Protecting the WRS Fighting for Retirement Security for All Workers

1. Protecting the WRS Fighting for Retirement Security for All Workers Adapted from Susan McMurray and Keith Roberts WAW September 22, 2012

2. Outline of remarks • Not the full pension presentation • The glowing WRS study • Right Wingers Foiled, now regrouping • What your union is doing • Sen. Dave Hansen’s retirement security legislation

3. Who participates in Wisconsin Public Pensions? Most full-time employees of state or local government, the University of Wisconsin, the Technical Colleges and school systems are covered by the Wisconsin state retirement system.

4. How Many People Participate? Active Employees: 266,629 Annuitants 155,775 Inactive Employees 149,815 Total 572,219

5. Two Kinds of Pensions Defined Benefit: The benefit is determined by a formula that usually involves salary, years of employment and an accrual rate multiplier Defined Contribution: The benefit is determined by using the money, plus interest, that was contributed to either provide a lump sum or purchase an annuity. 401K's are often used for this purpose.

6. Two Basic Pension Plans Defined Benefit Plan: The benefit upon retirement is determined by a set formula. The formula is usually a combination of years of service, average salary for last 3 years and an accrual rate. Example: someone who has worked 20 years, is 65 years old and has an average salary of $50,000 would receive the following annual pension 20 X 50,000 X 1.6% = $16,000 Defined Contribution Plan: The money that has accumulated will be used to purchase an annuity

7. Wisconsin Plan is a Defined Benefit Plan The Wisconsin Public Employees Retirement Plan is a Defined Benefit Plan (as are most Public Employee plans). Most Private Sector Employers have moved their pension plans from Defined Benefit Plans to Defined Contribution plans. The American Legislative Exchange Council (ALEC) has encouraged legislators to require Public Employee pensions to become Defined Contribution Plans.

8. Wisconsin Employee Pension Contributions General employees originally contributed ½ of the pension contribution. During the 1970's union contracts requested that employers pay the employee contribution in lieu of raises in salary. In most cases, the employers agreed and the total pension contribution became part of the compensation package.

9. Changing the Wisconsin Plan? The ALEC Business/Industry co-chair for Wisconsin is Lobbyist Amy Boyer. Some of her clients are: Koch Industries Walmart Xcel Energy

10. WRS Study Issues • Act 32 The study shall address the following issues: • Establishing a defined contribution plan as an option for participating employees. • Permitting employees to NOT make employee required contributions.

11. Providing Choice Dismantlesthe WRS Giving employees the option to not participate reduces the number of potential annuitants and reduces the size of the principal that generates income for the system. How does this hurt you as a current retiree? The WRS is an outstanding and sustainable system because it adjusts the contribution and the payout each year based upon the size of the principal and the amount of interest generated.

12. Bad Deal for Taxpayers! Defined Benefit plans are better deals than 401(k) plans for taxpayers because they cost less, attract & retain suitable workers, and help stabilize the economy. A traditional pension plan yields more benefits than a 401(k) plan because 401(k) management and investment fees are three times higher. Teresa. Ghilarducci, Chair of Economic Policy Analysis, New School for Social Research

13. The pension study findings: some good news, for a change! • “Given the current financial health and unique risk-sharing features of the Wisconsin Retirement System, neither an optional DC (defined contribution) nor an opt-out of employee contributions should be implemented at this time.” -Wisconsin Department of Employee Trust Funds (ETF), July 1, 2012 report on the Wisconsin Retirement System (WRS)

14. The ETF study also said: • The “solid foundation upon which the WRS has been built means it is well-positioned to fulfill its intended purposes long into the future”

15. Dark Cloud • We will “continue to monitor” and “continue to look at options for reforming the current system” and “…a 21st century workforce may prefer portability of benefits and freedom offered by other retirement plans” -Mike Huebsch

16. Red Alert!

17. Red Alert! • They’ll have to build a case for the need for “reform” • How will they try to dismantle one of the best run pension systems in the United States? • They can’t claim the WRS is underfunded! • In Rhode Island, Illinois, California and other places - pensions have been underfunded

18. They’re already making the case for pension and WRS reforms “government actuaries” grossly underestimate the cost of the pension system, and that the “true cost” of the pension system is two or three times what you’re paying. -May 30, 2012 Milwaukee Journal Sentinel column by the Heritage Foundation policy analyst

19. Quietly building a case for pension “reform” • “we cannot afford the government we have” • Lies • “liberals must see the light on smaller government” • Rhetoric • “Public workers are the ones who are rich” • Madison Isthmus, June 2012

20. Setting the stage…with misleading, inflammatory stories Trying to stir up trouble by writing “news” stories about SWIB investment staff bonuses while retiree pensions are cut in 2012 -Wisconsin Reporter, July 12, 2012

21. Setting the stage: geeky policy arguments • may involve advocating for new accounting methods, such as GAAP which would treat long term liabilities as if they were due now (2011 AJR 100)

22. Lobbing more geeky arguments • GASB 0r Government Accounting Standards Board new rules for state and local governments. • If applied here, WRS would look less than fully funded, but still good: from nearly 100% fully funded to 93.9% • Unclear whether Wisconsin will adopt GASB but some zealots in the legislature may push it

23. Bottom Line: Be Prepared !! • Attacks will come on many fronts • The right-wing already has started • Letters to the editor, columns, think tank pieces

24. What are we doing about it? • AFSCME, other unions formed the “Wisconsin Coalition for Retirement Security” • Two goals: Protect the WRS, make retirement security a reality for all • Working with local grassroots coalitions • Yes, more pension presentations!

25. What we’re doing: setting up grassroots coalition meetings • Sept 12 – Pardeeville, Portage • Sept 18 – Janesville • Sept 20 - Milwaukee • Sept 26 – Richland Center • Oct 5- AFSCME Retirees Convention • Oct 10 – Menasha/ Fox Valley • Oct 11 – Stevens Point • Oct 15 – Rhinelander • Oct 16 – Menomonie • Oct 18 – Madison • Green Bay, LaCrosse, Eau Claire, other communities – dates TBD

26. What your union is doing to protect your pension and the WRS: • Hired a campaign manager • Grant from the National Public Pension Coalition • Editorial Board visits • Lobbying • Preparing “Pensions 101” online course • See wiafscme.org “Protecting your pension” tab

27. We’re shifting the debate! • Don’t dismantle the world class WRS: create a dialogue, and press for a society where every worker has retirement security! • Create a parallel, sister pension plan for workers in the private sector • Working with Green Bay Democratic Senator Dave Hansen on legislation

28. Retirement security for EVERYONE • Best defense for the WRS, bring everyone up! • AFSCME’s founders, including Roy Kubista, helped build the WRS • It is part of our AFSCME heritage!

29. We need strong pensions to keep the best workforce

30. Timeline • Next legislative session starts Jan 7, 2013 • State of the State speech – third Tuesday in January • Budget address – third Tuesday in February • Budget deliberations – March thru June

31. So what proposals might we expect in 2013? • Higher pension contributions - driven by actuarial projections (from 5.9% to 6.4-6.85%) – recommended by ETF • Possibly tinker with pension contributions –politically driven increases • Possible raise the age of retirement (55 to 59.5, as suggested in 2005 AB 361)