Skip to comments.The Wisconsin Lie Exposed–Taxpayers Actually Contribute Nothing To Public Employee Pensions
Posted on 02/25/2011 8:10:46 PM PST by tcrlaf
Pulitzer Prize winning tax reporter, David Cay Johnston, has written a brilliant piece for tax.com exposing the truth about who really pays for the pension and benefits for public employees in Wisconsin. Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to contribute more to their pension and health insurance plans.
Accepting Gov. Walker s assertions as fact, and failing to check, creates the impression that 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 this be possible? Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.
Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete.
A review of the states collective bargaining agreements many of which are available for review at the Wisconsin Office of State Employees web site - bears out that it is no different for state employees. The numbers are just lower.
(Excerpt) Read more at blogs.forbes.com ...
There is some truth in this but not as much as many seem to think. Because the pension plan is a defined benefit plan requiring the state to pay the agreed benefit for however long the employee may live in retirement- if the employee lives longer than the actuarial plan anticipated, the taxpayer is on the hook for the pay-outs during the longer life.
But is this the fault of the state employees? The pension agreements are the result of collective bargaining. That means that the state has every opportunity to properly calculate the anticipated lifespan and then add on some margin for error. Whats more, the losses taken by the pension funds over the past few years can hardly be blamed on the employees.
Take a look at what Sue Urahn, an expert on the subject at the Pew Center on the States, has to say about this when describing the $1 trillion gap that existed between the $2.35 trillion states had set aside to pay for employees retirement benefits and the $3.35 trillion price tag of those promises.at the end of 2008-
To a significant degree, the $1 trillion reflects states own policy choices and lack of discipline:
* failing to make annual payments for pension systems at the levels recommended by their own actuaries; * expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and * providing retiree health care without adequately funding it
Via Pew Center on the States
That is the point. While the governor of Wisconsin is busy trying to shift the blame to the workers in an effort to put an end to collective bargaining, the reality is that it was the state who punted on this not the employees.
Further, by the state employee unions agreeing to the deal proposed by Walker on their benefits (as they have despite Walkers refusal to accept it) they are taking on much - and possibly all of the obligation out of their own pockets.
As a result, the taxpayers do not contribute to the public employee pension programs so much as serve as insurers. If their elected officials have been sloppy , the taxpayers must stand behind it. But if the market continues to perform as it has been performing this past year, dont be surprised if the funding crisis begins to recede. If it does, what will you say then?
Who pays their compensation?
Taxpayers, now or later.
Forbes is full of crpp on this one.
BARF-HURL-AND BOVINE EXCREMENT ALERT!!
Ok folks, have at this.
Explain to me how deferred compensation, especially deferred compensation that is never paid, and never budgeted for, is not paid by the taxpayers???
This is making big rounds on the Leftist internet websites, aspecially Daily Kos...
How much do public employees pay toward their health insurance?
Well, it's here - but this still is an appropriate picture.
Forbes is a Global Bankster -
I guess I’m missing something here. The insurance is paid for as part of compensation, just as their salaries are paid for. Taxpayers pay both to the teachers.
The only “lie” would be if the benefits were paid for by teachers out of their own pockets separately—i.e. if salaries were the ONLY compensation the teachers received from the state.
I must be missing something.
The Unions donate to the Democrats who in turn use the taxpayers money to fulfill the state's unsustainable obligation. When we reach the point that the state can no longer fulfill the obligation then the system goes bankrupt and "poof" go the obligations into bankruptcy. This doesn't seem very moral to me.
I learned something new ... deferred compensation appears magically out of nowhere! It’s magic found money that came out of no one’s pocket and magically appears on the books like money from the tooth fairy.
OK..so part of the paycheck goes to the employee and part to retirement, but at the end of the day..with a defined benefit plan the shortfall must be made up by the taxpayer with additional taxes. That is the perfect argument for a defined contribution plan. That is the only thing that protects the employee and the taxpayer from evil doing by the politicians who have underfunded the retirements funds.
Every cent paid to a public employee is paid by the taxpayers or those who pay fees for specific services. How can an outfit like FORBES fail to understand this?
Bump for tracking
This is pure sophistry.
And this is why there needs to be some focus on total compensation (and how its 2x private sector jobs), because public union workers are financially pampered from hire date to grave, and then some.
And just where does “their pay” come from??? The taxpayers! State to not generate anything, or make anything. Their only source of funds to pay state employees, deferred or not, comes from tax revenue that comes from tax payers.
Someone get the popcorn!!!!
Heads are going to explode!!!!
As I understand it, there is no provision for states to actually go into bankruptcy.
However, at some point their checks will just start bouncing and suppliers will stop doing business with them.
I believe IL is very near this point now.
Today, Flee Levin had a Maryland caller who would not identify himself. He said some folks are collecting on their retirement fund prior to retirement. The loot gets dumped electronically into accounts.
One is a legal definition and the other is a literal definition. But both are basically the same thing. WE IS BROKE!
Where does that 100 cents come from?
The paycheck fairy?
And two plus two equals five, we all know that.
The writer keeps saying this over and over in the comments section: “characterizing the contribution to the state pension fund as some additional gift is false.”
I have yet to see anyone besides him refer to the non-salary compensation as a gift.
