The Wisconsin Policy Research Institute

Wow. I never imagined that an actuary could create such a stir. But since we at the WPRI published a study prepared by Joan Gucciardi, a respected actuary, there has been a steady stream of invective coming out of Madison. We actually shouldn’t be surprised since the study dealt with the third rail of government; public pensions.

Some of the reaction to our study has been thoughtful, some has been intemperate. I have to say that overall I am mystified by the reaction from my former colleagues. They can only be diagnosed as turning a rather indifferent ear to Wisconsin taxpayers.

Before addressing the insularity that most of the responses represent, I should address some of the standard talking points from the defenders of Wisconsin public pensions.

We agree that the Wisconsin Retirement System is well funded – something that unfortunately is not true of many public pension plans. Wisconsin’s elected officials have consistently made sure that the pension plan is well funded (more on that later).

We agree that the WRS is well managed. The national respect for both ETF and SWIB has been well earned.

Yes, public employee retirement benefits are at least adequate to allow retirees to maintain their pre-retirement living standard – something our study clearly identified.

And yes, I worked for state government and, as such, I am part of the system. I disclosed this in the President’s Notes at the front of the study.

The central finding of the study is that the WRS is decidedly different from retirement plans offered by private businesses in Wisconsin: the benefits are richer, the employee pays little or nothing toward their own pension and public employees retire earlier. While this might seem like old news to some, having a respected actuary measure just how different the two systems are is enlightening to most taxpayers. It is especially germane during our current economic malaise when a nervous public is told that less than 2% of Wisconsin’s unemployment has fallen on the public sector workers. In 2009, 163,000 workers lost their jobs, 2,500 of which are public sector workers.

I list these statistics by way of understanding why our pension study resonated so differently among public and private sector workers and employers. Critics of our study would have the taxpayers continue to top off the tank of this fine-running engine called the WRS, no questions asked. That just will not wash with the private sector workers who have responded to our study.

How insular have defenders of the status quo become? I’ll give you one example. Tucked away in a corner of one of the critiques of our study is the argument that the WRS is actually good for the economy since many of the dollars are invested in Wisconsin companies. Maybe, just maybe the taxpayers who pay the bill would prefer keeping a little more money in their own wallet to help balance the family budget. However, that never occurs to those on the inside.

Over the last several days, the defenders of the status quo have spent a good deal of effort describing the internal beauty of the WRS. They note how the system adds value to Wisconsin. They rhapsodize about the elegance of the risk sharing features of the WRS and they explain the tax advantage of having employees contribute nothing to their pension. I’m sorry, but those nostalgic arguments will resonate with the public about as well as the investment banks’ explanation of executive bonuses. This is a different time and the sooner we all understand that, the sooner we can move on to a serious discussion of the pensions.

I’ll close with one last thought. We suggested that the Governor and the Legislature should remove themselves from the WRS. Their participation in the system is an inherent conflict of interest and stands to dampen their enthusiasm for pension reform. Who will be the first to echo our call for change?

-March 4, 2010

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