Sometimes friends will ask for advice and I nearly always tell them the same thing, “You know what you have to do.”
For example, “James, my boyfriend is a hippie bicyclist who believes cars should be banished from the roads. What should I do?”
“You know what you have to do.”
They do know better, and eventually they will make the hard choice because they know it’s the best solution rather then the easy choice that will only lead to disaster and heartbreak down the road.
The Public Policy Forum (PPF) looked at Milwaukee County’s proposed budget last week and declared that it’s “risky.” The PPF says that the county executive’s budget is too focused on one aspect of closing the structural budget gap, current and former employee wages and benefits.
“In light of the serious and longstanding fiscal problems facing Milwaukee County government, one might have expected the county executive’s 2011 recommended budget to look like his previous budgets, with tough programmatic decisions and proposals for new ways to operate county services. Instead, this year’s budget replaces such initiatives with the singular strategy of reducing wages and benefits for county employees and retirees as the means to erase its annual structural gap.”
But later in the same report, the PPF says, “As a long-term strategic direction, stringent controls on wages and deep cuts in benefits are necessary and appropriate.”
Why might they say that? A rough draft of the Greater Milwaukee Committee says that in six years Milwaukee County may be paying out its entire tax levy in employee and retiree wages and benefits. This dire prediction is not new and is certainly not unknown to the authors of the PPF report.
The PPF report lends support for the idea of cutting wages and employee/retiree benefits in the proposed budget.
From a fiscal management perspective, it could be argued that this approach is fair, imaginative and effective, as it imposes greater cost sharing on the county’s highest paid workers and makes their health insurance plan more comparable to those offered in the private sector. More important is its impact on retirees, who the county previously exempted from cost sharing for monthly premiums, but who now would be required to substantially increase their contributions via the enhanced out-of-pocket costs and deductibles.
As the Forum has pointed out in several previous reports, rising retiree health care costs are perhaps the county’s most serious fiscal challenge, creating an unfunded liability estimated at more than $1.5 billion. This approach develops an innovative mechanism for helping to address that challenge, reducing the liability by an estimated $149 million, or nearly 10%.
The PPF report, however, calls relying upon the wage and benefit concessions “risky” because of the requirement for $12.2 million to be negotiated with the county’s unions.
As the report concedes, this year the proposed budget has an end-of-year deadline for when the concessions must be achieved. If the deadlines come and go, Milwaukee County’s union employees face real consequences. If the unions fail to come to terms, 165 of their members could be laid off and they could have up to 26 furlough days.
The risk, then, is all on the unions, especially when the PPF report confirms that the concessions requested bring benefits in line with the private sector.
The PPF report calls the inclusion of the fallback plan commendable, but then expresses concern that the proposed budget does not address what the impact on service levels will be should the layoffs and furlough days occur. Again, the report itself says that past practice would indicate across-the-board cuts in staff from discretionary and administrative functions. This past week the county executive’s staff also presented a hypothetical layoff list to the county board.
While the county executive’s approach may not have the mixed approach preferred by the PPF, what is the real alternative? As previously mentioned, the county board is unwilling to consider service cuts. Raising taxes, as County Board Chairman Lee Holloway called for last week in an op-ed last week for the Milwaukee Journal Sentinel, is certainly not advisable in a weak economy.
But more importantly, raising taxes and fees would only put off the cuts in wages and benefits that are required for the long-term fiscal health of the county.
The PPF repeatedly expresses concern in the report that Milwaukee County is not taking into account long-term planning and goals when creating the budget. By tackling the employee wages and benefits in this budget, the county executive has taken a positive step to ensuring the long-term fiscal health of the county.
When the County Board in Milwaukee asks PPF for advice, PPF would be better off telling them, “You know what you need to do.” Far better than telling the County Board the right thing to do is too “risky.”
By James Wigderson
Special Guest Perspective for the MacIver Institute