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Study on pension options worries public workers

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Steven Walters
February 27, 2012

A major study is due June 30 on whether there should be options to the defined-benefit pension system for public employees. The study likely will reignite the emotional debate over whether the compensation of government workers is too generous.


The Internet is already full of rumors on the subject.


For example, this rumor rocketed through the UW System:


“She just got back from a regional meeting, and the word there was that (Republican Gov. Scott) Walker is saying that after he wins the recall election, he plans to push through the Legislature a plan to abolish the state retirement system and convert everyone to 401(k), which will reduce our pensions by at least a third. … Tell everybody you know, included those already retired…”


Time to try and put the report due June 30 in context.


Q. Who will make a report on options to the defined-benefit pension system for public employees, and who gets the study?


A. According to Department of Employee Trust Funds (ETF), the nonpartisan agency that runs the Wisconsin Retirement System (WRS), the state budget passed last year requires three officials—the heads of ETF, the state Department of Administration and the Office of State Employment Relations—to report to the governor and Legislature’s Joint Committee on Finance by June 30. The report will not cover city of Milwaukee and Milwaukee County pension systems because they are not part of ETF.


Q. Exactly who can change the pension system for public employees?


A. Any changes to the current pension system must be passed by the full Legislature and approved by the governor. And, with recall elections likely for governor, lieutenant governor and three or four Republican state senators, the issue will be publicly debated.


Q. Why are public employee unions worried?


A. AFSCME Council 24, one of the largest state employee unions, says: “(WRS) is one of only four state pension systems that meets the strict actuarial definition of being fully funded. In AFSCME’s view, there is no need to ‘study’ the WRS or modify a pension system that works well and provides a modest pension for a career of service. However, since the budget law mandates the study, having ETF take charge is the best we can hope for in this uncertain time. AFSCME has been keeping a close watch on the study proposal. We have a fightback campaign underway to protect the WRS and your pension.”


Q. Why is the study being done?


A. To control costs, private businesses and other governments nationally have changed their defined-benefit pension systems. Sponsors of the study say state and local governments in Wisconsin need to know future costs of the current defined-benefit pension system and what options there may be to that system.


Q. I’m a retired public employee who is very worried. Are the pension benefits I’m now collecting safe?


A. Yes, according to the Wisconsin Supreme Court and courts across the nation. They have ruled that pension benefits, once bestowed on a public employee, become a vested “property right” that cannot be subsequently taken.


Here is what a unanimous Wisconsin Supreme Court ruled Jan. 1, 1997:


“The system of benefits provided by WRS is no mere legislative gratuity. Rather, benefits are a form of deferred compensation for service provided. When a public employee chooses to take his or her retirement benefits in the form of an annuity, he or she is thereby guaranteed certain rights under the WRS contract.”


The fears of those who insist that Walker wants the Legislature to cut pensions now being collected by retirees are wrong, said Jocelyn Webster of the state Department of Administration. “Already earned benefits—nothing will touch those.”


In a Dec. 23 interview, Walker agreed: “It’s pretty safe to say that, people who are in the pension system right now—we’re not looking to fundamentally change that.”


Q. I’m public employee who hasn’t retired. The benefits I’ve already earned may be safe, but what about future pension benefits?


A. According to ETF, changes to the pension system “could only apply to the accrual of future benefits.” And there is no doubt that the pension system can be changed for future public employees.


Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. This column reflects his personal perspective. Email stevenscwalters@gmail.com.

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