Rarely has there been a funnier example of the pot calling the kettle black than last week’s pension study by the conservative Wisconsin Policy Research Institute. The study concluded that the state pension is far more generous than the average private sector pension, and urged the next governor to cut back the coverage significantly. In particular, the study recommended that employees start contributing half of the money put aside for pensions (they now contribute nothing), thereby saving the state $600 million annually.
The fact that governments typically offer more generous benefits than the private sector is hardly news. The standard wisdom is that public employees earn more in benefits but less in wages. So I asked WPRI president George Lightbourn if he had any evidence that Wisconsin’s government workers actually earn more in total compensation than comparable private sector workers. The answer was no. “That would require a separate study,” he said. “That’s something we might do in the future.”
Might I suggest that’s a rather odd way to proceed? How can you suggest slashing state pensions in half without first proving that state workers are in fact overcompensated? This sort of approach, of course, opens the door to complaints that your think tank only thinks in a rightward direction.
The supreme irony here is that Lightbourn was a state employee for 22 years. His sole full-time employee, Christian Schneider, was a state employee for many years. So were board members James Klauser, Gerald Whitburn and Ave Bie. All will get a state pension to which they donated not a nickel. Yet now that all are safely aboard the state pension system, they have a message to taxpayers: Pull up the ladder, we’re aboard.
I asked Lightbourn if he or his board members intended to donate back the money they now feel the state shouldn’t contribute to employee pensions and he brushed the question away. “When we do a study, we set all that aside,” Lightbourn said, emphasizing that his job is to do the best research regardless of who it might affect. “I have family members that are currently participants [state employees]. There are all sorts of cross-cutting interests on an issue like this.”
Lightbourn added that he made a point of including a president’s note disclosing that he was a former state employee. “As a public employee,” he wrote, “I always knew Wisconsin’s pension system was generous. Now I know just how generous that pension system is.”
Hmm. Lightbourn was a top official in two Republican administrations, for Govs. Tommy Thompson and Scott McCallum. He was considered one of the smartest people in the capital, and it’s only now dawning on him how generous his pension was? Certainly some of the details in the new study are fresh, but the central point, that government employees make no contribution to their pension plans, was surely obvious whenever he looked at his own paycheck.
In justifying this study, Lightbourn noted that the recent economic meltdown has forced private sector employers to cut back benefits, so maybe government should do likewise. But his study shows something very different: Private sector employers began moving away from government-style defined benefit pension plans in the mid-1970s. That transformation was complete by 2000, the study showed, with little change since then.
But I don’t recall Lightbourn or the administrations he worked with noting this trend or arguing that state pensions needed to be cut back. Quite the contrary. In 1999, the Thompson administration rammed through a state law that greatly increased – by a whopping $5.5 billion – the benefits going to pension recipients. The law was structured so that only those hired prior to 1999 would gain this sweetener; that would have included Lightbourn and the WPRI board members listed above. For officials with higher salaries, the sweetener was not small: Thompson himself saw the lifetime value of his pension increase by $111,000.
This legislation was a naked attempt to cash in on the stock market gains of the 1990s for the state investment fund (which have since been lost). Had this law never been passed, there would be far less reason to call for any cutbacks in the state pension fund.
Journal Sentinel Flubs the Issue
Back when I worked for the Milwaukee Journal Sentinel, I wrote a series comparing government benefits at the various local governments to those nationally. Managing Editor George Stanley was also anxious to include an article showing how public employees earn more in total compensation than private sector employees. So I searched for any studies ever done on the issue.
Because public employees are more likely to be college-educated, white-collar workers, it doesn’t work to compare aggregate averages between the public and private sectors. A fair analysis would have to look at comparable jobs, and then compare total wages and benefits. A few studies had attempted to do this, and generally concluded that the private sector paid the same or even more in total compensation. So that’s what we reported.
Last week, Stanley got the headline he always wanted, and the JS gave the WPRI report front-page, top-of-the-fold prominence. The story’s lead tells readers the best way to have a financially stress-free retirement is to work for government. But if it is true that private sector workers earn more in wages than public employees (and thus have more opportunity to save for retirement), this statement is quite possibly false.
Indeed, the WPRI study at least notes up front that it does not examine total salaries and benefits, and “only through such a comprehensive evaluation could an assessment be made as to the relative strengths and weaknesses of the public and private sector compensation.” The JS story, however, left this statement out of its story. Reporter Kathleen Gallagher also swallowed Lightbourn’s claim that the current economic crisis has pushed the private sector to change how it handles pensions, when his own study’s results show otherwise.
A few days later, the paper did a follow-up story in which state union officials blasted the study, but the article ran at the bottom of the business page. Once again, the editors used the scarce real estate of the front page to control the message to readers.
But while this rather cockeyed study didn’t deserve such prominent coverage, it is not without merit. It was an interesting decision by the WPRI to have an actuary do the research rather than a university academic. Joan Gucciardi does know her stuff and there is some interesting detail in her study, along with some less-sweeping suggestions for reform. One recommendation addressed what I am convinced is an egregious abuse of the state pension system: Employees find ways to load up extra hours of work to jack up their final three years of pay and thus significantly increase their pension payment (which is based on the final years’ average salary). Gucciardi proposed averaging the final 10 years of pay instead – an excellent suggestion.
The Buzz
-Last week, I referred readers to news stories showing that newly hired Milwaukee Public Schools Superintendent Gregory Thornton apparently faced a swap in board members at his old job that might have prompted him to seek a new job. That prompted this comment from Milwaukee School Board member Bruce Thompson on the news stories: “First it is clear that everyone, including his bosses on the Chester control board, the local editorial board, and the Chester mayor, credit him with turning around the Chester school system and are unhappy that he is leaving. Second, it solves the great mystery as to why Thornton is willing to tackle MPS with all its uncertainties.”
-And to those carping about the Milwaukee board’s choice of Thornton, School Board member Terry Falk offers a valiant defense on this column’s letters page.
-The Journal Sentinel noted and headlined the praise for U.S. Rep. Paul Ryan’s performance at the health care summit from Washington Post blogger Chris Cillizza. But back when commentators attacked Ryan’s road map for health care, the JS didn’t report that. The devastating critique in The Economist put it this way: “Mr Ryan proposes to simply slash Medicare spending and balance the budget on the backs of poor seniors.”
-And the Sports Nut thinks, nay demands, that we should all care about the Winter Olympics.
