My goodness it’s hot around here. Record temperatures yesterday and, it’s up to 100 again today. Did you know that this year so far there have been about twice as many record highs set as record lows?
You might think I’m digressing, but not really. A big part of our big governor’s agenda has been to stall local budgets, including schools, at a 2.5% increase year-over-year. Some people — many people — think that’s a brilliantly cool simple idea to solve all New Jersey’s budget woes. Me, I think it’s just simple.
A big part of our big costs are being driven by energy. With all this heat, we’ll all be using a lot more of it. Thank goodness school happens (for the most part) in cooler weather. If it didn’t many teachers and students would end up in the ER with heat stroke. And that means their insurance coverage better be good.
Which brings us to the other big cost, healthcare. Now first of all put aside that notion you might have heard that all we have to do is push over x% of the costs to the employees. The money still comes from taxpayers, and so will the increases.
If you aren’t totally put off by equations, say that x is total compensation, y is takehome pay, and z is health insurance, and t is other benefits. So that
x = y + z + t
If you make employees pay a certain amount, call it s, as a portion of their coverage, the equation just becomes in the end:
x = (y+s) + (z-s) + t
Because there’s no reason to believe that over the long haul employees are going to stomach a whole lot of reduction in x.
What happens when all your budget lines are capped at 2.5% year/year increases, but your costs increase without any real limit? What if your energy costs are going up 8% and your healthcare costs are going up 12%? There’s got to be a day of reckoning at some point in the future. If you liked the equations above you’ll love my spreadsheet:
At year 23, with the budget fixed at 2.5% and with healthcare and energy costs rising, there is no money left for anything else — not just pensions, but salaries, books, maintenance, buses, administration. All the money is going to PSE&G and the health insurance carrier.
I guess if they progressively started laying people off, there wouldn’t be anyone to insure anymore, and since there wouldn’t be anyone in the buildings they could turn down the heat.
Now my presuppositions may be a bit (or a lot) off. I’m starting with a budget of $10MM, where 10% of the budget goes for energy and 10% goes for health insurance. And the rates of increase are going to vary year-over-year. But I think the patently absurd result is still the same, only the time frame may vary.