Thursday, April 29, 2010

Battle of the Budgets: Barrett Wins, But Barely

A couple of weeks ago, Milwaukee County Executive Scott Walker, and gubernatorial candidate, crowed about coming up with an unconfirmed $9 million surplus in the 2009 budget for Milwaukee County.

Predictably, City of Milwaukee Mayor, and gubernatorial candidate, Tom Barrett announced that the city has a $23 million surplus from last year. Barrett also boasted of having no debt and a fully funded pension, as well as a drop in police overtime.

Now, when Walker made his proclamation, I was critical of his claim and and pointed out that the County actually has a debt in the area of $1 billion. I further pointed out that county has a slew of issues to contend with such as a parks system falling into decay, a courthouse falling apart, and a transit system that is about to be crippled.

The City of Milwaukee has its own issues. Many of the roads are in terrible shape and in desperate need of being resurfaced. The libraries are looking at cut backs in services.

Given all the work that has to be done, I don't see how either Barrett or Walker can really claim that they have a surplus.

That said, the edge in the Battle of the Budget would have to go to Barrett and the City of Milwaukee.

The city doesn't have the outstanding mountain of debt that Walker has bestowed upon the county by his refusal to fully fund the pension fund.

An example would be the two pension funds. Barrett has reported that the city's pension fund is fully funded. Walker took out a risky pension obligation bond scheme to cover more than $300 million, but even that only covered half of what is owned. A study from the Public Policy Forum showed that one of the leading contributions to this deficit is Walker's willful failure to fully meet pension obligations each year.

Furthermore, Barrett sat down with AFSCME and worked out a contract in which the city did get some concession for the unions, including four days of furloughs. Due to this, Barrett was able to present a balanced budget for 2010.

Walker, on the other hand, has refused to meet with the union for twenty months, choosing instead to try to dictate conditions through the media and through the budget, including mandating three different tiers of furloughs, going from eight days up to as high on 22 days. Instead of concessions, Walker has given the county a number of lawsuits that tax payer money is being spent on defending against and a budget with a built in $17 million deficit.

The City Hall just had a major face lift. The County Courthouse is literally falling down around are ears.

The comparisons could go on for a long time, but each one would show the city to be in a better position than the county.

To summarize, neither Tom Barrett nor Scott Walker should be going around boasting about having a surplus when their respective governments have a lot of work that needs to be done. However, it is undeniable that the City of Milwaukee, under Barrett's leadership, is in a much more fiscally secure place than the Walker-led County, which is in an untenable situation, literally bordering on bankruptcy.


  1. “A study from the Public Policy Forum showed that one of the leading contributions to this deficit is Walker's willful failure to fully meet pension obligations each year.”

    I’m curious, where specifically does the Public Policy Forum report say that one of the leading contributions to the Pension’s unfunded liability is the failure to pay the ARC?

    The report does mention that in 2006, the County funded only 53% of its $52.5 million ARC. Your criticism of the underfunding, with which I agree, begs the question: from where would you have gotten the additional $24.7 million to make the complete payment? More layoffs? Higher taxes? The 2006 adopted budget raised the property tax levy by $6.7 million or 2.9%. An additional $24.7 million, which I highly doubt the County had available under the state cap at the time, would have represented a 13.9% increase. Do you think the Board had the stomach for that? The public?

    Was the underfunding specifically Walker’s choice? Did the Board have an opportunity to address the issue?

    The total underfunding of the pension between 2005 and 2008 was about $48.7 million. The pension fund, sans POBs, is $486.7 million short of its accrued liability. So the underfunding represents about 10% of the problem.

    Again, from where would you have gotten that cumulative $48.7 million? Higher taxes? More service cuts? More layoffs? Reduced employee benefits?

    If the POBs were not issued, how would you suggest filling in that nearly $400 million? That would be a doozy of an ARC in 2011...requiring still higher taxes or service cuts, unless you have other ideas?

    I’d really like to see an answer to that questions.

    As I read the report to which you link, it makes pretty clear that the fund’s performance, the number of retirees and retirements during the period, and the outlandish benefits are the primary causes of the pension fund’s problem. It criticizes the County for not making the full ARC, and rightfully so, but nowhere do I see it calling that failure a “leading contribution”. If it specifically does, I’m sure you’ll be glad to cite the specific reference.


  2. You are correct in that I should have been more specific in my citations. Thank you for calling me on that.

    After the report came out and I had a chance to review it, I had the opportunity of speaking with Rob Henken about the findings. I specifically asked him which was the greater factor, Ament's pension scandal or Walker's desire not to pay the full amount.

    What I had learned is that Ament's pension scandal was the original culprit obviously, but that it was very difficult to put percentages for what item caused the damage currently, especially when one factors in the current severe recession.

    Henken agreed that the bulk of the Ament effect occurred in 2004 when the large number of workers took retirement. (The way the pension deal was worked, 2004 was when the maximum effect of the enhancements took effect.)

    Currently, there are only about 113 or so workers that will still benefit from Ament's misdeeds, one of which is rumored to be eligible for a seven figure lump sum back drop when he retires later this year.

    As for your numbers, which I do not dispute, I would point out that the County failed to pay it up from the time Walker took office. Before that, Ament also did not contribute, but there was no need as that the economy was solid and the pension fiasco had not kicked in.

    That would leave the 2003-2005 budgets that were also short changing the fund. If the county had paid it up then, the exponential increases wouldn't be a factor by the time it got to 2005.

    I forgot where I saw it, but there was a report that if the recession hadn't occurred, or if it hadn't been as deep, the pension plan could have still worked itself out by 2016. I only offer that last note as a point of interest, and not as a defense for the indefensible thing Ament caused. After all, I am ending up paying for that twice. Once as a tax payer, and again as a county worker that is constantly having my job threatened even though I am not eligible for any of the complaints associated with county workers. I do not get the handsome enhancement, the lifetime health coverage or sick time payouts.