The Wisconsin Retirement System: The attack against it. How to protect it.

Readers whose retirement plans involve the Wisconsin Retirement System (WRS) may be interested in these upcoming presentations/forums sponsored by the WUU and AFSCME:
“The WRS:  The attack against it.  How to protect it.”

  • Monday, March 12, 5-6 PM. Memorial Union.
  • Monday, March 19, 12-1 PM. Union South

Background: Last week there was a flurry of comments, press releases, and TV appearances from the Governor and his staff asserting that they were not thinking about doing anything at all (indeed, “zero”) to the WRS system.

The denials (here) focused on Walker’s “study” of two WRS questions: Should WRS’s current defined benefit program be replaced with a defined contribution plan (such as a 401-K)? Should participation in the program be voluntary?

The study, which will ostensibly be conducted by the department secretaries of administration and employee trust funds and the director of state employment relations, is due for release by June 30, 2012.

Over the past month or so, there has been increased attention and indeed, alarm, about the study and more importantly, the legislation that may follow it. This anxiety is indicated by a chain e-mail reported to reach 30,000+ recipients, on-line petitions and a surfeit of misinformation, most notably, that the pensions of current retirees are in danger as a result of potential changes in retirement system.

Apparently, given the unexpectedly severe political repercussions resulting from the repeal of public employee collective bargaining rights, the Governor and his advisors decided that stoking a firestorm over threats to destroy the retirement system a few months before a recall election might not be a wise strategy.

However, many of his statement belie the denials.

In a WISC-TV (local) interview the Governor said, (the pension program should be) “a balance of protecting hardworking taxpayers and providing whatever we might provide in a respectful and responsible way.” And “for people in the pension system right now, I can’t anticipate anything in the future that wouldn’t allow them to continue in that pension system if that’s what they prefer to do.”

Providing whatever we might provide...”? Sounds quite charitable. The second underlined portion however, refers to those who are currently receiving a pension. However, he is also saying, all bets are off for current employees.

In a 1/15/12 interview on a very right-wing blog, “The Daily Caller” edited by Ginni Thomas, the wife of Justice Clarence Thomas (here) Walker said, “I think any of us who are honest understand if you don’t get legacy costs under control, it’s a virus that will eat up and eat up and eat up more and more of your budget. It’s the same problem that Chrysler and GM got into, and state and local governments have to fix it.”

The statement is so packed with misinformation, innuendo and fear-mongering, it’s hard to take apart. Most notable is the use of “virus” metaphor as a descriptor of the public pension program. After all, you know what we do with viruses. We kill them.

Some of the seeming-denials and quasi-explanations from Walker and his aides are described in the Milwaukee Journal Sentinel’s “Politifact” (Feb 26, 2012) here In the article, Administration Department Secretary Huebsch notes the uproar in other states when workers were forced into a 401-K style plan.  Huebsch said “there is no intention at this point of forcing anybody into a system they wouldn’t want to be a part of” and “that’s why we would give them the option.”

While one can parse the meaning of “there is no intention” or “at this point” the real issue is “forcing anybody into a system they wouldn’t want to be a part of.” Remember that the study will review two options: offering or converting to a defined contribution plan and making participation in the Wisconsin Retirement System voluntary.

For Walker, et. al. moving employees from a defined benefit to defined contribution plan has the potential to provide billions of dollars (literally) in fees to financial management companies. This would be a financial and ideological benefit to GOP leadership. It would also reduce the state payroll of a few hundred state employees. Still, the state will still have to make a pension contribution of about 6%.

The second option, making the system voluntary could generate potentially enormous savings. These savings would be accrued because a significant segment of the workforce would opt out of the retirement plan. Why? Consider that last year, lower-paid state workers (<$30 K) with family-plan insurance had salary reductions of approximately 15%. Many dropped their health insurance because they could not afford the co-premium. Now, if given the option of ending their retirement contribution and retaining 6% of their pay, they would quickly grasp the desperately needed money. It will not only be the lowest pay-tier of employees who would decline to participate. Add to their number, many young employees who cannot foresee the need for a pension, those in a financial squeeze and those who would rather “do it themselves.”

If one-third of state employees drop out of the system, this would be a savings of nearly $80 million per year to the state.  But, it would also be a structural assault on the retirement system as income sharply declined. Actuarial assumptions that have guided the system will have to be trashed. This loss of income coupled with a rush of retirees in 2011-12, along with many fewer and lower paid replacements create perhaps not a perfect storm but a battering of the system.

This is exactly what Walker wants.

For background material on the conservative origins of Walker’s pension initiative are here and here

A brief and fact-based rebuttal from ETF is worth reading: here

 

David A.
Wisconsin University Union

 

 

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One Response to The Wisconsin Retirement System: The attack against it. How to protect it.

  1. Admin says:

    The following update was received from WUU:

    “Wisconsin University Union, in conjunction with the AFSCME unions, is offering two additional presentations on the Wisconsin Retirement System. Please note that this message has been sent to a very limited list of contacts. As such, your colleagues would benefit from sharing this information with them.

    “The presentations will be held at:

    Monday, March 19 // 12 PM-1 PM *Union South (TITU)
    Monday, March 26// 5-6 PM HSLC Rm 1248

    “We hope your schedule will permit you to join us.”

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