It’s Sort of Working in MPS

MPS Teacher Compensation Plan Changes Delayed Due to Board/Union Shortsightedness

On Monday, the Milwaukee Public Schools School Board approved a new compensation plan that will save the district millions of dollars. This windfall will be poured back into classrooms and ensure job security for teachers across the city.

Unfortunately, it won’t take effect for almost two years.

Thanks to Milwaukee’s first-ever four-year contract that the district signed back in November of 2010, which include retroactive compensation changes, this new money-saving contract won’t go into effect for all employees until the summer of 2013.

The board voted through a new contract that won’t take effect for over a year and a half, tallying a 6-3 count in favor of benefit reform in line with Wisconsin’s Act 10. Act 10, which was passed this summer, requires state employees to make contributions towards their pensions and health insurance. Previously, Milwaukee’s public school employees did not have to pay towards their retirement funds and paid for between one and two percent of their salaries towards health care costs.

The new program calls for an increase in premiums and deductibles across insurance costs for all employees. Contributions will be between five and 12 percent for staff members that choose an exclusive-provider plan and will be staggered based on an employee’s salary. Contributions for those choosing a preferred-provider would be 11-14 percent.

This program will be enacted for 35 percent of MPS employees – but not teachers – in July 2012. From that group of staffers alone, the city expects to reduce its deficit from $20 million to $6 million in the 2012-2013 school year.

Most notably, changes in benefits for new retirees will cut nearly one billion dollars from the district’s post-retirement benefit liability over the next 30 years. This figure, which rarely comes up when discussing pension costs, was an estimated $2.4 billion in benefits alone in July of 2009. If the city’s retirement program were to continue on that same path, it would have hit a projected $5 billion of unfunded debt by 2017.

Board President Michael Bonds was confident that the plan would reduce the swollen benefits deficit for retirees down to $1.5 billion or less over this three-decade span.

“It almost cuts the unfunded liability in half,” said Bonds. The deal itself is supposed to ensure financial stability in Milwaukee for all three years of the contract’s life.

The program will also freeze wages and eliminate step pay increase changes over the course of the contract. This will reduce tenure payments and equalize pay between teachers despite their levels of experience. The district also approved four furlough days for employees per year. They did not make any changes to pension or retirement programs.

This plan will come into effect too late to have an immediate effect during a time of fiscal strife for the district. While other districts combated decreases in state aid from the 2011-2013 budget by applying state-mandated benefit contributions to their employees, Milwaukee held true to the contract they signed in late 2010. While this protected the preexisting health care and pension programs that the school board had already put in place, it also stripped the district of significant sources of revenue. As a result, MPS faced a significant deficit of approximately $84 million for the 2011-2012 school year. In June, Superintendent Gregory Thornton announced over 500 layoffs as a result.

Now, almost a year later, MPS is showing what they can do to their budget when they incorporate the tools of Act 10. Not only has the school board come up with a contract that will provide stability, but it will also address the looming threat of post-employment benefit debt. It’s a step in the right direction for Milwaukee, but for the teachers who were served notice that they were being laid off this summer, it may be too late.

More importantly, it will provide Milwaukee’s schools with more money that can be spent in the classroom and on students. With the district staring down another year of stagnant educational growth, this may be the most meaningful effect that benefit reform will have in all.