Wednesday, June 21, 2006

Walker Has Change of Heart on Fully Funding Pensions

In 2006, the Milwaukee County pension system needed $46 million and it got $27 million.

In 2007, the Milwaukee County pension system needs $59 million and it looks like it'll get it all.

What's changed?

Last year it seemed to be no problem to underfund the pension system by a cool $19 million. And, what's more, County Executive Scott Walker's initial budget proposal last year actually suggested underfunding the system by $27 million, bringing the total funding down to $19 million, but the County Board added $8 million to the allocation.

In the end, the final county budget allocated $8 million more for pensions in 2005 ($35 million) than it did in 2006 ($27 million) -- so not only was the system underfunded last year, it was allocated 23% less funding than the previous year.

Of course, by underfunding the pension system Walker was just increasing the size of the liability in the long run, but it was evidently necessary at the time -- as the budget explains -- "to facilitate a debate within the county over the future of the [Employee Retirement System]."

A more logical explanation for Walker's underfunding last year was that he was a candidate for governor at the time and it was imperative for his campaign pitch that he propose budgets that included no increase in revenue. It was a major selling point of the campaign, and something he didn't hesitate to highlight at every opportunity.

Of course, Walker could've bit the bullet last year and either increased revenues or demanded major service cuts -- the latter is what he's doing this year -- in order to fully fund the pension system. And while he certainly did advocate for some cuts, it wasn't nearly on the level that he's pushing this year.

Indeed, just as increased taxes don't look good for a candidate for higher office, neither does slashing public services.

But since Walker is not a candidate this year, he evidently doesn't feel compelled to hold back on his quest for major cuts. Fully funding the $59 million request for the pension system this year no longer seems to be an option; as Walker notes, "I think this just shows how serious our financial situation is. I don't have a choice but to fully fund this."

Apparently last year, though, the financial situation of the county wasn't serious enough in Walker's eyes to fully fund the $46 million that was requested for the pension system. In fact, it was comical enough at the time to underfund it by 41% (and initially propose underfunding it by nearly 60%).

As it turns out, fully funding the pension liability this year is the right thing to do -- but it was also the right thing to do last year. In other words, this is a debate we should've been having last year and probably even earlier than that, but it didn't take place.

And underfunding the system last year was not a move to start the debate -- it was a move to delay it.

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