Report Finds Big Benefits From WI’s Bargaining Rollback

Report Finds Big Benefits From WI’s Bargaining Rollback
March 12, 2012

M.D. Kittle

M.D. Kittle writes for Wisconsin Watchdog (read full bio)

While there is no disputing the divisiveness and political bitterness Act 10 has created, the law that redefined collective bargaining in Wisconsin has made a dramatic difference for the state’s financially struggling school districts, according to a report released in March.

But school superintendents say they worry about the long-lasting emotional scars left by the contentious reform battle.

Wisconsin school districts have realized significant savings either through the implementation of collective bargaining changes or the threat of them, according to an analysis by the Michigan-based Education Action Group Foundation, known as EAG, a nonprofit research organization promoting school spending reform.

The pointed report, titled “The Bad Old Days of Collective Bargaining: Why Act 10 Was Necessary for Wisconsin Public Schools,” devotes plenty of its pages to applauding the collective bargaining reforms led by Republican Gov. Scott Walker, and it backs up the assertions with some telling numbers.

Act of 'War'

Act 10 stripped collective bargaining for most unionized public employees in Wisconsin, limiting negotiations to wage only, and only up to the rate of inflation. It also requires teachers and other government workers to contribute 5.8 percent to their state pensions, and at least 12.6 percent of their health isnurance premiums.

When Walker and Republican leadership rolled out the proposal in February 2011, it ignited a firestorm of controversy in an unprecedented political war.

Democrats said as much, insisting the governor was “declaring war” on unions.

Packed With Protestors

And Big Labor responded, organizing tens of thousands of people in protests that packed the Capitol and the square surrounding it, images captured for weeks on nightly newscasts and hourly on cable news networks.

Fourteen Democrat state senators fled the state to stave off a vote. It didn’t matter. The Republican majority eventually voted without them, passing the measure 18-1 -– Dale Schultz (R-Richland Center) the only dissenting voice. The bill moved on to the Assembly, where Republicans hold a substantial majority.

Walker signed the measure into law, but Dane County Circuit Court Judge Maryann Sumi issued a permanent injunction, voiding Act 10, arguing Republican lawmakers violated the state's open meetings laws by not giving enough public notice before the vote. The state Supreme Court, on a 4-3 decision, overturned the lower court’s decision, declaring the Legislature was not bound by the open meetings laws.

Some eight months after the legislation took effect, the political battles continue, with the governor, Lt. Gov. Rebecca Kleefisch and four Republican senators targets of recall.

Substantial Savings

But the benefits of Act 10 on school districts, according to EAG’s report, are clear.

“This (school) year many districts simply imposed the Act 10 standards for increased contributions toward health insurance and pension costs, saving millions of dollars in one bold stroke,” the report reads.

The report, which WisconsinReporter obtained in advance, is scheduled for release Tuesday at educationactiongroup.org.

Other districts, the report notes, agreed to extend their unions’ collective bargaining agreements, but only under the condition of significant union concessions. EAG cites the Madison Metropolitan School District, expects to save $15.5 million in Fiscal Year 2011-12 and $18.6 million in the coming school year due to union concessions.

Staff Concessions

District Superintendent Dan Nerad has said approximately three-quarters of the funding fill for a $20 million budget hole came from staff concessions  — increased pension contributions and health insurance payments, among them.

“Under either scenario, hundreds of school districts saved millions, which helped them absorb the blow of reduced tax revenue,” according to the EAG report. “Those savings would not have occurred without Act 10.

“The bottom line is that Act 10 allows school boards to take control of their budgets without union interference and act in the best interest of their students.”

Labor organizations, like the Wisconsin Education Association Council, the state’s largest teacher’s union, have a different take on the law, fighting against what the group sees as a destructive force in Wisconsin public education.

WEAC spokeswoman Christine Brey did not return phone calls Friday seeking comment.

WEAC president Mary Bell, following last year’s Senate vote, called the action “heart wrenching and unconscionable.”

“We’ve won the battle in the court of opinion  — and we’ve exposed the truth behind Governor Walker and Legislative Republican’s motives,” she said in a statement.

Standing Firm

But while Walker late last year expressed some regret for not doing a better job of communicating to the public the need for Act 10, the governor has stood firm on the importance of collective bargaining reforms to help local governments fill deep budget holes.

Wisconsin faced a $3.6 billion budget shortfall at one point, and Republican leadership filled the gap with some $800 million in cuts to education, a $77 million reduction in the state’s shared revenue program, with municipalities taking a $47.7 million hit, and counties, $29.1 million.

The cuts, billed as Draconian by Democrats, filled the budget gap and effectively froze property tax rates.

But those funding reductions didn’t sell well with school administrators, already faced with shrinking revenue.

