MILWAUKEE, Wis. – The Milwaukee Public School District announced $2.6 billion in savings as a result of changes and cuts to retiree benefits – a great deal of which is the result of Act 10 reforms.

MPS reports that the other-post employment benefits (OPEB) liability has been reduced by 70% since 2007 and “has improved the district’s financial outlook and allowed us to redirect dollars back to the classrooms, with a focus on improving student achievement,” said MPS Board President Michael Bonds.

A 2007 actuarial report projected that the MPS OPEB liability would be $3.78 billion in 2013. But by 2014, the new liability is totaled at $1.2 billion, a $2.6 billion decrease.

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“The most recent change involved a move to Medicare Advantage for eligible retirees, which cut liability by $250 million,” said the MPS press statement by Bonds. “Other actions which the Board has taken to reduce long-term liability include freezing a supplemental pension for current teachers, eliminating supplemental benefits for new teachers, and changing the benefit structure for some part-time employees.”

The ability to adjust OPEB was one of the most signficant cost saving measures that Act 10 afforded school districts and local governments around Wisconsin.

A 2013 report from the Thomas Fordham Institute found that “Act 10 empowered MPS to pare back the costs of retiree health benefits (as well as active employee health benefits). This enabled MPS to start making the hard choices necessary to avert more acute fiscal distress in the near future.”

Wisconsin Reporter documented some of the Fordham Institute’s 2013 findings.

Taking pension costs and retiree health together, the Fordham Institute calculates Act 10 will save MPS $1,588 per pupil by fiscal year 2020, wrote Robert Costrell and Larry Maloney, the study’s authors.

MPS counts about 78,000 students.

Instead of retiree costs rising by $1,652 per pupil, to a total of $3,512 per student, Costrell and Maloney now project an increase of $64 per pupil, to a total of $1,924 per student.”

That works out to about $110 million annually in savings, or about 10 percent of MPS’s current budget.

And the study projects Act 10, loathed by public-sector unions, will save more than 1,000 jobs, or about 25 percent of MPS teaching positions, by the year 2020.

“The Board has worked diligently, often making tough decisions even prior to Wisconsin Act 10, to dramatically cut the OPEB liability,” said Bonds. But pre-Act 10, changes to OPEB were subject to collective bargaining agreements. Post Act 10, the MPS school board can make the decisions necessary to put the district on more solid footing when it comes to the significant liabilities of retiree benefits and pensions.

Authored by Collin Roth

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Published with permission