Paying more for less

WORCESTER -- Here in the state's second-largest city the nightmare is Springfield, 1990.

The state Democratic convention is to convene in Worcester in June, as it was in Springfield then. The Springfield cops, in a contract dispute with the city, threw the convention into chaos with a picket line, and helped elect Republican Bill Weld governor. Here it was the firefighters' protracted contract fight that had the city and Democrats fearing a rerun.

An arbitrator's decision last week, a compromise welcomed by all sides, has lowered tensions. But the forces behind the contentious dispute have not changed: Double-digit increases in healthcare costs are wrecking municipal budgets from Boston to Pittsfield. In Massachusetts today, city and town officials openly acknowledge, you are paying more for local services, and getting less.

''Our ability to provide services is in decline," Worcester city manager Michael V. O'Brien candidly admits. Boston is no different.

But we need look no further than state government of all places for relief. The Commonwealth's healthcare costs are going up, too, but at a significantly slower rate. Over the last five years the state's employee healthcare costs have gone up 57 percent compared to a 73 percent spike in Boston's costs, according to the Boston Municipal Research Bureau.

The reason: The state is able to manage its healthcare plans administratively outside the collective bargaining process while municipalities must negotiate any changes with each union. The state's healthcare plans are very good -- in fact state workers often have greater choice than municipal employees. And the issue does not even involve changing the percentage of premiums that employees pay; that change requires approval of the Legislature.

The state is at an advantage to local governments because the autonomous Group Insurance Commission, made up of representatives from labor, management, and others, has greater flexibility to purchase health insurance coverage and adjust health plans. It has largely been opposition from employee unions, which believe health insurance should be part of contract negotiations, that has stood in the way of a similar statewide pool for cities and towns.

Just saying ''no" will mean that a larger proportion of cities' tight budgets will go to employee benefits, making less money available for everything else. New accounting rules that require governments to recognize the huge costs of retiree healthcare benefits -- now funded on a pay-as-you-go basis -- only add to the urgency for a statewide solution.

Worcester is a good example. In the last six years, the city has cut the workforce by 14 percent, or 887 positions, while benefits (largely health insurance) for the remaining employees have grown from 15 percent of the budget to 24 percent. Spending on health and pension benefits has grown at 15 percent a year; spending on education is up just 3 percent. Meanwhile, an average single-family tax bill has increased 42 percent, or $860, in seven years.

The story is similar in Boston and many other communities. Forty-five percent of the increase in Boston's operating budget last year went to healthcare. It is not a sustainable business model.

Worcester may have finally settled with its firefighters, but its teachers and its public works unions are standing in line right behind them. If Worcester cannot make progress with all its unions, the June convention could yet go the way of Springfield. Worse yet, Worcester's finances could go the way of Springfield's -- which is teetering on the brink.

The world is consolidating all around us, and we still have most Massachusetts cities and towns buying health insurance and running pension plans on their own. At Harvard University, it's called ''every tub on its bottom," meaning every school is responsible for itself. Harvard has the luxury of a $26 billion endowment, and that concept doesn't work well even there. Massachusetts has no such luxury.

See your property tax bill for confirmation.

Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com.