A Win For Philly’s Financial Future

The Philadelphia School Reform Commission showed true grit Monday when it made the politically risky move of asking public sector teachers—just like the vast majority of American workers—to modestly contribute to their health care costs. Though denounced by the teachers union as a “war on teachers,” this is a necessary and manageable step in restoring the Philadelphia School District’s finances.

The Commission unanimously cancelled the union contract after nearly two years of bitter negotiations, during which time the Philadelphia School District’s finances continued to deteriorate. Meanwhile, the union, through its intransigence, held children’s educational needs hostage to adults quibbling over a shrinking pie as a growing number of students flee to charter schools.

In August, the credit rating agency Moody’s downgraded the District further into speculative grade (read, “junk bond”) territory, citing its declining traditional student market share, much of it lost to charter schools.

The growing popularity of charter schools—which are budgeted for more than 30 percent of the District’s expenditures this school year and 25 percent last year—means state funding has increasingly flowed to charter schools. While charters are no panacea, they allow greater flexibility in staffing decisions, including regarding spending on health care and retirement plans.

The premium payments, reportedly rising from $27 to $71 per month for individual health-insurance plans and $77 and $200 for family plans, are still far cheaper than their actual cost. While this will save the District a reported $54 million this year (aided by a too-late $2-per-pack cigarette tax), it is still not enough to close a cavernous budget deficit.

Assuming that an entry-level teacher was single and lived alone, his or her salary would be 107 percent higher than the $21,946 per capita income for Philadelphia County. If that single teacher paid into the District’s most expensive health plan at $71 per month, that would be an annual cost of $852, leaving his or her salary at $44,508, or still 20 percent higher than the county median household income and 103 percent higher than the per capita income.While pay cuts were off the table, union leaders decried the health care contributions as chipping away at what they claim are too-low salaries. However, payment schedules from the District show that even the most basic, entry-level teacher salary package (not including health care benefit and retirement contributions) is $45,360, an amount that is 22 percent higher than the $37,016 median household income for the county, according to Census data.

Now let’s assume the absolute worst case scenario: An entry-level teacher would need to pay for health care for a family on a single salary. If that entry-level teacher needed to get a family plan, with a maximum monthly cost of $200 or annually $2,400, that would still leave his or her salary at $42,960, which is still 16 percent higher than the median household income and 96 percent higher than the per capita income. That single Philadelphia teacher is getting a relative bargain in health care insurance when compared to most American families, who pay an average of $4,565 toward the cost of their coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust. And let’s not forget that many teachers get paid summers off.

It is easy for union bosses to demagogue this issue, but the hard numbers tell a different story. While no one disputes the valuable service teachers provide, there is no reason policy makers should not ask them to tighten their belts—just like all American workers have done in this sluggish economic recovery. In that regard, the Philadelphia School Reform Commission deserves praise for its fiscal wisdom and boldness.