This guy is just trying to find an angle to push his position; he’s not looking at the facts and coming to a conclusion, but trying to make facts support his already-arrived at conclusion.
Other than his own article, I have NEVER seen these benefits called a ‘gift’ as he keeps saying.
And this writer believes SS Benes are totally funded by employees contributions. (I mean forced contributions)
Taxpayers don't pay for Public Employees?
Learn a new thing everyday - well, slap me silly......
I think reading FORBES may be on the defer list too...
“Who pays their compensation?
Taxpayers, now or later.”
“Walkers refusal to accept it) they are taking on much - and possibly all of the obligation out of their own pockets.”
What difference does it make if the benefits are being paid
from the workers pocket, when it is the taxpayer filling the pocket?
“the taxpayers must stand behind it”?
Au contraire mon ami. What government promiseth, government can taketh away. And guess what you bunch of overpaid government slackers, take it away we will.
What we have is widespread lack of knowledge about how companies, and governments, and individuals, arrive at what we all call "pension plans".
Right now I'm retired ~ I benefit from 5, or maybe 6, different pension plans. A couple of them were established by Congress ~ but even there you find only superficial similarities. The way they work is dramatically different.
Fur Shur, along the way toward retirement Congress changed the terms several times, and even changed the contribution requirements.
The Wisconsin system bears only the slightest similarity to any of the plans that pay me, but ALL of them have one definite rule ~ if a benefit was promised the court requires that it be paid.
Essentially Walker is proposing a NEW SYSTEM, not really a revision to the existing system. He'll win. And the union won't know what hit them.
They why are the union members so mad at Walker if taxpayers pay nothing? What a bunch of croc.
states should just require workers to stay at their jobs longer before their pensions are fully vested.
“Which is why I am wondering why you’re posting this bullcrap here?”
So that leftist crap propaganda can be countered by intelligent minds???
For the same reason we post anything else--so we can be informed as to what the other side is doing. I for one am glad this was posted. Otherwise when some lefty brought it up I wouldn't know what he was talking about, and would assume it was the meds talking, because this is ludicrous.
When I first saw the headline I thought it was another chain e-mail someone saw.
It just illustrates why Governor Walker is right to reform public unions bargaining rights to limit them to wages only. So that no more “deferred compensation” punting can occur.
Lets not pretend that union leadership wasn’t sitting on both sides of the bargaining table, buying politicians with fat campaign contributions to get these golden parachutes worth far more than the compensation they were giving up in exchange.
We’re broke, the party is over.
100% of simple servants wages are extracted from the taxpayers!
what happens here is that the market went south or the funds lose money then the workers lost a lot of their money and they want the tax payers to make up the difference.
Just like all that free, clean electricity that's in our homes' walls to power all our electric cars!
The article is not true:
My 401k dropped by huge amounts over the past few years. I expect Wisconsin government employees to send me checks to make up the shortfall.
We must know what the other side, even our enemies are saying so that we don’t get caught by surprise and end up with egg or shit on our faces.
What the article left out was “WHO” was in charge of Wisconsin - Governors, State Legislature, etc when the terms of the public employees contracts were written (i.e into law).
It has fallen to the Republicans to at least call attention to the fiscal disasters their predecessors have left for the state and new Governor/Legislature to try and fix.
Another issue the article avoided is the use of union dues to pay off Democratic politicans in return for jobs and perks. THIS IS WHERE THE SCANDAL LIES.
Seems that FORBES missed a couple of important things. WHY?
“To a significant degree, the $1 trillion reflects states own policy choices and lack of discipline:
* failing to make annual payments for pension systems at the levels recommended by their own actuaries; * expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and * providing retiree health care without adequately funding it”
Um, how do benefits expand and cost-of-living increases occur? Oh yeah, through collective bargaining. The unions got the benefits without upping the amount employees contributed, and the taxpayer picks up the rest.
Sounds like deliberate fraud to me.
I think he is assuming that the pension funds make money in the stock market and elsewhere. Fact is, though, that local boards put money into the fund. Of course it is deferred compensation, but that benefit is denied to most in the private sector. Then there is the undeniable fact that taxpayer/teacher money passes on to the unions, and that the unions continually work on politicians to funnel money into the public schools—large amounts of which goes to school administrators. Which is one reason why administrators—despite their protests—like unions.
And most of the time this seems to happen when governments get union "concessions". Give them only a little bit now since the economy is in the tank, but guarantee payments to their dogs 20 years later.
State employees are paid from TAX money - regardless of how the pie is divided up - it is still TAX money - paid by tax paying citizens... differed this or that ... it is still tax money - paid by citizens of that state...
So this Forbes article is lunacy
How stupid do they think we are? Their compensation, immediate or deferred, is provided by taxpayers. So the taxpayers are, indeed, funding their pensions.
I looked around on the site and it seems this is just a blog. One guy’s opinion but since it is connected to Forbes, it gives leftists cover. I just read a story, a real story, not a blog, on Forbes’ site about how non-union states are eating the lunch of union states.
Anytime I see the word “blog” in a title or url, I take it with a grain of salt.
I have no idea who Rick Ungar is but he seems to be Forbes’ token liberal.
OK - start paying income tax on all the health insurance if it is just salary in a different form.