Report: Health Care Costs Overwhelming Local Government Budgets
By Amy Lambiaso for the State House News Service
       The cost of providing health insurance to municipal employees has risen by an average of 63 percent between 2001 and 2005, and is nearly double the annual growth of health care costs for employees at the state level, according to a new report.
       The Massachusetts Taxpayers Foundation (MTF) report also concludes that the share of local government budgets dedicated to employee health care costs has risen by 42 percent, from 7.4 percent to 10.6 percent during the last four years. Those “soaring” costs are consuming nearly 80 percent of the property tax growth allowed under the law, according to the report.
       The statistics, outlined in “A Mounting Crisis for Local Budgets: The Crippling Effects of Soaring Municipal Health Costs,” prompted Boston Mayor Thomas Menino and other local government leaders to call on state lawmakers today to pass legislation that gives municipal officials the ability to change health care plans and employee contribution amounts without making it part of collective bargaining.
       “Give us some relief,” Menino said at a press conference held to release the report. “If we save money on this issue, just think of how many more police and fire we can put on the streets.” Menino said the City of Boston pays more than $200 million to provide health insurance to its 27,000 employees, up from $124 million in 2001.
       Local officials say the rising costs are especially difficult because the state, facing plunging tax collections, cut local aid in 2003. Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, said local aid is “hundreds of millions of dollars” below 2002 levels, in part because of the lack of adjustments for inflation in recent years. Beckwith said 14,000 municipal employees have been laid off during the last three years due to the reduction in local aid. The association predicts more layoffs and service cuts without a state level remedy. “The state’s leaders urgently need to take action to give municipalities greater flexibility – and new tools – to address the crisis of rising employee health costs, which in combination with local aid cuts is having a serious impact on local finances and services,” according to the MTF report, which is based on statewide revenue data and a Massachusetts Municipal Association survey of 32 cities and towns.
        Gov. Mitt Romney and Senate President Robert Travaglini have separately proposed removing portions of health care negotiations from collective bargaining, in part to help cities and towns to control rising health care costs. Romney will unveil the full details of his plan on Wednesday at an 11 am press conference at the East Boston Neighborhood Health Center.
       Under the law known as Proposition 2 ½, local property taxes can rise by 2.5 percent each year, unless local residents vote to override that limit
by a certain amount. Those local property tax dollars are used in
conjunction with state aid to pay for local services, such as education,
police, fire and public works services. According to the report, the rising
health care costs have eaten roughly four of every five dollars allowed
under the 2.5 percent growth cap.
       “Clearly this is unsustainable, and this is getting worse,” said MTF
President Michael Widmer. The report predicts that without a remedy,
employee health care costs will consume roughly 15 percent of municipal
budgets in four years.
And while Romney and Travaglini have separately proposed in their health
care reform legislation to give local leaders more flexibility and
authority in changing health care plans and employee contributions, union
leaders have vowed to fight any change, which they fear will lead to a
reduction in health benefits.
       Romney’s plan would allow cities and towns to opt in to a system
establishing a local board, much like the state’s Group Insurance
Commission, to negotiate health care plans. Travaglini has proposed giving city councils and town meetings the ability to approve employee
contribution rates for health insurance, and allowing municipal officials
to negotiate different health care plans with different employee groups.
Robert McCarthy, president of the Professional Firefighters of
Massachusetts, attended today’s press conference to decry any proposal that would remove heath care negotiations from collective bargaining. McCarthy said he gets “defensive” when municipal leaders “attack” employees by insinuating that they are the reason for rising health care costs.
       “We’re professionals, and there is a problem out there and it’s a national problem,” he said. “It just hurts me. We’re out there working for the taxpayers every single day and night . . . We pay our share.”
McCarthy said he doesn’t believe the Democrat-controlled Legislature will
go along with a plan that weakens collective bargaining and is opposed by
unions. Further, he said, cities and towns already have a non-binding
health insurance advisory committee, consisting of union members and local officials, used to discuss health care options.
       “I don’t think this has any legs,” he said. “All we have is collective
bargaining.”
       In its report, the foundation says local procedures for determining
employee health care coverage is “an enormous barrier to implementing
timely changes in response to rapidly increasing costs,” such as the type
of plan offered, benefits included, and employee contribution.
       “All too often, the necessity of extended negotiation of even the most
minute modification in employee coverage dooms initiatives that are in fact
in everyone’s interest, initiatives that would save local government (and
thus the taxpayers) money while preserving employee benefits,” the report says. The report is available at www.masstaxpayers.org.