Tide turning on municipal health savings

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The Globe‘s editorial page came out with a very clear view on the House and Senate proposals on the issue of how to contain municipal health care costs.

LAST-MINUTE provisions inserted in the Senate budget undermine much of the effort on Beacon Hill to give cities and towns the tools they need to control the rising health care costs of municipal workers. It’s a setback to the stellar work of the House, which earlier passed a plan to save an estimated $100 million annually by allowing municipalities to place their workers in the state’s less-costly Group Insurance Commission or a similar plan…

Unions and special interests battered the House, seeking to weaken the municipal health reform effort. The House stood firm. There wasn’t much action in the Senate, however. Suddenly, it’s clear why. The Senate isn’t serious about municipal health care reform.

I was glad to see that, given what I wrote at the end of May on the need to hold firm in revamping the way many municipalities purchase health care benefits for local employees, including teachers:

Now, in 2011, there are now three competing proposals on the table, the Governor’s, the House, and the Senate. As Pioneer has blogged previously, the Governor’s effort

signals a desire to get communities into GIC or give them control over plan design but pushes the details off onto the regulatory process. The House is much clearer—communities can adjust plan design up to the equivalent of the biggest plan for state workers or enter GIC, so long as 10 percent of first year savings is returned to workers. The Senate takes a different approach—communities can negotiate their way to plan design changes or entering GIC but they have to undergo an approval process by a 3 person board (1 appointee from the unions, 1 appointee by the municipality, and 1 by the Secretary of Administration and Finance).

Crucially, that committee can provide up to 33% of the first year savings to employees.

Not only the unions have fought for more resources, but also certain policy organizations. My own organization has been supportive of increases in funding for schools, though not as forthright as organizations like the Massachusetts Budget and Policy Center and the Mass Taxpayers Foundation, the latter of which a few years ago was calling for 40 percent of the state budget to be redirected back to localities. I think MTF’s research director, Andrew Bagley, got this wrong in yesterday’s Globe:

You get to the exact same place if you’re a municipality; it’s just a different process.

The Globe’s Michael Levenson also gets it wrong today, suggesting that the choices before us—the Governor’s, the House’s and the Senate’s—are all sort of interchangeable. They are not for two reasons:

  • The potential for mischief at the 3 person board level is high—just ask Boston how their three-person arbitration board for the firefighters’ contract worked out
  • 33% is more than 10% (tens of millions of dollars more)

The disinterest in the details (and long-term impacts) of the three proposals is surprising.

I am also glad to see the Mass Taxpayers Foundation go back and rethink their response to the Senate bill. And, in fact, they’ve gone one step further by digging deep into the actual fiscal impact of the mischievous language inserted at the last minute in the Senate bill (technical corrections!), which was highlighted by the Globe editorial staff. From the State House News Service (subscription required):

The report, slated for release on Tuesday, identifies 50 communities that would have to contribute more for retiree health care under the Senate budget proposal, offsetting much of the savings achieved through plan design, according to the non-profit, business-backed Taxpayers Foundation.

Based on the initial survey of 80 to 85 municipalities, the report extrapolates and concludes as many as 100 cities and towns would be forced to contribute more for retiree health care, and argues that all municipalities and regional school districts would have their hands tied in the future to manage retiree health care costs.

“Since virtually no community in the state can pay for its current retiree health care liability, limiting the ability of local officials to make changes in the future will send cities and towns into a permanent spiral with ever deeper cuts in critical local services such as schools and public safety,” wrote the authors of the report.

Getting the Taxpayers Foundation to revise its position is an important step forward. The tide is turning, and the public employee union officials should get on board or risk getting left back at shore.

Crossposted at Boston.com’s Rock the Schoolhouse blog. Follow me on twitter at @jimstergios, or visit Pioneer’s website.