Broken pension funds -- NOT | Wis.Community

Broken pension funds -- NOT

Scott Walker is causing chaos with his apparent policy overcorrection, which is really not an overcorrection but a well-aimed dagger at the heart of public employee unions. One of his weakening arguments is that not only are state finances in deficit, but that public employee pension funds have huge obligations that will come due sooner or later unless employees pay more toward their retirement.

That may have been true in Milwaukee County, where Walker rose to power as county executive after a public scandal over generous pension benefits. And it may be true in many states across the country, where governors and legislatures for years have shorted their respective pension funds on payments owed by government.

But it's not true in Wisconsin, either at state government or in some local units of government.

The State of Wisconsin Investment Board, which manages the state pension system for hundreds of thousands of current and retired public workers, has run a tight ship and is widely considered the best managed, and in sheer dollars most flush, public pension fund in the nation. It's 97 percent funded, even after the national fiscal meltdown, according to established accounting methods.

Yet we still hear conservatives on national TV -- and Walker himself -- lumping the state's Employee Trust Funds in with pension shortfalls in other states that total tens of billions of dollars. This is rhetorical sleight of hand from a guy who doesn't particularly seem to like pensions at all; indeed, his "budget repair" measure requires the state to study moving toward a defined contribution plan (like a 401K in the private sector) and away from pensions altogether.

But the state's pension problems aren't even real. Meanwhile, in Milwaukee, Mayor Tom Barrett took on the city's faltering pension system and fixed it without borrowing -- unlike Walker who borrowed hundreds of millions to "repair" the Milwaukee County pension system and who wants to do the same, at least in part, to fix the current state shortfall. Meanwhile, Milwaukee's pension fund was so well patched without borrowing that Milwaukee has been paying the entire 5.5% employee contribution share for general employees and 7% for police and fire employees.

The city didn't need to provide its own, employer share of pension contributions because it was 113% funded in 2010. Naturally, Walker's "budget repair" proposal will likely break this well-running system by screwing up the contribution mix and destroying the city's revenue-sharing base, forcing drastic cuts in local services, cuts in public worker pay and by mandating that local police and firefighters will continue to enjoy their current level of contributions. [An exception: About 1,800 Milwaukee jailers and dispatchers would unaccountably -- unless you count politics -- be subject to the Walker benefits cuts.]

Of course, it doesn't really matter how well heeled any pension fund is. In the Walker-verse, underfunding means you have to cut employee compensation. Just like adequately funded pensions mean you have to ... cut employee compensation. And no doubt, if he presided over a government whose pension system, like the City of Milwaukee's, was overfunded, Walker would react by .... cutting employee compensation.

In the Walker-verse, one size fits all, excluding, of course, billionaire pals and supporters like David Koch and organized Wisconsin business interests that Walker already has repaid with a corporate tax cut.

Published

February 28, 2011 - 10:54am

Author

randomness