MILWAUKEE - $1.4 BILLION UNFUNDED POST EMPLOYMENT BENEFIT LIABILITY

Walker’s Act 10 to save Milwaukee taxpayers $110 million a year, study finds

http://watchdog.org/96143/walkers-act-10-to-save-milwaukee-taxpayers-110-million-a-year-study-finds/

Wisconsin Reporter – Ryan Ekvall – 7/18/2013

Those retiree health benefits were promised, but not budgeted for in advance. The flaws of the pay-as-you-go financing system were hidden during a time of growing student enrollment and tax revenues. But with a declining student population and payroll, the school board would have to raise taxes or cut educational services to meet the district’s promises to retirees.

“On retiree health insurance, the problem is that these costs are projected to continue to follow a pay-as-you-go basis,” Costrell, a professor of education reform and economics at the University of Arkansas, told Wisconsin Reporter. “The measures the board took did cut the unfunded liability. But it’s still quite large and unfunded to a large extent.

“Those bills are ultimately going to have to be paid.”

Unencumbered by collective-bargaining contracts, the school board increased employee contribution rates, raised the eligible retirement age and increased time of service to receive benefits. Even with the changes, MPS teachers still can retire at an earlier age with less time on the job and fewer contributions made to health insurance premiums than their private-sector counterparts.

Jeff Spence, a school board member, said the district’s $1.4-billion unfunded Other Post-Employment Benefits liability is a “very serious problem.”

“What it does, is it actually decreases the amount of money you’re putting in the classroom. … We need to catch up.  It’s hard, we need to pay our current employees, but at the same time, we have an obligation to past employees.  There is a liability problem,” he said.

The study found MPS spent 43.3 percent of its $1.27 billion budget on salaries and 11.5 percent on retirement benefits in fiscal year 2011.

“Retirement costs were therefore 26.5 percent of salaries on average, far higher than the comparable standard of 5 percent in the private sector. In per-pupil terms, MPS spent about $16,200 in FY11, of which $1,860 went to retirement costs,” the authors note.

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