Where is the QEO?

Susan Troller’s story on the MTI/MMSD negotiations and the health care issue is timely and informative. It is a good story, except one thing is missing and that is any mention of the Qualified Economic Offer law (and one thing seems to me to be misrepresented and that is Madison’s competitiveness for starting teacher salaries — I’m saving this for another post, but see here, scroll down to “News Flash,” thanks Robert).

I know that the impasse agreement (reproduced here) negotiated earlier this year moves the parties away from the QEO, but it remains part of the context and should be discussed.

The QEO requires districts that wish to avoid arbitration to offer each year a total package that is at least 3.8% larger than the previous contract. Total package means salary and benefits combined. With health care costs rising that has meant very small salary increases for Madison’s teachers. Last year the total package went up 3.97% (compared to the State average of 4.29%; I think that in Madison .8% of that was salary and the rest benefits, statewide I think the salary figure is a little over 3% and that the increase in health costs has been above 7% – correct me if I’m wrong — info here and here). This mix or balance has been their choice, how they have wished to “spend” their 3.8%. The state says this is their money and that health care is part of collective bargaining.

The lack of any discussion of the QEO leads to the misconception that money saved on health care could be used to avoid staff and programmatic cuts. I have heard a figure of $2 million, but I don’t see where that would come from (I may be missing something and am open to being informed, corrected or educated).

Robert Butler of the Wisconsin Association of School Boards (and part of MMSD’s negotiating team) identifies a number of reasons that districts should seek to lower health care costs, some of these are good and some not so good but I don’t see any that will have a significant impact on programmatic cuts. The first is that teachers having higher (and higher cost) benefits than many in their communities is bad for public relations. In Madison, we know this is true but I would guess that much of this has to do with ignorance about the total compensation aspects of the QEO (ignorance that is reinforced with every story or discussion of teacher health care that does not include a discussion of the QEO). The second is the undeniable effect on teacher salaries. As I said above, that is their choice; our teachers know that higher benefit packages in lean times and under the QEO mean lower salaries. Butler also points out that many districts are moving away from work shares, part time positions and increasing the workload of employees. He attributes this to a wish to avoid insuring additional people. I’m sure that is part of the picture, but common sense tells me that this is a manifestation of the quixotic quest for efficiency inspired more by the broken state finance system than by health care costs. Butler’s last reason is the only one that I see (again, correct me if I’m wrong) as having the potential to increase the amount of money a district has to maintain programs (or keep schools open):

The cost of health insurance has driven up school districts’ post-employment benefit costs dramatically. Post-employment costs are not part of the total compensation calculation used for a qualified economic offer (QEO). This has three major implications. First, it constitutes a significant drag on district budgets. Second, it doesn’t allow the school district to assess this cost within the parameters of a QEO. Third, it means that money saved on insurance modifications for retirees can be accrued to the district.

If I understand correctly, savings achieved through lower cost health care for retirees would not have to be converted to another part of the total package calculation and therefore would represent money that could be spent elsewhere. This might be the source of the $2 million dollar figure. If it is, I’d like to see the calculations because the post-employment health care benefits aren’t very big and anecdotally I’ve heard that many (most?) Madison teachers switch to the HMO option upon retirement (leaving WPS with the higher cost individuals and further driving up rates).

It may seem like I’m defending the choices MTI has made. I’m not. That discussion is best left to their membership. I am (indirectly) defending collective bargaining.

Since this is a public matter, I do think that actions on both sides of the bargaining table need to be presented to the public in their full context. In this case that means placeing front and center the way the QEO functions to limit the potential impact of one aspect of the contract (health care) on the district’s budgetary choices. What I am really interested in defending and furthering is informed discussion.

Thomas J. Mertz