Opinion: Who Pays for Public Employee Health Costs?

A detailed inspection of these revenues reveals that they come from sources subject to significant discretionary reporting (Cullen, 2003). One third of the relevant dollars are associated with “categorical aid” for students classified as having special needs or requiring remedial education. Recent work documenting troublingly high error rates in school lunch programs (Bass, 2010) emphasizes the flexibility of school reporting and the limitations of the systems through which eligibility claims are validated. We also find that the strength of teachers’ unions mediates school districts’ responses to benefit growth. The relationship between our projections of benefit growth and actual benefit growth is strongest in school districts with strong teachers’ unions. Districts with weak unions appear to have offset increases in health care costs much more through reductions in the generosity of benefits. Inflows of categorical aid also appear to be mediated by union strength. The same is true of inflows of general formula assistance, though this result is imprecisely estimated.