End of collective bargaining saves WI school district nearly $2 million - unexpectedly!

Posted by Michael Laprarie


I've decided to start having some fun with real world economics results that are clearly understandable to anyone with even a basic understanding of how markets work, but which seem to be totally perplexing to the headline writers and editorialists in the mainstream news media.

Today's story concerns the Kaukauna, WI public school district.  After re-negotiating teacher contracts in the wake of Gov. Walker's notorious (to Democrats anyway) bill that eliminated most collective bargaining rights for public employees, this district found itself going from a $400,000 budget deficit to a $1.5 million budget surplus.  The reason?  Teachers are now required to contribute 5.8% of their salary to their retirement pensions, as well as pay 12.6% of the cost of their health insurance.

But here's the real killer:

In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.

Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.

What?  Competition saves money?  No-bid crony contracts where only one service provider is locked in, result in unnecessary cost markups?  Well knock me over with a feather!

Actually this is worth mocking for two good reasons.  First, because teachers are finally making pension and health care contributions on par with the rest of us who don't have cushy union contracts, and incredibly no one has died of starvation or has been shoved off a cliff in a wheelchair.  And second, because the WEA Trust was obviously trying to gouge the school district by needlessly raising health insurance premiums just as the new Obamacare rules were going into effect.  Geez Louise people, didn't you get all those Democratic Party memos explaining how Obamacare would lower the cost of health care and save everyone a ton of money?  Such SHOCKING behavior, and from an organization run by a labor union (the working man's friend!) no less.  For shame.

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Regarding the story about Amazon.com closing its sales associate program in California that I posted yesterday, you owe it to yourself to read the response from Bill Quick, who is really steamed because he now stands to lose $3500 to $5000 a year.  To briefly recap, a new California law considers anyone in California with an online retail sales associate link on their website to have a "business nexus" (and therefore a virtual point of sale) in California.  From now on, vendors who sponsor these associate programs will be required to collect California sales tax on all sales generated through them.  Amazon's response to the new law was to simply terminate its relationship with all associates in California.

Quick thinks that the goal of the tax bill was never to raise more revenue.  Instead, it was designed by the California legislature as a sop for big box brick and mortar retailers like WalMart and Home Depot, who lose millions of dollars in sales each year to Amazon. 
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