If you find the title perplexing, be patient; I will explain.
It’s often said that ‘luck is what happens when opportunity meets preparation.’ Likewise, one could say that reform in governance is what happens when fiscal calamity meets determined leadership.
Globally and nationally, government fiscal crisis is endemic. In many, if not most cases, leadership is lacking, and conditions are approaching meltdown. Greece, Spain, Portugal, Illinois, Michigan, and California come immediately to mind. Cities and counties across the land face the same disasters.
But there is cause for optimism. Here in Maine, the new administration and legislative majorities are confronting long-standing indifference toward fiscal discipline in unfunded liabilities; DHHS finances; and operations of the Maine Turnpike Authority and the Maine State Housing Authority. Careless and misguided practices are being exposed, and progress is being made correcting them.
Nationally, a few determined leaders are fighting the status quo, targeting the icebergs that threaten the ships of state. In Wisconsin, Governor Scott Walker is putting all his political capital on the line to remedy unsustainable fiscal conditions. John Kasich is trying to do the same in Ohio. As thanks for his efforts, Walker is facing a recall challenge led by entrenched public sector unions, who are no fans of fiscal sanity.
Driven by undeniable reality, fiscal common sense is making inroads across Wisconsin because of Walker’s efforts. For example, local school districts are rebelling against a long-standing obligation to buy health insurance through the state teachers’ union, which derives considerable income from this arrangement. This practice rejects competitive market forces, and needlessly burdens local school budgets.
The Situation in Maine
Maine prizes ‘local control,’ which takes the form of ‘strong’ municipal governments and school administrations. Both exist in various types, depending on where you live.
Two statewide organizations dominate policy in these sectors. The Maine Municipal Association, a non-profit, non-partisan organization, functions as a wholly owned subsidiary of municipal governments, lobbying for their interests in statutory and taxation matters. Per Maine law, the MMA is an ‘instrumentality of government.’ They are a regular and visible presence in the halls of Augusta.
The Maine Education Association, or as most call it, the state teachers union, is a greater force to be reckoned with in Augusta. Teacher pay and benefits, including state provided retirement payments, is the lion’s share of school expenses, and the MEA is an ever-present factor in school budget outcomes, not to mention how teaching staff is protected.
As MaineWire readers may know, MHPC has engaged in a civil suit charging the MMA with electioneering with taxpayer funds. As I write, this suit is awaiting summary judgment in Federal District Court.
Inspired by an article about school insurance costs in Wisconsin, I decided to look into local costs for coverage. Together with data from the MHPC action against the MMA, the results show circumstances ripe for substantial savings for taxpayers, if only local officials had the gumption to vigorously pursue them, and the tools to do so.
Annual insurance costs for Brunswick on the municipal and school department sides are as follows (figures are rounded, and payments to other agencies are not included):
- The Brunswick School Department pays $5 million to the MEA for health insurance, of which $4.5 million is taxpayer funds, and the rest is employee contributions. It also pays $140,000 to the MMA for other coverage.
- The health insurance payments alone amount to $2,000 for each student in the system.
- Brunswick Municipal Government pays $2 million to the MMA to purchase various insurance, of which $1.7 million is taxpayer funds, and the remainder is employee funds.
Brunswick’s population of 21,000 represents about 1/60th of Maine’s total. Assuming per capita expenditures for coverage are typical statewide, MMA‘s insurance business amounts to roughly $140 million per year. And the MEA’s insurance business runs about $360 million per year.
According to available data, the MMA annually earns about $8 million in ‘fees’ (or profits) on this insurance business. If the MEA earns fees at the same rate, their insurance business would yield $20 million or more per year in profits. This does not include revenues generated by dues from roughly 15,000 union members, which could easily amount to another $5 to $10 million per year. (Figures in the article about Wisconsin suggest these estimates are very conservative.)
For a sense of scale, $20 million in MEA insurance profits equates to an annual figure of $300,000 plus for political activism in Brunswick alone. Think about how that can swamp local efforts.
In the past legislative session, two new laws were enacted. They went largely unreported by ‘mainstream’ media outlets.
