Milwaukee County's $59 Million Pension Problem

When the news broke this week of the need for Milwaukee County to contribute a whopping $59 million to fund its pension system, the liberal blogosphere predictably blamed County Executive Scott Walker for the problem.

Seth Zlotocha and Jim McGuigan suggest that Walker shorted the pension fund in the 2006 budget because, while running for governor, fewer people would care about pension funding than they would about funding for programs from which citizens actually benefit. They suggest that Walker should have set priorities and cut programs in the 2006 budget instead of underfunding the pension.

The motive that these bloggers assign to Walker is misguided. Walker proposed underfunding the pension in his 2006 budget because he wanted to send a message to the County Board that to this day has not been heard: The County does not have the money to fund employee fringe benefits (including the pension) and maintain services at present levels.

Walker has made no secret of his desire to scrap the current unsustainable defined-benefit pension system for a less expensive defined-contribution, 401(K) style system. The Board, supported by County Employee unions, has not been perceptive to this idea. Walker proposed Pension Obligation Bonds to at least attempt to reduce the cost of the current system. The Board and the community were not perceptive to that idea either.

The liberal bloggers have merit in their complaint that Walker, prior to this year, has not set priorities and not gotten serious about cutting programs. But when it comes to the budget, Walker can only propose such a plan. It is up to the County Board to actually approve them.

Herein lies the problem: even if Walker had done this by proposing a substantial reduction in services based on an in-depth strategic plan, the Board has not shown that it would accept any cuts. The Executive did propose several smaller cuts in his 2006 budget. For the most part they were not adopted. For instance, the Board overruled a proposal to eliminate the obsolete and ineffective County Farm during the 2006 budget process – a program that amounts to only $180,000 of the County’s $80 million problem. They further approved increases in contract services for human services providers and approved phantom state revenues to cover proposed cuts to Circuit Court Services.

If they did not have the stomach to cut a $180,000 program, will they have temerity to eliminate the Zoo or the General Assistance Medical Program?

This mentality, not the Governor’s office, was the target of the Executive’s proposal in 2006. The Budget laid the choice before the Board: If you are not interested in cutting services, then the pension contribution has to be cut - you cannot keep both. The Board responded by restoring most of the cuts actually proposed and adding what little phony revenues it could find to the pension contribution and other programs. If Walker deserves to be chastised for being to gentle – and he does – the Board deserves outright scorn for not even accepting Walker’s minimal cuts.

This is the reason the County is literally going bankrupt. The County Board will not make any choices that involve prioritizing how resources are allocated. They and the liberal bloggers will try to blame Walker’s zero tax levy-increase. Increasing the tax levy, due to state-mandated caps, would provide a proverbial drop of revenue in the expense bucket. They will blame Walker’s lack of support for a sales tax increase. A sales tax increase is not realistic due to its certain death in Madison. Worse, it lets policy-makers off the hook by simply continuing on their present path instead of prioritizing and finding efficiencies.

The sad fact is that Milwaukee County has enough money to provide every single service it currently offers, and it could provide it with better quality if it were not under the weight of a $59 million pension bill. Consider this: if Milwaukee County employees participated in the State retirement system, with roughly a 10% contribution based on employee salaries the County’s pension bill would be around $26 million in 2007.

Imagine how many pools you could keep open with an extra $23 million.

If the County were not spending $60 million on health insurance for 57-year old retirees who are leaving with $300,000 lump sum payments, imagine the housing it might be able to find for its mentally ill.

Eventually the choice is going to have to be made.