The Latest Assault on Public Employee Benefits: Prepaying Post-retirement Health Benefits
Legislative Proposals Squeeze Local Governments from Many Directions
In Wisconsin and across the country, most government bodies finance the cost of post-retirement health benefits for their former employees on a pay-as-you-go basis. A number of Republicans in the legislature want to change that and begin requiring local governments, including school districts, to pre-pay those benefits for any public employees hired after 2014.
Evidently, the proponents of the change decided that converting to up-front financing of those benefits is working so well for the U.S. Postal Service that it’s time to do much the same thing for local governments. Okay, that’s probably not their reasoning, and I have to confess that I’m not sure what their primary argument is. However, a good State Journal article by Steven Verburg about the debate over the proposed legislation says that the bill’s proponents contend their intent is to protect workers from being cheated out benefits they have been promised.
Perhaps that’s what some of measure’s backers want to achieve, but the broader fiscal context strongly suggests that the proposed legislation would hurt far more public sector employees than it would help. Local officials would be squeezed from all directions because the new cost would be applied as the state continues to freeze the major sources of aid to municipalities and counties, freezes the revenue cap for schools, and applies a very tight cap on growth in local property tax levies. (Read more about those budget recommendations in our March 26th issue brief.)
I actually think there’s something to be said for pre-paying a significant portion of retirement benefits, which our state does very well for pension benefits for public employees. However, I don’t think the right question to debate is whether local governments should switch to up-front financing. Instead, I think the key question is whether the state should tell local governments how they must finance the employee benefits they provide.
There was a time when the Republican Party considered itself to be the party of small government and local control, but perhaps I’m dating myself when I say that. Proposals like the mandate for prepaying health benefits for retirees make it increasingly difficult to think back to the days when legislators in both parties seemed genuinely committed to local control.