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Teachers’ Union Has $100 Million Slush Fund, GOP Charges

Article by Erik Smith. Published on Monday, March 01, 2010 EST.

Dollars Came From Taxpayers – Could be Used for ‘Mischief,’ Republicans Say

By Erik Smith

Staff writer/ Washington State Wire


OLYMPIA, March 1.—The state’s biggest schoolteacher union has amassed a more-than-$100 million slush fund at taxpayer expense, Republicans charge, and the public ought to know what it’s doing with the cash.

            They say the money could be used to prevent cuts to education programs, or to reduce the premiums that teachers pay for health insurance. But public records make it appear that the Washington Education Association is keeping the money in the bank. Republicans say they suspect the union, one of the largest bankrollers of Democratic candidates, will use creative accounting maneuvers to divert money toward election campaigns.

            Republicans also say they believe the amount in the account has increased since the union’s latest tax report. On Sept. 30, 2008 it showed the fund stood at $106 million.

“Knowing their track record, you have to question it,” said state Sen. Mark Schoesler, R-Ritzville. “What do you do in a union if you have $120 million and you don’t spend it on your members? The potential for mischief is tremendous.”

            The union disputes the charge. It says it is using the money for health insurance programs, just as it is supposed to; that federal rules prohibit the money from being spent on elections, and the Senate’s information is out of date.

            The situation came to light Saturday as the Senate debated the state’s operating budget. Republicans distributed copies of WEA tax forms on the Senate floor and offered an amendment that would have required the union to tell members about the fund. They suggested a creative accounting maneuver of their own that would have allowed teachers to use the insurance money to bail out threatened K-12 education programs. Though the measure was shot down by majority Democrats in the Senate, the argument called attention to the fact that most of the state’s schoolteachers are enrolled in a union insurance program that has amassed a pile of public money in recent years, yet is beyond the state’s control.


            Money Came From Taxpayers


            It is really a tale of two systems – a public system that covers state workers and other public employees, and a private system that covers the majority of the state’s schoolteachers. The private insurance program is overseen by the WEA, which offers insurance through Premera Blue Cross. School districts are allowed to decide whether to enroll in the state program or an alternative, but the decision really occurs during bargaining sessions between union locals and school boards. Union negotiators favor the union health plan, and most districts concede the point. About 65,000 school employees are covered by the WEA plan.

            The Legislature pays the same amount, regardless of which health plan is used. That’s how the problem started. About five years ago the state overestimated the cost of employee health insurance and started pumping out payments that proved higher than needed.

            Where the state employees were concerned, the excess payments swelled the reserve account of the Public Employees Benefits Board, a state agency. In 2007 the Legislature voted to give the extra money to the state workers, by reducing their health insurance premiums during calendar year 2008.

            But the WEA program was a different story. Tax records obtained by the Senate Republicans indicate that the union kept the excess money in the bank. They show that the fund swelled from $16 million on Sept. 30, 2005 to $106 million three years later.

            Exactly what is happening with the money is a mystery, lawmakers say.

            “It would be one thing if the money were being used to buy down the cost of members’ health insurance premiums,” said state Sen. Dale Brandland, R-Bellingham. “But it doesn’t appear to be so.”

            What makes the situation painful, the Republicans say, is the fact that the state is in the midst of one of its worst-ever budget crises. Lawmakers must find a way to cover a $2.8 billion shortfall, and programs are being hacked right and left. Among the casualties is Initiative 728, which required the state to spend money to reduce class size. The solons say an extra $100 million sure would be handy right about now.


            No Hanky-Panky, Says Union


            The union says there’s nothing fishy about the fund, and the Republicans are relying on outdated and incomplete information. The trust account covers all WEA insurance programs – life, dental and accident – and not just state-subsidized health insurance.

            WEA spokesman Rich Wood said Internal Revenue Service regulations prevent the money from being spent on anything but insurance benefits.

            And he said that since the last tax report was released, the union has used the money to reduce the cost of members’ health-insurance premiums. Exact dollar figures were not available Monday, but Wood said the account made it possible to cover a big shortfall in the amount the Legislature paid last year for health benefits. The Legislature provided for a 3 percent increase, but actual costs rose 4.5 percent, he said.

            No figure was available for the total amount currently in the account.

            Wood said the account is likely to be drawn down further as the state continues to underfund health insurance programs.

            “We have some pretty big and real issues to tackle around school funding, but this issue is a nonstarter,” he said. “We should be looking at ways to put the schools on a sound footing.”


            Outrage on the Senate Floor


            The issue sparked outrage among Senate Republicans Saturday night as they argued for their budget amendment. They said teachers are complaining that their out-of-pocket costs for health insurance are going up. They said that’s a sure sign the union isn’t using the money to keep insurance costs down.

            “The slush fund grows while their costs go up,” Schoesler said.

            Said state Sen. Mike Carrell, R-Lakewood, “This is money that the taxpayers paid. This is $106 million as of 2007. I wonder what that fund looks like today? Now, these are monies that didn’t go to teachers, didn’t go to health care. In every other agency, what would this body have done with a pot of money like that? We would’ve put it into the budget rather than raising the taxes of the people of Washington by maybe $150 million, that’s what this is. This money should have been returned if it wasn’t used for the purpose intended. It should have been used by this body so we wouldn’t have to do what this body is going to do over the next few days – raise taxes $150 million, perhaps. But we just can’t get ahold of it because we gave it away.”

Said state Sen. Jim Honeyford, R-Sunnyside, “I’ve been hearing from teachers in my legislative district, and I just had an email from one in the last few days. It seemed like he was paying something like $700 a month for health insurance for his family, and we’ve got $100 million in reserve to stabilize those rates, and we’re not using it. Something’s wrong. I mean, these teachers are struggling to make ends meet, and we’re not going to help them out?”


            Democrats Defend Union


            Democrats pointed out that the Republican proposal asked teachers to spend down the account for education programs that ought to be financed by the state. That doesn’t seem right, said state Sen. Eric Oemig, D-Kirkland. “The reality is that our teachers already are overworked,” he said. “They rise to the challenge, and if we ask them to raid their savings account to pay for education they might do it. But the reality is that’s just not fair. The underlying budget is cutting them. Last year we took their COLA [cost-of-living allowance]. Inviting them to raid their health savings account is too much.”

            Senate Majority Leader Lisa Brown, D-Spokane, said that if WEA members have a problem with the way the money is being spent, they can deal with the problem themselves. “I just want to say that teachers who belong to unions, just like folks who belong to any union, have an opportunity to make their voice known when they elect their leadership, and so if something comes to light that their members are not happy with, they have a very direct democratic way to change that, and that’s by changing the leadership of their organization.”

            The amendment was defeated 25-17.

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