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Sorry Gov Walker, Wisconsin Pension System Is Nation’s Most Solvent

Wisconsin’s budget may be in a hole, but the state’s pension system is among the healthiest in the nation.

In fact, the Badger State was one of just two states to fully fund its public employee pension in 2009, according to a report released Tuesday by the Pew Center on the States. New York was the other.

Although nationally there was at least a $1.26 trillion gap in 2009 between what states have promised in public employee retirement benefits and what they have set aside, Wisconsin stands out as a leader in managing its liabilities for both pension and health benefits over the long term, the Pew report concluded. The shortfall is 26 percent greater than it was in 2008.

Pew researchers attribute the gap to unwise decisions by retirement benefits fund officials and the Great Recession that whacked pension fund investments. In all, 31 states were below the recommended 80 percent funding level for their pension plans in 2009, compared with 22 states that fell short of that threshold the previous year.

“Over the last decade, it was all too common for state leaders to skip or shortchange their annual retirement contributions and increase retiree benefits without checking the price tag or figuring out how to pay the larger, long-term bill,” said Susan Urahn, managing director for the Pew Center on the States. “Now, policymakers in many states are taking a long overdue look at how they have managed, or failed to manage, the considerable costs for public employees’ retirement benefits. Even in states like New York and Wisconsin, where pension systems are well-funded, governors have sought policy changes aimed at reducing their pension liabilities.”

The report was released at a time when Wisconsin sits at the epicenter of state budget battles across the country as governors are focusing on public employee benefits to cut costs and balance budgets. Wisconsin Gov. Scott Walker ignited a firestorm with his “budget repair” proposal that strips public employees of many of their collective bargaining rights and requires them to contribute more of their income toward their retirement benefits. Several states followed with similar proposals, fueling a debate over the role of pension systems in the financial crisis in the states.

At a Capitol Hill forum Tuesday sponsored by the American Action Forum, a conservative think tank, the consensus among panelists was pensions are not to blame for states’ fiscal woes. One panelist, Eli Lehrer, vice president of the Heartland Institute, said given the health of Wisconsin’s pension fund, Walker would be wise to focus his budget balancing effort elsewhere.

“The pension system in Wisconsin is fully funded,” Lehrer said. “As a budget focus, I think he’s better off expending his political capital somewhere else.”

Andrew Biggs, a pension expert at the American Enterprise Institute, said just because Wisconsin’s pension fund is solvent doesn’t mean it should be off-limits.

“It could be well-funded and still be a drain on the budget,” Biggs said.

Pew researcher Stephen Fehr said retirement benefit costs for all states continue to rise, and while states like New York and Wisconsin should be commended for maintaining their funding obligations amid hard times, they face financial strains.

“They don’t have a pension crisis, but on the other hand they do have some pressures as all states do when it comes to figuring out how do we pay our bills,” Fehr said.

New York and Wisconsin have fulfilled their pension fund obligations regardless of the economic times, Fehr said.

By: Larry Bivins, Greenbaypressgazette.com, April 27, 2011

April 28, 2011 - Posted by raemd95 | Collective Bargaining, Gov Scott Walker, Governors, Politics, Public Employees, States, Wisconsin | American Action Forum, Health Benefits, New York, Pension Funds, Pensions, Retirement Benefits, State Budgets