Earlier this week the Milwaukee Journal Sentinel published a lengthy article about state and local government obligations to retirees in Wisconsin. Much of the article focused on the costs of retiree health care obligations. The article was generally positive when it came to pension obligations, praising the Wisconsin Retirement System for being fully funded. We’ve written before about the strength of WRS.
While the article was right to celebrate the fully-funded status of WRS, the author fell for the “Big, Scary Number” trap. Retiree pension obligations due over the lifetime of a pension system – or even for the next 20 years – may add up to a large number, but these obligations are never due all at once. The mathematical and budget reality is more complicated.
At one point in the article, the author writes:
“For instance, if Beloit diverted all of its current spending for two years toward funding this obligation, it would not have enough to pay it. If the city postponed all of its planned investments on streets, bridges, parks and heavy equipment for the next six years, it would cover only 60% of the expected cost.”
This is not helpful because it does not convey the true nature of the obligation. Pension benefits are paid out over 15 or 20 years after a worker retires. Explaining the total expected cost of pension benefits as a percentage of two year’s worth of annual municipal spending distorts how the pension obligation works.
Wisconsin is fortunate to have a well-managed, fully funded public pension system. Decades of prudence and frugality by Wisconsin’s political leaders have maintained this robust system. As we know, fully funding the pension system every year is the most important thing states and localities can do to have a successful public pension system. The author of this article gives an unfair and inaccurate portrayal of the health of WRS.
In discussions like this, it’s often easy to lose sight of the people behind the pensions. Public pensions are the best retirement plan for working families because they provide a modest, but reliable monthly benefit. For teachers, firefighters, nurses, and other public servants, they earn their pensions through a career of service to their community. These are people like Ethel Gates:
“I worked for thirty-nine and a half years with the elderly as a Certified Nursing Assistant in Racine, WI. I loved working with the people I cared for and they became my family in my heart. I was finally able to retire because I worked for so long to build both my pension and my Social Security savings.
“My secure retirement means that, as a retiree, I can volunteer a lot more with my church and in my community. I am also able to help care for my mother now that I am retired. She needs care on a daily basis, and I am thankful that I am able to be there for her.”
You can read more about Ethel and other retirees like her on our website.