In the union debate in Wisconsin, public labor groups have howled about paying more for their health and pension benefits, going so far as to try to recall Governor Scott Walker as a result of his new law. Of course, they ignore what would have happened to other state services, specifically for the sick and the poor, had Walker not required them to kick in a little more for their benefits.
Of course, Walker could have found that extra $1.2 billion by laying off employees; instead, he required them all to make a small sacrifice in order to save thousands of jobs. But we will never know who those government employees are whose jobs were spared, and it seems likely that they will be sending Walker a thank-you note anytime soon.
Walker's budget called for state and local government employees to begin paying into their own pension accounts; most had paid nothing until then. Walker also raised the amount that government employees would pay toward their health insurance to 12.6 percent of their premiums--almost half of what the private sector pays. Walker anticipated that these changes would save the state about $1.2 billion. Consequently, in the very same budget, he increased state funding for Medicaid by $1.2 billion to ensure, he said, that "the neediest, the poorest of the poor, seniors, needy families and children are the ones taken care of." Had Walker not reformed government employees' pension and health benefits, he could never have increased funding for the poor and the sick by that sum.
To get an idea of how constructive Walker's reforms have been, consider the counterexample of Illinois, which has taken a decidedly different approach to managing employee-benefit and Medicaid costs. In early 2011, Governor Pat Quinn raised state taxes by $7 billion. Yet payments for Illinois' lavish government-employee pensions sucked up two-thirds of the revenue increase, according to City Journal senior editor Steven Malanga. The consequence is that the state now has a $9 billion deficit, despite the big tax hike. Consequently, Quinn has proposed a plan to reduce Medicaid eligibility and coverage and drop the rates that it pays to physicians. The state currently has an unpaid backlog of $1.9 billion owed to Medicaid service providers.