In Wisconsin, Assessing a New Labor Law’s Impact

RACINE, Wisconsin — James Ladwig recently took over the job of Racine County executive. He was sworn in last April, not long after Wisconsin Governor Scott Walker signed a controversial bill curtailing the bargaining rights of state and local workers. So with the new job, Ladwig got a new set of rules for governing his county. 

For the most part, the new rules suit Ladwig just fine. Now that unions have less of a say, local leaders like Ladwig and school officials have more options for balancing their budgets. One way Ladwig and the Racine County board  exercised this freedom is by putting volunteer inmates from the county jail to work shoveling snow from sidewalks, mowing the medians on state highways and doing landscaping. Before the Wisconsin law passed, unions blocked the move on the grounds that if the work was to be done, it had to be done by union members. Under the new law,  unions can no longer block the program. 

Other changes saved Racine County money, largely at the expense of workers. Under the new law, county employees had to begin contributing half the cost of their pension contributions. Ladwig and the county  decided that only full-time nurses at the county hospital should get county-sponsored health insurance, booting part-timers off the plan. Snowplow drivers and other county employees used to get double pay, plus eight hours of comp time, for working holidays. Now they just get time-and-a-half. 

“It allows you to take a more competitive business approach to your decision making,” Ladwig, a Republican, says of the new law. “That’s what I really think is the biggest difference.” 

For Ladwig and other local leaders in Wisconsin, however, this new era of managerial flexibility comes with some downsides. The biggest of them is that, in exchange for the collective bargaining changes, the state budget significantly scaled back its payments to local governments and schools. In many places, that decline in state aid outweighs the savings they enjoy from reducing employee benefits. 

For Racine County, the result in the first year was largely a wash: A $2 million drop in state aid was offset by all the cost-saving steps the county was able to take. Still, Ladwig worries that these kinds of tradeoffs might not be sustainable in the long run. “Will [the new law] allow us to deal with further cuts? It provides us the tools, but you get to the point of diminishing returns,” Ladwig says. “You can’t say ‘OK, now everybody has a $5,000 deductible’ and expect to have productive employees.” 

Ripple effects

Ladwig’s experience is just one window into life under what may have been the most controversial bill passed in any state last year. Despite all the criticism and praise that fell on Governor Walker for pushing the labor law, it is local officials, by and large, who are the ones working with the new rules every day. 

The law made several significant changes. It reduced the powers of public unions to negotiate on almost any issue other than pay, which was capped to rise no faster than the rate of inflation. The law requires public employees to pay half of their pension contribution. State workers also must pay 12.5 percent of their health insurance costs, a standard many localities adopted, too. 

Public employee unions have turned from fighting the policy to trying to oust the people who voted for it. Walker, a Republican, expects to be the target of a contested recall election this summer. His lieutenant governor could also lose her seat. Also up for recall are four Republican state senators. If a Democrat wins any one of those senate races, Democrats would capture control of the chamber this summer. 

Racine County, along Lake Michigan about 45 minutes south of Milwaukee, could play a pivotal role in the Senate battle. Its voters backed Barack Obama in the 2008 presidential race but then supported Walker in the governor’s race two years later. The same year, Racine voters replaced a Democratic state senator with a Republican, Van Wanggaard. Now, Wanggaard is up for recall, and is widely seen as the senator in greatest jeopardy. 

The one-time policeman served on the Racine County board for a decade before getting elected to the Senate. In an interview in his Capitol office, Wanggaard said he could remember county employee health care costs increasing by as much as 25 percent a year. Under the previous Wisconsin law, runaway employee health costs were entirely government’s responsibility. Jurisdictions had to offer the same benefits year to year, regardless of their financial shape. 

“You can’t continue to have the costs go up without having some cost sharing,” Wanggaard says. “If there are areas you’re forced to bargain over but you can’t consider the [county’s] economic ability to pay, then where’s the actual negotiation? There really isn’t any compromise.” 

Wanggaard says the collective bargaining law, known as Act 10, protects taxpayers from having to pay for benefits that local governments cannot afford. “If you have people who aren’t working, that aren’t making any money or enough money to be able to pay for their mortgages,” Wanggaard says, “you can’t continue to say we’re going to continue to raise taxes again.” 

Since Republicans took over last year, they passed a balanced budget that included no state tax increases, he notes. And overall property taxes inched up by just 0.3 percent last year, the smallest increase in 15 years, according to the Wisconsin Taxpayers Alliance. Property taxes for schools, the group says, actually dropped by 1 percent. 

But Racine’s school district increased its levy. Wanggaard’s own property taxes, he says, went up 11 percent. The senator blames the local school district for not cutting its costs aggressively enough. The district points the finger back at state government for cutting its aid. 

Funding shifts 

Months after passing the collective bargaining bill, the Republican-controlled legislature passed a two-year budget bill that reduced state payments to schools by $834 million. Racine, like many urban districts, relies heavily on that state aid. The Racine school district says that only one other school district in the state, Beloit, lost more money per pupil than Racine in those cuts. Before the cuts, state aid made up about two-thirds of the district’s funding. Now, it provides 60 percent. Property taxes accounted for most of the rest. 

The state decides not only how much money to give to schools, but also how much schools can spend per child. In an unusual move, lawmakers last year reduced that per-pupil spending limit. For Racine, the new spending level was $542 lower than the previous year. Meanwhile, the state reduced its share of per-pupil funding by $700. According to Dave Hazen, the school district’s chief financial officer, this left the district with only two choices. It could further cut its spending per student, which is already among the lowest in the state. Or it could raise property taxes to fill the gap. The school board chose to raise property taxes. 

When it was clear the legislature would severely curtail union power, the teachers union in Racine asked for a new contract. The union wanted an agreement in place when the new law took effect. That way, for as long as the contract was in place, the union could continue to collect dues out of its members’ paychecks. The union also would not have to hold yearly certification votes, as Act 10 requires, until the contract expired. The school district agreed to a contract that runs through 2013. 

Racine schools avoided large-scale layoffs that the urban districts in Milwaukee and Kenosha experienced. According to a survey by the Wisconsin Association of School District Administrators, Wisconsin shed some 1,655 teaching slots last year. Racine, on the other hand, actually added a handful of teachers, although other staff positions were eliminated. 

For Racine teachers, though, the price of self-preservation was steep. With the new labor law on its way, the teachers had little leverage in negotiations. The self-insured district made big changes to its health coverage. Individuals now have a $2,000 deductible; for families, it is $4,000. The teachers agreed to wage freezes for two years. And, of course, state law now requires them to pay half their pension contributions. 

All told, Hazen says, the changes will cost a typical teacher $7,000 a year. Their average salary is around $45,000. What concessions did the district give? “Really nothing,” Hazen says. 

The district knew it had the upper hand in negotiations but did not press further, Hazen explains, because it wanted to preserve employee morale. “You have to consider … employee groups … are demonized in the press and everywhere else about what’s going on,” he says. “In order to maintain morale and a working environment that is good for the students, our board was looking at that.” 

Officials from the Racine Education Association, the local teachers union, say their members are unfairly being portrayed as the enemy. They argue that the cuts to public schools are based more on politics than finances.

“The governor and the majority of the legislature, they’re too far away from schools to actually know what’s going on inside of them. And they’ve shown a considerable disinterest in knowing,” says union president Pete Knotek. “They want the voice of educators suppressed. And that doesn’t bode well for the future of Wisconsin’s schools or Racine’s schools.”