In the mid-1950's and early 1960's, as the Michigan Education Association (MEA) was making its transition from a professional teacher's association to a militant labor union, the organization's leaders hit upon a brilliant plan to shore up support for their growing organization. The plan was so ingenious, in fact, that it is responsible in part for catapulting the MEA to its current position as one of Michigan's most powerful political forces and the most influential state affiliate of the National Education Association. It is also a plan that is being examined, and in some cases duplicated, by labor organizations across the country.

The plan was simple in concept. Since 1939 the MEA had worked with an agent of the Hoosier Casualty Company of Indianapolis, Indiana to provide its members with limited insurance coverage, usually paid by the MEA member. Facing competition from the Michigan Federation of Teachers, the MEA's rival union, the MEA began to augment existing insurance benefits as a way to entice teachers to support their organization. The union leaders recognized that they would have maximum control over the insurance program if the union itself were in charge of the insurance plan. Since Michigan law prevented the MEA from acting as an agent, it created in 1960 a wholly-owned non-profit subsidiary, the Michigan Education Special Services Association (MESSA). MESSA acted originally as a third party administrator, handling the policies and claims which were paid by a separate insurance underwriter.

The genius of the arrangement after 1960 was that MESSA would pay the MEA to bargain MESSA benefits during contract negotiations, thereby becoming a source of revenue to subsidize the union's rapidly expanding field operations staff. While in the beginning MEA members paid the premiums, school districts were increasingly pressured during negotiations to make payments directly to MESSA as part of the union contract. Thus the machinery was in place to develop what is today a complex arrangement of subsidiaries and fund transfers that provides revenue and services to support the MEA and its political operations, while wasting millions of dollars intended for education. MESSA is, in effect, an insurance company that uses mandatory collective bargaining laws to sit across the negotiating table and pressure school districts to purchase its coverage.

Today, in more than 300 of Michigan's 524 public school districts, the rising cost of education is linked to this arrangement, which often goes unnoticed by many school boards, as well as the parents and taxpayers who ultimately fund the districts. While there is no question that public school employees deserve decent, well-administered insurance benefits, the benefits packages now negotiated by these school districts from MESSA offer unreasonable coverages and unusual provisions that simply cannot be justified on their merits. Those school boards that do recognize the pitfalls of MESSA insurance are often placed in the no-win situation of either agreeing to fund MESSA coverage or face a disruptive and illegal teacher strike that would cheat children of their education.

This report documents the relationship between the MEA and its MESSA subsidiary, as well as the other MEA subsidiaries that affect it. Figure 1 illustrates the basic elements of this relationship. For those who are concerned about the quality of education in Michigan, an understanding of this relationship explains much about why Michigan citizens are not getting full benefit from the money that is dedicated to education, as well as why education reform has been thwarted at nearly every turn. But in order to understand MESSA's success and the power it provides, it is important to understand something about the MEA.