State pension program should never be put in risky position

Jim Baumgart  Sheboygan County Supervisor

Wisconsin’s state pension fund has long been considered one of the best managed programs in the country - almost always in the top 5 to 10 funds in the nation. Why? Partly because when the state developed the retirement fund many years ago, they set strict guidelines in its management - it was part of the Wisconsin’s Progressive Idea. Workers and local units of government paid into the fund. You might say it was a Sacred Trust between workers and their employers - that their pension will be well managed and protected for retirement.

Today, the fund can fully pay out to all invested retires within the system. It covers state, county, city and town workers, and includes most public school employees. The retirement fund was set up as a well thought out longterm conservation investment as a way to guarantee funding for workers when they retired.

But, from time to time, special interests, politicians and others have seen this well managed retirement system as possible sources of funding or revenue for their special projects. It recently happened again. According to Ryan Ekvall, of the Wisconsin Reporter, “Reed Hall, CEO of (Gov.) Walker’s Wisconsin’s Economic Development Corporation (WEDC), recommended that the State of Wisconsin Investment Board loan $200 million to the WEDC”. The story says the money would be used in a Wisconsin business start-up program.

While the State of Wisconsin has good reason to invest in startup companies, many which could fail during their first five years, because it may lead to expanded employment growth over time. It should be money where risk is not the main issue but where the risk may have a potential value in the long run. Retirement money should never be part this high risk money use - never.

The State of Wisconsin Investment Board politely rejected the Wisconsin Economic Development Corporation’s request. They said, “....., use of WRS trust fund monies to fund economic development initiatives does not meet our fiduciary duty”. Added worry about the request, the Milwaukee Journal Sentinel reported on major issues with financial oversight problems by Walker’s Wisconsin Economic Development Corporation in the recent past. Certainly a “red flag” that did not get past the Wisconsin Investment Board.

But that they even asked to fund what would be risky investments of the state’s retirement fund, was certainly a request that would break that long held “Sacred Trust” between workers and their employees. Present and future retirees need to understand that an organization under the oversight of Governor Walker’s office tried for these funds but failed - this time.

One would ask, does the Wisconsin Retirement Fund invest in Wisconsin firms and businesses. They certainly do. “Over the past 12 years, SWIB has allocated a total of $305 million to its Wisconsin Private Equity Portfolio. This represents 20 percent of SWIB’s total venture capital commitments. From July 2012 until June 2017, SWIB projects new Wisconsin private equity investments will range from $25 million to $50 million.” But these investments here will meet the high standards of the Wisconsin Investment Board - not one where the failure rate is known to be high.

Another story about the $200 million request by the Wisconsin Economic Development Corporation can be found in the business section of the Milwaukee Journal Sentinel, Tuesday, February 5, page D1. It should also be pointed out, there is great concern by both present and future retirees over the retirement fund and its possible politicalization.

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