Details of Wisconsin 2011 Walker Budget Bill

(Posted 2/25/2011) - It surprised me that virtually every reporter / journalist involved in coverage of Wisconsin's watershed events neglects to present the actual content of the budget bill. Instead, based on the angle the reporter chooses for the 'story' we are presented with either archtype narratives of the greedy unionist Democrat or the Republican governor lap-dog of David Koch.

I'd rather actually look at the bill and try and understand the impacts and motivations. To start that activity I present you the following link to the bill in it's present form: The Scott Walker Budger Repair Bill

Having read the bill linked above, here is my list of points to discuss (there are 369 sections in the bill right now):

  • Collective Bargaining
    • Public sector union reps will be restricted to 1-year terms; meaning annual elections for all reps.
    • If an election doesn't produce majority participation then there is no representative for that year.
    • Unless a public referendum is successfully floated public sector wages are frozen at present levels -- and can only be negotiated upwards at the rate of inflation as measured by the Consumer Price Index.
    • Collective bargaining for all state and municipal workers who are not performing public safety services (fire, police, paramedics) is limited to basewage rates (as limited above).
    • Unions lose the right to deduct dues automatically from paychecks.
    • Public employees may choose not to participate in unions
    • The bill removes the right of UW service employees, public-health caregivers, and some child-services employees to collectively bargain in any form (no unions allowed).
  • My Observations
    • If Walker's motivation was solely to reduce expenses associated with public service employees this section of the bill seems like an odd way to go about it.

      Why not negotiate reduced wage scales and hours, or try to collapse job requirements / seniority driven pay tiers as have been done in the private sector -- and leave existing union administration activities in the province of the union members?

    • It appears to me Walker is attempting to make administering and organizing unions more difficult, with the goal of dismantling union representation. This is an ideological activity not a budget activity.
  • Public Sector Retirement Systems
    • The bill mandates public sector employees will provide half of the premium cost of their retirement annuity as determined by the actuarial on an annual basis.
    • The bill removes the right of part-time state employees (less than 1044 hours per year) to participate in retirement (WRS) or health insurance (GIB) programs.
  • My Observation
    • My understanding is that the existing contract between the union members and the state was that in lieu of salary directly received a percentage (5%) was to be invested (annuity premium). Since the state of Wisconsin has in the past failed to actually invest that 5% of salary, and is now faced with retiree claims exceeding its 'self-insured' cash-on-hand, the bill effectively asks each state employee to take a 5% reduction in pay -- which they've apparently agreed to do. See the link at the bottom of this page for more on retirement annuity management.
    • This will probably result in a large number of part-time state / muni workers leaving their jobs since retirement and health insurance are strong incentives for such positions.

      If vacated part-time jobs need to be filled -- then the full-time rolls will grow, or the remaining employees will take on additional responsibilities.

    • I forsee much turmoil over this portion of the bill if enacted. The results on the state budget are unpredictable in the long run.
  • Health Insurance Premium Contributions
    • The bill indicates the amounts covered employees (no part-timers covered) will now pay per month, based on three tiers of coverage.
      • Tier One: Indiv $84; Family $208
      • Tier Two: Indiv $122; Family $307
      • Tier Three: Indiv $226; Family $567
  • My Observations
    • These are pretty common rates that individuals pay these days I think. Nothing too controversial on the surface. As I understand it the unions have already agreed in principle to these adjustments.
    • The kicker is what happens down the road. If the GIB continues to squeeze health care premium costs out of the budget then will all future health provider increases be passed on to the individuals through increased premiums? This has been the real killer to lots of group health programs -- premiums go up by double digits while salaries stagnate.
  • State Civil Service System
    • The bill allows firing of any employee(s) participating in work slowdown or stoppage as decided by the executive.
    • The bill allows the executive to move employees at will within the state.
    • The bill increases (by 35) the number of division level administrators; while decreasing (by 36) executive level administrators.
  • My Observations
    • Shades of Ronald Reagan -- fire and blackball any civil servant who strikes or complains too loudly about work conditions.

      This is every employer's dream -- workers work or their outa there!

    • This is an ideological stance and has little to do with the current budget crisis. Wisconsin public sector hasn't been a hotbed of civil disobedience in recent years has it?
  • Sale of State Property to Private Interests
    • The bill authorizes the executive to sell state owned power, heating, or cooling utilities and that the proceeds be deposited in the general budget.
    • Such sales move the utility outside the purview of the PSC, unless and until the legislator moves to apply such over-site to the private utility.
  • My Obsevation
    • In general sale of toll-roads, power-plants, and water purification plants built with public funds is a long-term mistake (see data on such state sales over the last decade).
    • It will generate revenue in the short term however.
  • DHS Medical Assistance Eligibility
    • A DHS review of services and costs must result in a new reduced cost plan, especially as it applies to the Medical Assistance (MA) program.
    • If a new plan is not approved and waivers granted by the federal level agency, then MA eligibility will be capped by state statute to a family income level of 133% of the poverty level.
  • My Observations
    • This is real social engineering -- it will cut family medical assistance to lower-middle income families (above $37K in Wisconsin). These families find themselves without health insurance / under-insured and are bankrupted by serious illnesses.
    • The funny thing about dropping folks from coverage is that they still get sick and use medical facilities... or die. Isn't this the real death-panel decision point?
  • So, having read this synopsis what do you think? Is governor Walker a white-knight, or the sheriff of Nottingham?

    States are in a pickle, trying to balance tax revenues and bond sales against expenses. I personally find it hard to understand why conservatives absolutely eschew taxing the top 1% of earners a bit more in times of financial stress. Haven't these folks profited greatly from the environment the state has provided for their commercial successes?

    I think that the Wisconsion Budget is a classic confrontation of two ideologies vying for the public's heart and mind: Unions and poorer families striving to hold their own, even as the puritan leaning believers in self-sufficiency and free markets shake their fists in righteous anger at 'those people' who don't pull their weight in a time of financiel crisis. Heard it all before guys.

Post-script: Just came across this REALLY enlightening Forbes article. I think it is representative of most state's problems right now -- inadequate funding of trusts during the 'good times' becomes a nightmare during recessionary periods.

The same is true for private businesses that fail to properly fund their employee defined benefit plans ... It is all elucidated here: Forbes Article on Wisconsin Public Employee Pension Funding.

I see some similarities to the pension and healthcare trust funding problems of Lucent Technologies (my old employer). Take a look at this excerpt from the Wall Street Journal way back in 2004 a couple of years after the big telecom bubble burst. Just the same story repeating, I'd say.

Post Post-Script: Fox News zeros in on the REAL issue in Walker's Budget Bill (and it's not about the budget).