Pension issues debate
Public employee pensions are back in the spotlight as several states try to change benefits for current and future retirees.
For example, state legislators packed a session on modifying public employee pensions at the recent meeting of the National Conference of State Legislatures in Louisville, Ky.
Legislators in Colorado, Minnesota, and South Dakota earlier this year voted to limit cost-of-living increases previously promised in their pension systems. Not surprisingly, retirees have filed legal challenges to peeling back those provisions.
Courts, including the Wisconsin State Supreme Court, have historically protected public employee pension benefits. The Wisconsin high court was unanimous when it struck down a 1987 bi-partisan move to change Wisconsin Retirement System benefits.
Republican Gov. Tommy Thompson and the Democrat-controlled Legislature had made the move. It took more than nine years before the final decision was issued.
In the past, courts across the country have held that states cannot reduce benefits promised to the public workers and retirees. Keith Brainard, research director for the National Association of State Retirement Administrators, has warned the new legal challenges are important. If any of the states are successful, it could induce other Legislatures to take the same sort of moves.
Wisconsin has taken a different approach to post-retirement pension issues. Rather than cost-of-living measures, retirees benefit from exceptional stock-market gains and face lower pensions when investments decline. That approach occurs in the basic “core” program of the Wisconsin Retirement System (WRS).
The WRS covers state workers, teachers and most municipal workers. Milwaukee County and the city of Milwaukee have their own pension programs. The WRS also has offered a “variable” program in which retirees can have virtually all of their money invested in stocks. This program has had large ups and downs over the past 30 years.
The WRS also includes the seven State Supreme Court jurists and all state judges. Membership of the high court and economic conditions have changed since the 1990s when the Wisconsin pension raid decision was made. Politicians are anxious to find ways to reduce costs.
The glue that may continue the Wisconsin logic is that the high court is elected, not appointed. Scaling back promised benefits would make re-election very difficult for any justice who endorsed the concept. It would be easier for a judicial switch if the justices were to be appointed by the governor – an idea promoted on some editorial pages.
Decades ago the WRS was designed so employees paid half of the required contributions, but now more than 97 percent of the money comes from taxpayers. Public-employee unions have opted for the pension contributions in lieu of some higher wages. Governments like the deal because it eliminates their share of Social Security and Medicare taxes that would accompany higher wage payments.
Republican gubernatorial candidate Scott Walker wants to require state workers to pay the “employee” share of pension contributions. Democratic gubernatorial candidate Tom Barrett wants to scale back the pension levels for top state administrators.
Those are small steps compared to what is being proposed in other states. But if retirees lose their challenges in other states, it could open a broader debate in Wisconsin.
