Here’s his story.
You’ve asserted that the WRS is not only one of the best public pension systems in the country, but also in the world. What do you reference to make that kind of statement?
“Well, our pension system has been studied by a number of different groups to look at funding levels, to look at stability, and its performance. Our pension system is currently fully funded. There is no unfunded liability; it doesn’t cost taxpayers anything. It is supported in full by the contributions by the members and required employer contributions. The Pew foundation, in a study, recently indicated that it was 99.67% funded. The National Public Pension Institute considers anything that is 80% funded as fully funded. We are the 9th largest public pension fund in the country, the 30th largest in the world. The fund pays its own costs of administration. It has typically beaten the benchmarks; it’s beat the stock markets in its performance. It has provided pensions, so that the retirees can retire in dignity without costing the taxpayers. And so, yes, our pension is, I think, one of the best in the world. It is one that many other states wish they had. It would resolve many of the issues that Rhode Island is dealing with, or California, where a lack of adequate funding levels have created huge holes in the budget, which were used to justify to changes.
It is clearly not broken. I guess I really question the wisdom of essentially trying to fix what ain’t broke.”
So, has there been an assertion that the WRS is, in fact, broken?
“There has not been an assertion that the WRS system is broken. However, there has been a request for a study of the WRS and ways in which it could be converted…converted in ways that would be very detrimental to the system. The study request was originally in Act 10, the “Budget Adjustment Bill”, some people call it the “Budget Repair Bill”. I don’t really think it repaired anything, so I prefer to call it a Budget Adjustment Bill. The study of the WRS was pulled from that bill. I’d really like someone to explain why it was pulled. I have my own guesses, but it magically reappeared in Act 32 in the Budget Bill. So, that study request is still out there. The study will be conducted.”
UPDATE: (After this interview, WI Rep. Strachota introduced AB 539 (previously LRB 3202) that would initiate the first changes to the current WRS. I contacted her office for comment. I received an email that asserted the bill’s only intention “would allow the UW System discretionary authority to create an optional retirement plan limited to new professors and new academic staff hired after the bill becomes effective.” However, many opponents of AB 539 assert that passage of this (now delayed) bill would be an effective “back-door attempt” to overhaul the WRS entirely through smaller stages.)
“Ironically, the results of that study will be presented to the governor and the Joint Finance Committee, which is a bit unusual. Typically, anything dealing with pension systems would go to the Joint Survey Committee on Retirement Systems. Why, suddenly, is that channel being abandoned? Even though any changes to the pension systems have to go through that committee? But instead, suddenly, the study is going to the JFC and the governor…raises some questions.”
What questions does it raise?
“Well, if you were to consider changes to the WRS, it would only make sense that you would refer it to the committee of legislators (JSCRS) that have specialty, experience, and knowledge in that area. The JSCRS is also comprised of 3 Republican, 2 Democratic, and one independent legislators. It might be more difficult for the governor to control what comes out of that committee than to control what comes out of the JFC (which has 12 Rep/4 Dem split).
Now, if I wanted to change something, the first thing I need to have is a reason. This study opens up the system to any changes. One directive of the study is to look at the contribution rates and whether or not people can opt out. Allowing people to opt out will make the fund ineligible for IRS…if you make it voluntary, it becomes very easy to adjust the rate, and any budget bill can manipulate it further. And with voluntary contribution rates, with college loans and families, and you are creating a generation of people who are not going to be self-supporting in their elderly years. I’d say, pay me now or pay me later, but YOU are not really paying me now. The people have paid themselves! Lose regular contributions and the fund would be destroyed.
Another possible change, as we’ve seen in Michigan, is that ALEC has encouraged governors around the country to move from a “defined benefit” to a “defined contribution” pension plan. We call WI a defined benefit plan, but it really isn’t. It is a hybrid. It is a combination of a defined benefit and defined contribution.
My concern I guess is — ah – you take a retirement system that is really the envy of 49 other states. Very, very few other states, today, can say that they have a pension system that is fully funded, pension system that supports itself, that pays its own costs of administration, that doesn’t cost the taxpayers anything, and yet provides a decent pension for retirees and allows them to live out their elderly years with some dignity. And this opens the door to the possibility of the right-wing agenda to privatize that pension.
