MPS’ tough-but-necessary actions cut $1.4 billion from long-term retiree benefit costs, including $117 million annually
Savings help put district on more sustainable path so academic work can continue
Tough-but-necessary actions undertaken by Milwaukee Public Schools have cut the district’s long-term retiree health and life insurance benefit liabilities by $1.37 billion – including cost reductions of more than $117.2 million annually – as of fiscal year 2012.
“This is an important step upon which we will continue to build,” Board President Michael Bonds said. “We will continue to offer high-quality benefits to our employees and retirees. At the same time, we will not lose sight of the continuing financial challenges that face many employers such as the growth of medical costs and our growing retiree population.”
“In order to improve student achievement, we have to stabilize our growing legacy and health care costs so we can continue our work,” MPS Superintendent Gregory Thornton said. “It has not been easy, but our actions have, without question, worked to stabilize this district amid continuing tough financial challenges. We have taken an unsustainable liability and made it more sustainable. As I have shared with the Board, there is more work to do.”
The $1.4 billion cut amounts to a 49 percent reduction in MPS’ long-term retiree health and life insurance benefit liabilities as of fiscal year 2012. And the $117.2 million annual cost reduction amounts to a 55 percent cut.
The new savings figures come from a just-released independent actuarial report written by Gabriel Roeder Smith & Company. That report shows that instead of facing a $4.9-billion long-term liability as of fiscal year 2019, the figure is projected to be down to $1.8 billion, a 63 percent reduction.
Short-term health savings from employee contracts negotiated in 2010 have already allowed the district to restore 88 teaching positions once slated to be cut for 2012-13, as the district announced in August.
Selecting a new district health plan administrator as part of those 2010 negotiated contracts helped set the platform for lower long-term health costs, but the bulk of the long-term savings come from changes passed by the Board in November 2011. Those changes were made possible, though not mandated, by 2011 Wisconsin Act 10.
The changes include increased health care premium contributions for employees, ranging from a 5% contribution for single employees earning under $25,000 and using the less-expensive plan to 14% for family coverage for employees earning more than $75,000 and choosing the more-expensive plan.
The November 2011 actions also included increasing the age and years of service needed to be eligible for the district’s retiree health benefits for those with dates of retirement on or after July 1, 2013. After that date, retirees must be at least 60 years old and have at least 20 years of service.
Eligible retirees must earn district-subsidized retiree health care – and under the changes, the district increased the amount of unused sick time an employee must have accumulated in order to earn the benefit.
Milwaukee Public Schools is Wisconsin’s largest school district, serving 80,000 students in more than 160 schools across the city. U.S. News and World Report named MPS’ Rufus King International School and Ronald Wilson Reagan College Preparatory High School the two best high schools in the state and among the 200 best in the country in 2012. In the past year, Milwaukee Public Schools posted a growing graduation rate 17 points higher than the rate for 2000.