‘Betterment of Students’

“I have to be honest with you, half the administrators I talked to for this said they were not happy with the governor’s budget cuts, but they appreciate the financial windfall they got out of Act 10,” said Steve Gunn, EAG Foundation’s communication director and main researcher for the report on Act 10.

“But they feel like, finally, for first time ever, they have control over their school districts so they can run their districts for the betterment of students, not for unionized labor,” he said.

Sue Schnorr, director of business services for the Fond du Lac School District, said Act 10 essentially saved the school system’s budget.

The district faced a reduction in the revenue limit of nearly $4.7 million. All but a small fraction of the gap was filled through the provisions of Act 10, much of it through increased employee benefits, Schnorr said.

“(Teachers) were only paying 6.5 percent of health insurance premiums. (Act 10) almost doubled employee contributions,” she said. “We benefited more than other districts that had higher employee contributions. We happened to be in the right place at the right time."

The district did not have to cut any positions, other than two that had previously been marked for reduction.

Fond du Lac was ranked eighth of 10 districts in the state with the highest savings from Act 10. All told, those districts saved more than $85 million, according to conservative news service The MacIver Institute. Racine public schools realized $19.2 million in savings through Act 10, the most on the top 10, according to the study.

It was the same story in Waukesha.

Budget Flexibility

Todd Gray, superintendent of Waukesha School District, said the district expects to save as much as $6 million this school year and another $1 million next year through a combination of Act 10 provisions and retirements.

Gray said the reforms have helped bring the budget in balance without forcing job cuts. Act 10’s biggest fiscal impact, he said, has been in the flexibility it affords  — a much different scenario than when teachers unions rejected wage and benefits concessions in trying economic times.

In the EAG report, Gray voiced criticism about union motives in recent years, after they had fought for and won the rollback of the Qualified Economic Offer, a wage ceiling in place since the early 1990s.

Average Wisconsin teacher salaries increased from $37,897 in 1998 to $50,627 in 2011, according to the Wisconsin Information Network for Successful Schools, part of the Wisconsin Department of Public Instruction.

“They talk about the welfare of students, but I really question that,” Gray told EAG. “They used their power to take away the QEO and restructure the arbitration system in their favor. The only way districts could deal with that was a reduction in staff.”

End to Insurance Monopoly

Districts also are realizing savings through a change that ends what many saw as the WEA Trust’s monopoly over the school district health insurance market. WEA Trust, one of the state’s largest insurers, is an independent nonprofit, although created through WEAC.

Instead of being bound by collective bargaining demands that effectively tied school districts to WEA Trust insurance plans, which critics have long blasted for being less competitive, public school systems are free to bid out their insurance contracts.

That has resulted in some significant savings, either through lower-cost providers or more competitive rates from WEA. The nonprofit reportedly had lost about a third of its schools business as of February, according to the Milwaukee Journal Sentinel.

The Hartland-Lakeside School District unilaterally switched its insurance carrier after WEAC’s regional union balked on a move to do so without a contract extension, district Superintendent Gary Schilling said in the EAG study. The switch and the imposition of the 5.8 percent contribution to the pension fund have saved the district about $900,000, Schilling said.

Hartland-Lakeside still needed to ask voters to approve a millage rate increase to cover a remaining shortfall, but Schilling said things could have been a lot worse.

“Without finance from Act 10, instead of the referendum being only a small increase, like 2 percent, we would have had to ask taxpayers for much more, which would be very hard to sell,” the superintendent told EAG.

Ongoing Fight

But Waukesha schools superintendent Todd Gray said the contentious Act 10’s savings do come with a hefty cost.

“If we have teachers concerned and morale is low, that hurts us. If we have students that don’t want to go into teaching, that hurts us,” he said.

Fond du Lac’s Schnorr said teachers have been vilified in the debate and fallout over Act 10, and that’s not fair. She said the teachers’ union negotiated for what they received over the years and now that many of those gains have been taken away, there’s been a lot of mean-spirited criticism of educators.

But the unions, teachers, public employees, all who fought against Act 10, are not going gently into that good night.

Historic recalls are in the offing, political payback for Act 10, Wisconsin watchers say. And the campaigns have been hostile on both sides of the argument.

Meanwhile, states like Idaho and Indiana have followed in the path of collective bargaining reform, getting there with much less resistance than seen in Wisconsin and Ohio, which saw its reform measure buried in a ballot question in November.

Gray said as an administrator he is in a much better position to manage his school system than he ever has, but the verdict on Act 10 still is out.

“This is going to take some time to play out,” he said. “All I can say is I’m doing my best to take care of our teachers and our staff, and I will do that irregardless of Act 10.”

M.D. Kittle (mkittle@wisconsinreporter.com) is bureau chief for WisconsinReporter, a statehouse news agency, where a version of this article first appeared. Used with permission.

M.D. Kittle

M.D. Kittle writes for Wisconsin Watchdog (read full bio)