Tomorrow, Ohio voters will go to the polls and decide whether or not to keep Senate Bill 5, a law which would restrain the cost of pension and health benefits for government workers. Wisconsin enacted a similar law this spring, and the benefits are already showing -- instead of laying workers off, Wisconsin's local governments are retaining workers and adding services, as the new law has given them fiscal breathing room. Ohio voters can reap the same benefits -- more services for less money -- but only if they retain Senate Bill 5. Conversely, if voters repeal SB5, higher taxes, service cuts and layoffs will be the norm in Ohio.
Wisconsin's Act 10, the subject of intense protest in Madison this spring, imposes new restrictions on the benefit packages that may be offered to public workers. All workers will have to pay 12 percent of their health insurance premiums -- roughly double what was typical for state employees before the law -- and will pay 5.8 percent of salary toward pensions, up in many cases from almost nothing.
These rules closely parallel those in Ohio Senate Bill 5, which would require that public workers pay at least 15 percent of their health premiums, and which would bar the practice under which some local governments pay what is supposed to be the employee's contribution toward the pension system.
Ohio voters should be interested to know that Wisconsin's reforms are saving a lot of money for local governments. For example, the Public Policy Forum, a 90-year old Milwaukee-based civic organization, estimates that the reforms will save the city of Milwaukee over $24 million in the upcoming fiscal year, even after accounting for over $13 million in local aid cuts that accompanied Act 10.
The Forum goes on: "The city's ability to redirect savings from reduced employee health care and pension costs has allowed the mayor not only to avoid service reductions and substantial revenue increases in 2012, but also to restore some recent budget reductions and enhance the city's efforts to prepare for the future."
In other words: less money spent on employee benefits means more money spent on public services. In fact, because of the savings generated by Act 10, actual program expenses in Milwaukee will rise 6 percent next year, despite the lean economic times. That's the largest increase in program expenditures since 2007.
Successes like Milwaukee's are being seen all over Wisconsin. The Kaukauna Area School district, located southeast of Green Bay, swung from a $400,000 deficit to a $1.5 million surplus due to Act 10 savings. Where will the money go? To "hire additional teachers and reduce class sizes," according to the local school board president. Manitowoc, on Lake Michigan, will use the Act 10 savings to reduce its school tax levy by nearly 6 percent.
This highlights the real question raised by bills like Wisconsin's Act 10 and Ohio's Senate Bill 5: will cities, school districts and counties get control of the cost of benefits, allowing them to provide some combination of enhanced services and tax relief? Or will they continue to pour ever-increasing amounts of money into the voracious mouths of pension and health care plans, necessitating tax increases and service cutbacks?
Union opponents of Senate Bill 5 paint it as an egregious attack on workers' rights. But the fact is that it is far from standard to allow government workers to collectively bargain for their compensation, especially benefits. Only half of states have a comprehensive employee collective bargaining law. Federal workers have no right to bargain collectively for wages and benefits -- which is why President Barack Obama was able to impose a wage freeze on federal workers this year.
This doesn't mean Obama is oppressing public workers. It just reflects that many jurisdictions, including the federal government, have chosen to restrict the scope of employee bargaining over benefits because it is one of the best ways to control costs. It's already working for Wisconsin, and it can work for Ohio too -- if the voters will allow it.
Josh Barro is the Walter B. Wriston Fellow at the Manhattan Institute, focusing on state and local fiscal issues. His recent work has included studies on public employee pensions and on property-tax reform which can be found on PublicSectorInc.org.
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