Archive for July 13th, 2010

Balancing local budgets on the back of teachers, firemen, and police … huh?

July 13, 2010

Every time a local school tax levy comes to a vote, the shrill is the same: we’ll have to eliminate football, band, and AP classes – those things that parents hold dear.

Borrowing the argument, budget-deficited locales are now claiming that the only way to balance their budgets is to cut policemen, firemen, and teachers.

Q1: Why not cut overpaid paper-shuffling bureaucrats instead ?  We’d never know they’re gone.

Q2: Why not cut back on the oversized pensions and healthcare that gov’t retirees get ? In the old days, I’d say “because a contract is a contract”.  But, once Team Obama disregarded contract law in the GM deal by elevating the claims of unsecured unions over secured bond holders, I say “what contacts ?”

Q3: If teachers have to be cut, why not the underperformers – the ones who aren’t contributing anyway ?  Think the NY public schools “rubber rooms” where officially tagged worthless teachers report each day to read papers, chat on their cells and draw a paycheck.

The WSJ article highlighted below raises an irritating  twist to the story.

In Milwaukee, the teachers union is resisting contract givebacks that teachers are willing to take to save jobs … instead, the union would rather threaten layoffs and count on Obama to rush in with bailout dough to “save teachers’ jobs.” 

Win-win for Milwaukee – lose-lose for fiscally responsible states. 

* * * * *

Excerpted from WSJ: A Case Study in Teacher Bailouts, July 7, 2010

The Obama administration is pressuring Congress to spend $23 billion to rehire the more than 100,000 teachers who have been laid off across the country.

Wisconsin is a microcosm of the union intransigence that’s fueling the school funding crisis in so many cities and states and leading to so many pink slips. It also shows why a federal bailout is a mistake. Milwaukee shows that unions will keep resisting concessions if Washington rides to the rescue.

Because of declining tax collections and falling enrollment, Milwaukee’s school board announced in June that 428 teachers were losing their jobs — including Megan Sampson, who was just awarded a teacher-of-the-year prize.

Yet the teachers union, the Milwaukee Teachers Education Association, had it within its power to avert almost all of the layoffs.

The teachers’ current health plan costs taxpayers $26,844 per family, compared to the typical $14,500 cost for a private employer family plan. The plan does not require teachers to pay any premiums toward the cost of the health plan.

In the spring, the school board offered a new health plan that would reduce costs to $17,172 per family. The plan would have saved money by requiring co-pays.

Shifting teachers to the plan offered by the school board could have saved $47.2 million.

This would have prevented, according to the report, the lay offs of “approximately 480 teachers” — more than the number that ultimately lost their jobs.

But when union officials were presented the option, they chose to allow their members to be dismissed.

Many Milwaukee teachers have been quoted in the local press complaining that union officials never offered them a choice to make health-care concessions, and many say they would have been willing to go with reduced benefits to avoid the firings.

So why were these teachers considered expendable by the people who are supposed to protect their jobs?

The Milwaukee Teachers Education Association was immovable on benefits in part because it placed a bet on its Democratic friends in Washington rushing to the rescue.

Milwaukee’s experience suggests that the $23 billion bailout fund is meant to provide a federal life raft to keep afloat the unsustainable, gold-plated compensation packages that unions negotiated when states and cities were flush with cash.

It is hardly sensible to force taxpayers in Mississippi, Colorado, New Hampshire and elsewhere to step in and save the union’s bacon.

A federal bailout only further entrenches bad policies — especially unaffordable benefit packages — that led to the school funding crisis in the first place and leave every child behind.

Full article:
http://online.wsj.com/article/SB10001424052748704535004575348980568232888.html?KEYWORDS=moore+milwaukee+school

Pricing magic: the power of a “decoy”

July 13, 2010

In a classic pricing study, researchers assigned quality levels ranging from zero to 100 to unbranded beers (think wine ratings).

For the first test a  “regular” beers was scored a 50 and offered for $1.80 per bottle, and a premium beer – scored at 70 – was offered at $2.60 per bottle.

Survey respondents opted for the premium by about 2 to 1.

In a second test, a “cheap” beer– scored at 40 out of 100 and priced at $1.60 — was added to the mix.

Though no respondent picked the cheap beer, there was a mix change.  Suddenly, the regular — now the mid-priced beer – was picked by more people..

Hmmm.

In a third test, the cheap beer was replaced by a super-premium – scored at 75 and priced at $3.40.

Now, nobody picked the regular (which was the “low end” of the 3 picks) … only 10% picked the super-premium …. 90% picked the premium.

So, by adding a “decoy” – a product that isn’t ultimately bought but which sets a high-end price impression in people’s mind – the researchers were able to get respondents to “step up” from regular to premium – and increase the “price realization” of the regular and premium beers by 16%.

The theory of the case: “Aversion to extremes” … often, people conclude that the cheapest product is, well, a cheap product … and that the highest priced product may not deliver enough added benefits to justify its higher price.  So, the safe bet is to buy the mid-priced product.

That’s pricing magic, for sure.

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