Who ‘Contributes’ to Public Workers’ Pensions?
Wisconsin's taxpayers are paying 100 percent of the cost of the benefits programs for state employees. But the benefits amount to a payment in kind.
David Cay Johnston of the progressive Tax.com argues that Wisconsin’s public sector workers are already paying for their benefits and therefore asking them to “contribute” more amounts to a pay cut.
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, created 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 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.
Thus, state workers are not being asked to simply “contribute more” to Wisconsin’ s retirement system (or as the argument goes, “pay their fair share” of retirement costs as do employees in Wisconsin’ s private sector who still have pensions and health insurance). They are being asked to accept a cut in their salaries so that the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin.
The labor agreements show that the pension plan money is part of the total negotiated compensation. The key phrase, in those agreements I read (emphasis added), is: “The Employer shall contribute on behalf of the employee.” This shows that this is just divvying up the total compensation package, so much for cash wages, so much for paid vacations, so much for retirement, etc.
This is really a semantic argument. Wisconsin’s taxpayers are, as Walker suggests, paying 100 percent of the cost of the benefits programs for state employees. But, yes, as Johnston argues, the benefits amount to a payment in kind: They’re part of an overall package that people evaluate when deciding whether to work for the state.
If my employer pays for my parking and then announces that they’ll no longer do that, this policy change amounts to a pay cut. But I’ll likely get very little sympathy from those who’ve paid for their own parking to begin with.
Regardless, treating the current arrangement as a permanent baseline makes little sense. States, like any other employer, have to constantly evaluate their compensation packages in light of the market and their own ability to pay. Pension and other liabilities to retired employees are a more-or-less fixed cost. Pay and benefits of current and future employees are variable.