Um, we have been really reactive in the way that we’ve dealt with the governor’s office. I don’t think anyone can argue that these aren’t extraordinary times. But we’ve seen a pattern where agendas were suggested and suddenly rolled out that were much more aggressive than suggested and then fast-tracked through the legislative process. And we’ve reacted to these changes.
And at some point we have to be pro-active. That requires that we do a little guess, and look in the crystal ball, who is opening up this pension system to change? What is some of the rhetoric that we’ve heard?
That group that wants to move to the right does offer some suggestions. There has been a move toward personal responsibility, towards reducing government. I think Grover Nordquist said it best, when he said he wanted to reduce government to the size that it would drown in the bathtub. Well, one way to reduce the size the government is to eliminate 2 agencies: SWIB (State ofWI Investment Board) that invests the pension funds, and ETF (Department of Employee Trust Funds) which administers the programs of the retirement system.”
Do you know the amount of money that is in the WRS?
“The WRS currently contains about 80 billion dollars. That 80 billion is the result of contributions made by employees, matching contributions made by employers, and the interest in dividends…many of which until this past year were made totally by the employees and employers. If they shut their doors, tomorrow, it is estimated that it would pay for the full retirement costs of anyone who has participated for the next 30 years. All public employees that work more than 1,200 hours a year… all state, local, and municipal…there are a few exceptions…
I think WC Fields told us, “Democracy is the best form of government that you can buy.” And with the $5 to $6 billion in private management fee you could generate by privatizing the system, you might be able to buy a good chunk of that government. And this is the concern.”
How do you challenge the assertion that this is really tax payer money and that the state should be able to do with it what is pleases?
“I would challenge the assertion that it is state money simply based on the fact that it is part of a wage and benefit package that I earned for work I performed and contributed my money to that fund. If I contributed, as I have to other retirement funds, it doesn’t make that state money. I earned that for services that I performed. It is compensation that employees earned for services performed. Unlike social security – those assets currently exist in the WRS. They exist in a separate fund, and they exist in the form of assets, in the form of stocks and bonds.”
People in the private sector do not always have the same type of pension opportunities. Is it unfair that public workers have these retirement packages?
“Well, I would say, if you go back historically about 20 years, you would find that about 80% of private employees that had pensions had defined benefit plans, very much like ours. There has been a huge change. And now that number has flipped to about 20% of private pensions with defined benefit plans. So, many private employees had those at one time. Now, many of them don’t, unfortunately. Public employees enjoy a benefit package that was one of the things that caused them to choose public employment over private, where often they would’ve received a much higher wage. But they chose the benefit over the wage. Besides which, rather than looking at how we can all reduce ourselves to the lowest possible level and choose the lowest pension to which we should aspire…it seems to me, that we ought to be looking at ways that all of our citizens, both in private and public employment, can enjoy dignity in their old age and a pension system that provides for that.
The notion of pension envy. Dave Obey tells a story of the Russian peasant that is walking along this dusty trail and he’s living on the edge of starvation, barely able to eek out a living for he and his family. And he picks up a bottle and he rubs it and a genie appears. And the genie says I’m empowered to give you one wish. And the peasant says my family is starving, we have no clothes, we don’t have enough food, we’re just living in poverty. My neighbor has a goat. The goat gives really good milk and he’s much much better off, he’s much wealthier than I. The genie looks at the peasant and says, do you want me to give you a goat? No, I want you to kill my neighbor’s goat.
This notion, that we should all be as poor as the poorest, just defies reason and common sense. We should all aspire to that rising tide that lifts all boats…to that kind of a pension system that is fair and provides opportunity for our elderly to live out their lives in dignity.”
Bob’s wife, Sheryl, sat quietly in another part of the room. Bob encouraged her to tell him if he was getting too “long winded”. We all laughed. At some point during the interview, Sheryl and I were pleased to make the connection that she had been a former elementary teacher of mine from Elk Mound. Typical of teachers in small farming communities, she remembered me 30 years and thousands of students later.
Later, I thought about Bob and Sheryl as I was dozing off to sleep, warm and comfortable in my bed. They were probably still on the road, hours yet from home. I imagined myself as a young child, this couple already well into their careers. Yet they continue to work endless hours for the people of this state, when they should be enjoying their retirement. Why? For the “opportunity for the elderly to live out their lives in dignity”, Bob says.
A value we all share.