Who really contributes to Wisconsin's public employees' pension funds?
On Friday morning, the Wisconsin state assembly passed a bill that would, as the Associated Press put it, "require public workers to contribute more to their pensions and health insurance and strip them of their right to collectively bargain benefits and work conditions."
But David Cay Johnston, who won a Pulitzer Prize for his reporting on inequities in the corporate tax code, says the AP's description of Walker's bill is critically misleading. The problem lies with the claim initiated by the Governor, that under the proposed plan state workers would "contribute more" to their pension plan. This distorts the issue at hand because, Johnston writes at Tax.com, it leads to a certain implicit impression:
"Somehow the workers are getting something extra, a gift from taxpayers. They are not.
Out of every dollar that funds Wisconsin' s pension and health insurance plans for state workers, 100 cents comes from the state workers.
How can that be? Because the "contributions" consist of money that employees chose to take as deferred wages -- as pensions when they retire -- rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.
The AP is not alone in this, Johnston points out. This claim has been frequently echoed in nearly all the press coverage of Wisconsin's protest, including some stories produced by this publication.
Pension funds, like paid vacation days and salaries are a negotiated part of public workers' total compensation. In Johnston's view, when Governor Walker says that he wants workers to "contribute more" to pension funds, one correct way to put this would be that the governor "wants to further reduce the cash wages that state workers currently take home in their paychecks."
It is well worth reading Johnston's full explanation of one of the central aspects of the battle in Wisconsin -- and other states where public sector employees are under pressure from Governors to "contribute more" for the sake of looming deficits.
Earlier this week, the Huffington Post's Zach Carter, pointing to a Pew report, noted that Wisconsin's pension fund was among the nation's healthiest.
The Pew report, issued last year, concluded that Wisconsin is a "national leader in managing its long-term liabilities for both pension and retiree health care." Walker has cited the fund's lack of sustainability as grounds for his plan to revoke collective bargaining rights for state employees, but that proposal has sparked outrage among state employees and drawn tens of thousands of protesters to the state's capitol.
As Carter writes, "the Wisconsin pension fund is simply not in fiscal trouble."