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Wisconsin keeps pace with pension payments

By Matt Pommer

Wisconsin’s public employee retirement system is well-financed. Whether that is good news or bad news may depend on how you view credit and debt.

In mid-January the State Investment Board reported that money in the basic, core pension program was up 22.2 percent to $67.8 billion in 2009. More than 142,000 retirees are collecting pensions, and the program covered more than 550,000 people. The only major exceptions are Milwaukee County and the city of Milwaukee, which have separate pension programs.

The stock market declines in 2008 led to higher payments from state government to pay for the pension system and a reduction in pensions for most retirees.

Benefits from the core plan were cut 2.1 percent last year and are expected to drop another 1 percent this spring.

By 2006, Wisconsin’s was one of just five state governments that had fully financed public employee pension obligations. Wisconsin pension law calls for pensioners to share in investment gains and losses, spread over a five-year rolling period.

Annual pension contributions top $1.3 billion, and virtually all of the money comes from taxpayers. According to pension law, half of the money is supposed to come from workers, but the state and most local governments pay the entire tab, opting for that payment rather than putting the money into pay increases.

Money going to pensions is exempt from the Medicare and Social Security contributions tied to wages.

The pension contributions are one reason both state and local government taxes are higher in Wisconsin than in some other nearby states. The Wall Street Journal recently reported Illinois has an $80 billion gap in pension liabilities. The Illinois hole is larger than all of the money already in the Wisconsin Retirement System.

“In many states, retiree benefits have been vulnerable to ‘buy-now, pay-later’ approaches,” the Pew Center for the States reported in its Promise with a Price report. It is easier for politicians to approve retirement programs than to pay for them.

Officials at the State Investment Board note the Wisconsin system “is in sound financial condition and much better shape than other states.”

Talk radio is full of warnings that Wisconsin is in fiscal trouble. The governor elected in November will face more than a $2 billion gap. Wisconsin is one of 40 states struggling with ongoing finances.

The conservative “pay-as-you-go” approach to pensions is one favorable sign for Wisconsin. But the taxes it requires may anger folks who would rather leave the problem to their children and grandchildren.

Matt Pommer worked as a reporter in Madison for 35 years. He comments on state political and policy issues.

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