A commentary by Matt Pommer.
A Republican legislator is proposing a change in how the Wisconsin Retirement System (WRS) calculates initial pensions, creating a mild case of jitters among those who work for state and local governments.
The WRS is ninth-largest pension system nationally and covers more than 500,000 persons, many still working and some who have left governmental service. The major exemptions are Milwaukee County and the City of Milwaukee which have separate retirement programs for their workers.
State Rep. Duey Strobel, R-Saukville, thinks some workers - especially University of Wisconsin System faculty - are getting promoted to higher paying levels as they near retirement, boosting their starting pensions. Currently the initial core pension is based on the three highest years of WRS-covered income. His plan would make it the five highest years.
Overtime pay, rather than promotions, is the pension-boosting route associated with blue-collar employees such as prison guards. For example, one Madison bus driver attracted statewide attention with reports he pushed his one-year's pay total to over $120,000 by working gobs of overtime.
Ironically the proposed change would cramp the decades-old job hopping by members of the Legislature. Legislators can more than double their initial pensions by taking a cabinet spot in the executive branch.
Among those ex-legislators in Gov. Scott Walker's cabinet are Administration Secretary Mike Huebsch, Transportation Secretary Mark Gottlieb; Natural Resources Secretary Cathy Stepp; Agriculture Secretary Ben Brancel and Public Service Commission Chairman Phil Montgomery.
This is not a partisan thing. When a Democrat gets elected governor, some Democrats are advanced to high-paying jobs in the executive branch of government.
Public employees are wary of initial pension changes in the wake of the dismantling of public employee unions in 2011 by the Republican-controlled state government. That year a record 18,780 WRS-covered employees applied for pensions.
More than 168,000 persons already are receiving WRS pension checks. An estimated 61,000 will be notified this month that their monthly pension checks will be reduced by 9.6 percent because of investment losses sustained in the recession which began in 2008.
Starting this May, a person who retired since 2000 will find his WRS core pension is just the amount he originally received. There is no cost-of-living provision in the Wisconsin pension system as there is in Social Security.
Changes are made in the WRS "core" program pensions based on the gains and losses of the State Investment Board. Under state law the initial core pensions cannot be reduced beyond the beginning level.
The investment gains and losses are smoothed over a five-year period. The Retirement System also runs a more volatile "variable" program which is almost fully invested in the stock market and has no smoothing system or guarantees.
Moving the initial pensions to a five-year top pay average might slow down the retirement process. But that won't help state and local governments which have little money for compensation increases, such as higher health-insurance premiums. For example, new teachers get substantially less pay than those who have been working in classrooms for decades.
Encouraging veteran workers to retire is not limited to the public sector. Many private employers will build financial incentives for longtime employees to retire.