The first is LD 1326, “An Act To Allow School Administrative Units To Seek Less Expensive Health Insurance Alternatives.” This law is not a mandate of any sort; it simply requires that school districts be given access to claims experience information needed to pursue competitive bids for health insurance; information that the MEA and their insurer have been able to legally withhold in the past. It passed on a strict party line vote.
The second is LD 404, “An Act To Assist School Administrative Units In Providing Health Insurance to Their Employees.” It requires that school department administrators seek competitive bids for health insurance for their employees at least once every 5 years, rather than being permanently locked in to the MEA statewide plan. It passed, but not on as clear a party line vote.
Why would anyone vote against these bills? The question fairly answers itself, and confirms the power of MEA big money in politics, and to whom it goes.
The MEA response to these laws is exactly as you would expect; witness their press release:
Maine Education Association Challenges New State Health Care Laws
10/14/2011 03:23 PM ET
The MEA’s Health Benefit Trust, which covers tens of thousands of Maine educators and their families, contend that the new laws will weaken its system.
“Our health insurance plans are a fundamental part of the economic security for thousands of educators and their families and we need to defend them against this improper exercise of government authority,” says MEA President Chris Galgay, in a statement. “No other insurance provider is being hit with these mandates and it is clear that LD 1326 and LD 404 were enacted to undermine our employee-run insurance plan and replace it with management plans-even if they provide less coverage at higher costs to participants and taxpayers.”
Back to the title premise
So why did I open with a premise regarding membership in the Maine Teachers Union? You probably thought nothing could be further from reality.
The facts above contradict that innocent view. If you’re a property tax payer, you are, in effect, a member of the Maine teachers’ union. Your property taxes fund insurance purchased from the union, and this yields substantial discretionary revenue for the MEA. You have no choice about paying property taxes; it is a matter of law. And at the moment, you have no say as to where those funds are applied, especially as it relates to insurance coverage from the MEA.
If my figures are valid, Brunswick property taxpayers are sending along 1% or more of their tax assessments to the MEA for use in any way they see fit. This makes a taxpayer a de facto dues paying member of the union. Even worse, such taxpayers are deemed to be in full agreement with union officials on ballot issues, candidate support, and all other political campaign expenditures. And their lobbying efforts as well.
For me, this amounts to a minimum of $70 per year in unfettered funds for the teachers union, and most likely considerably more, if Wisconsin is any guide. While the amount I pay to the MMA is considerably less, the principle is exactly the same. I lose my right to say how the money is spent when I pay my compulsory property taxes.
You probably know what a ‘right to work law’ is; Maine doesn’t have one.
Sadly, we don’t have a ‘right to reside law’ either. We have to pay compulsory ‘dues’ to the MEA and MMA if we want to own taxable property in Maine.
Are you happy with that? Is this what freedom of choice and liberty means to you? And since you’ve been a ‘dues paying member’ of the teachers union all these years, do you think they’ve been doing right by you, and representing your political interests honestly?
As Paul Harvey would say, ‘ now you know the rest of the story.’
Now that you know, what’s next?
1) Timing and opportunity are everything, and given the electoral transition in 2010, we should expect the MEA and MMA to protect and leverage their profits more than ever.
2) It’s time to insist that local authorities, both school and municipal, have a fiduciary obligation to seek best value on behalf of taxpayers; it is a matter of honoring the public trust.
3) You should gather numbers for your community. You should testify to your town councils, town meeting, school boards, etc. And write to newspapers, circulate info to your friends, etc.
4) We should all encourage private sector providers to aggressively pursue access to this business base.
5) Discussions should begin on a statewide campaign to bring free market benefits to this enormous insurance business segment. And MEA full disclosure of taxpayer derived fund utilization should be vigorously pursued.
“When school children start paying union dues, that’s when I’ll start representing the interests of school children.” Albert Shanker – President of the United Federation of Teachers [1964-1984] & the American Federation of Teachers [1974-1997]
Pem Schaeffer is a retired Defense Industry Business Development Leader. He can be contacted at email@example.com. His blog, The Other Side of Town, is found at http://othersideofbrunswick.blogspot.com/