for County employees.”
It’s worth noting that the Milwaukee County proposed budget is not the only entity that is using projections of concessions by represented employees to hold the line on spending. For example, the city of Waukesha has a proposed zero increase in the tax levy that is also dependent on wage and benefit concessions by represented employees. This will be the third year in a row that Waukesha has sought employee concessions, and has been successful each of the last two years.
While the report accuses the proposed 2011 County Budget of “phantom savings,” the savings are very much real in the community next door where the political will supports holding the line on spending.
Milwaukee County’s proposed budget includes a 5% employee contribution to their pensions. Private sector workers long used to contributing to their own retirements 7-10% into a 401k without a guaranteed return may wonder why there should be any controversy. It will also raise the retirement age for employees hired in 2011 and beyond from 60 to 64, compared to private sector employees retiring at 65 and older.
If you are concerned about “phanton savings”, maybe the authors of the report should visit with their bureaucrat brethen in Brown County. There it has been proposed that administrative employees and represented employees receive a 2 percent “cost-of-living increase” (a raise in salary to the average joe) to offset the proposed increase in the health insurance employee contribution and deductibles that each will have to pay.
Wait, so the taxpayers need to pay the bureaucrats more so the bureaucrats will finally pay a minimal amount towards the health insurance that we taxpayers so graciously provide them? Talk about phatom savings. How does that save taxpayers money?
Back in Milwaukee County, the proposed budget also includes changes in the county employee health plan from an HMO-style plan to a PPO plan. The new plan will have higher co-pays, higher deductibles, and higher premiums. However, these higher costs for county employees are not out of line with what can be found in the private sector. For example, under the new plan family coverage will be $180 per month with a $1500 deductible and $25 primary care office visit co-pay.
Those in the private sector facing increased premium costs due to the insurance mandates of the new federal health care law may have a hard time feeling sympathetic to the idea that public sector employees should not also contribute more to their health care costs.
These changes will result in a savings of $12.8 million in 2011, a tax levy savings of $10 million. The new health care plan is already in effect for non-represented employees and the Machinists, TEAMCO, and the Attorneys’ Association. AFSCME District Council 48, the Deputy Sheriffs Association and the Fire Fighters have not agreed to the changes yet.
The report indicates over $7.5 million of the proposed county employee wage and benefit concessions have either been agreed to by some represented employees or can be imposed on non-represented employees. That leaves nearly $17 million yet to be negotiated.
Far from putting off decisions until next year as the report indicates, the budget has real contingency plans if these employee concessions are not agreed to by the county employee unions. The proposed county budget authorizes up to 26 furlough days next year for represented employees if they do not agree to the changes by December 31, 2010. If the pension changes are not made, up to 165 employees in all departments may be layed off.
The Milwaukee Journal Sentinel recently reported the Greater Milwaukee Committee says if Milwaukee County does not make serious long-term changes to control employee benefits, the county’s pension and health care obligations will consume the entire county tax levy in just six years. Unlike Niven’s Ringworld, Milwaukee County doesn’t have the option of firing the booster rockets to fix things.
During a rough economic period when many workers in the private sector are making concessions just to hang onto their jobs, there will be little sympathy for raising property taxes to keep public-sector employees from sharing the economic burden. It will be up to the county employee unions to determine whether they will act in the best interests of their members by agreeing to the concessions, or if they will cause themselves more economic hardship just to score a few political points and a couple of press releases.
That’s something for their members to chew on.
By James Wigderson
Special Guest Perspective for the MacIver Institute