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6/25/2008
Frank Lasee: State pensions better than Las Vegas

Last week, I wrote about the Wisconsin Retirement System (WRS). The good news is that the system is fully funded. The WRS has $87 billion invested by the state. It pays 132,000 retired state, university, school and local government employees about $2,000 per month, nearly all receive social security as well. There are 263,000 current employees expecting future pensions from it.

WRS is one of the best pension systems in the United States, both in terms of benefits paid and by being fully funded. It is a generous defined benefit plan (401K plans and IRA’s are defined contribution plans, more on this another time). The payment is the average of the three highest years of pay, times a multiplier, times the number of years employed in the system. If a government employee can get three really big years of pay, they can often retire at more than they ever earned during their working life (except for those three big pay years).

Under the state’s union contract, the government managers have little input into who does overtime and how overtime is managed. By contract, the most senior employees get to take the lion’s share of overtime hours. They often use sick leave and vacation time to pad their overtime.

Under federal law, employers are required to pay overtime when actual hours worked exceed 40 hours per week per pay period. Under the state collective bargaining contracts, an employee can use vacation or sick days in a pay period. Regardless of the number of hours that are actually worked. These contracts are designed this way. I have heard of employees colluding to up their overtime dramatically.

An audit by the non-partisan Wisconsin Legislative Audit Bureau revealed that state agencies paid nearly $200 million in overtime during the last three years. This is an increase of 15% since 2005. Fifty-nine state employees were paid more than $100,000 in overtime according to the Audit Bureau. This really increases the cost of the WRS payment our taxpayer-funded employers must make to the WRS.

The state is not the only WRS employer dealing with this issue. Two Madison bus drivers earned over $100,000 each. In the last five years, Sheboygan overtime payments have risen about a half million dollars, to nearly $1.2 million. Sheboygan County’s overtime pay rose $200,000 to $2 million. La Crosse reported overtime up by 14% from 2006 to 2007, now about $1 million. There, the top ten overtime earners included a payroll clerk.

The Journal Sentinel has a database of all employees’ overtime in Milwaukee. Take a look at the 101 employees making more than $30,000 in overtime last year.

Why should we care? When payments are dramatically increased, contributions must be increased. WRS checks are paid by the state, university, school district and local government taxpayers (government employers).

These contributions have ranged from 12.9% of employees’ pay to 10.3% in 2000. In addition, 7% of payroll is contributed to Social Security on the employees’ behalf. Last year the state paid $420 million into the WRS for employees and another $250 million for social security. Total WRS payments last year were $1.3 billion. If the employers (taxpayers) would be able to fund it with 9.8% instead of 10.8% payment, we would save $120 million.

Now, I think everyone should be prepared for retirement. Work hard, prepare for old age. Great idea. I don’t believe you should be able to game the system by using sick leave and vacation. Or having positions created just for overtime. Or having your co-workers help you out by calling in sick. Remember state employees get 16 sick days a year and can bank them.

What isn’t fair is that our taxes support government employees that can expect more than their private sector counterparts. When government compensation is looked at, it must include the very generous benefits, as well as pay. We don’t do that now, but we should.

Frank Lasee is a Republican and represents the 2nd Assembly District.

COMMENTS

Although the three highest years are used in the calculation, gaming the system is a stretch- unless you include Breske and Roessler. They are of the few who can double their salary in the last years of their employment. Would like to know what Doyle owed them and why.

Hear, hear. Jo E.

Ron (Wed Jun 25 09:11:34 2008)

The City of Appleton has done much to address overtime issues over the past years for the few who have in the past played the system to take advantage of the benefit calulation. The City has, just like any employer, those employees who will play the system. If not in the venue mentioned, some other. It is a small minority though as we have many hard working employees who work to make their community a better place to live and not necessarily for the overall employee benefit package attained. Its easy to point out the negative - it sells papers, its politics and it in some perverse way, it helps people feel good about themselves pointing out others weaknesses. Simple fact of life. The negative aspepcts in our workplaces need to be addressed, but its the positive attributes that need to be supported and encouraged. This is where our community has benefited the most for the least cost - from the unsung acts of many dedicated employees.

As the Finance Direcgtor for the City, I can tell you the total package is sold whenever I need to go out and fill a vacant position in my department, most significantly at the professional level. If it wasn't, I wouldn't have the highly competent staff that make our department successful. They make the wheels turn - I just help guide it.

Lisa Maertz (Wed Jun 25 10:14:05 2008)

Once again, Frank does a great job of highlighting and analyzing yet another cost excess in our Wisconsin system of controlling Government expenditures. The Wis. Prison Union situation is a classic example. When confronted, he defended the practice! Clearly, they simply "pump up" final three years earnings to scam the system. In many cases Employees in many areas of public service retire with greater benefit, net-after-tax, than they would if they continued to work. DAH! That's why most "jump" at 58-60 (or earlier, in case of police/Fire).

Contrast that with the Private Sector, in Wisconsin, where pension plans are typically designed to provide 30-35% of pre-retirement income, after 30 years of service, at age 65.

As usual, the Txpayer is stuck with the bill, with the unfortunate result that the "Public Servants" who work for the Taxpayer get a richer deal than the Folks paying the bill. Sad! Sad!

PS: How bout the departing Green Bay School Supt. He's leaving a $150M job for $200M in Madison, but under the "Emeritious" Program GB is paying him an extra $50m/year for 3 years. Thus, his final average earnings for pension benefit calculation becomes $200M ($150M $50M) or a nice 33 1/3% increase in Pension Benefit. Guess how long he'll stay in Madison before he "jumps"???

GL Schilling (Wed Jun 25 10:58:26 2008)

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