In November and December, the Milwaukee Journal Sentinel did three gloom-and-doom stories on the state pension system, telling us the assets are going down and state retirees will be hurt. I wrote briefly about this in a November column suggesting the first JS story was misleading. The paper followed with yet another story pumping up the drama and then a third story, called “State pension losses grow,” which is no longer available online. All three articles by reporter Cary Spivak were factual but foggy and misleading. Readers couldn’t possibly understand just how well-protected state retirees are.
Wisconsin’s massive retirement fund – the 10th-largest public fund in the country – has performed marvelously (averaging an annual return of 7.8 percent) and has regularly increased payments to retirees at a rate faster than inflation. Most retirees (79 percent) are in the “Core Fund,” which guarantees the payments they get will never go below the amount promised when they retire. In addition, this fund provides “dividends” to retirees based on the market returns of the investment and smoothed out over five years. From 1982 (when the pension system was created) through 2007, the dividends boosted annual payments to retirees by an incredible 370 percent, when you multiply the annual increases contained in state figures over this period of time. This compares to the increase in inflation of 112 percent over this time. (Depending on what year someone retired during this period, they may have done less well or better in their return than the cumulative increase over this 25 year period.)
Few, if any, states make such generous adjustments. Keith Brainard, research director for the National Association of State Retirement Administrators, notes that about three-fourths of states have automatic cost-of-living adjustments in retiree payments. But many states cap the adjustment so it can’t increase by more than 2 or 3 percent, while other states cap it at half the rate of increase in the consumer price index, he notes.
By contrast, Wisconsin retiree payments have been rising faster than inflation for more than 25 years. Brainard called Wisconsin’s system “unusual if not unique.”
The recent stock market meltdown could end up with retirees in the Core Fund seeing a 1.3 percent to 3.5 percent drop in their monthly payments, Wisconsin Retirement System officials have estimated. But those retirees still will be well ahead of inflation – and of their counterparts in other states.
That leaves the minority of state retirees (21 percent) who have elected to gamble on the state’s wild and wooly “Variable Fund,” which rises and falls annually based on the fund’s market returns. Employees who choose this option can only put 50 percent of contributions made on their behalf into the Variable Fund, meaning 50 percent remains in the Core Fund, with its same guarantee that payments will never drop below the original retirement amount and its historical returns that have bested the rate of inflation.
But the 50 percent they put in the Variable Fund has gone up by as much as 26 percent (in 1985) and down by as much as 27 percent (in 2002). Yet on balance, the roller coast ride has been up: Adding increases and subtracting decreases, the Variable Fund payments went up by about 360 percent since 1982, also much faster than the rate of inflation (but a bit behind the more stable Core Fund, so the turtle beat the hare). So even if these retirees see the huge projected decrease of about 40 percent in their payments after this year’s market returns are computed, the monthly payments will be still be way ahead of inflation.
Besides, these retirees decided to gamble on the market. Even if their payments do someday fall behind inflation, it’s a situation they chose and benefited from for many years. The reality of the state pension system is that its investments have done very well over time, and even the recent market meltdown amounts to little more than a blip in its performance. But you’d never know that reading the JS stories.
Media Meltdown
The latest publication to stop printing is Vital Source Magazine, the spunky, 6-year-old arts and cultural magazine. The magazine had been getting thinner, with fewer color pages.
“It breaks our hearts to think we won’t be putting VITAL on the streets every month, but we’re doing some very exciting things with our Web site to position ourselves well in the Milwaukee media mix,” says co-publisher Jon Anne Willow.
Willow says the magazine did well in 2008 and is maintaining its offices and current staff, but the expectation of declining ad revenue in 2009 forced a decision to stop printing.
Meanwhile, the stock of Lee Enterprises, which owns 50 percent of Madison’s WisconsinStateJournal and Capital Times, was down to 41 cents by last week. It’s now cheaper to buy a share of stock than to buy one newspaper at the newsstand. Based in Davenport, Iowa,Lee Enterprises publishes 49 daily newspapers and more than 300 weekly newspapers and specialty publications. This includes other state papers like the Portage Daily Register, Baraboo News-Republic and Beaver Dam Daily Citizen.
Meanwhile, Journal Communications stock dropped to less than $2, plummeting from its value of about $16 when the company first went public five years ago. (It has rebounded somewhat, to more than $2.60 in recent days.) The daily paper’s local coverage seems to just keep shrinking.
That drew a complaint from radio talker Mark Belling, who charged that the Journal Sentinel is turning into “an irrelevantly written and edited paper for the purpose of winning awards and impressing only its own staff. Sunday’s page one, consisting of yet another in an unending string of stories about some plastic chemical the paper wants to get outlawed and the 984th installment in an eternal series on drunken driving, is an example of a newspaper that has lost all sight of actually giving people what they want. I get around the community a lot and I still haven’t had a single person ask me about whether we should ban Bisphenol A.”
Belling undercut his point, however, by suggesting the paper was being out-hustled by the lackluster Waukesha Freeman, the paper which happens to print his weekly column. He did note the risk of being “preposterously self-serving,” which I guess makes his plug somewhat less egregious.
And of course, the question of how to report the local news is clearer for a publication serving only Waukesha. For the JS and its five-county readership, deciding which stories to run is trickier. But if the paper doesn’t figure out the solution, its stock – and its staff of reporters – could decline further.
The Buzz
-Speaking of jobs for reporters, word has it that at least one JS reporter and media types from Fox TV and WISN Radio applied for the job of press flak for Mayor Tom Barrett. As reported here, his former press person, Eileen Force, resigned. Barrett, my source suggests, may simply promote from within.
-As one former caseworker with the Milwaukee child welfare system commented on my column of last week, the system has become a monopoly now that La Causa has announced it will no longer serve as a contractor. This leaves only Children’s Service Society bidding to provide services. That doesn’t bode well for an already troubled system.
-Even as reporters lose their jobs and the JS profits and stocks plummet, its executives get rewarded. As the Business Journal recently reported , its top executives were given retention awards, while its departing chief financial officer got a package worth $400,000, as Gretchen Schuldt has reported.
-And will 2009 be Mike McCarthy’s last year? The Sports Nut offers his prediction.
