Monday, December 24, 2012

What They Call Saving Money I Don't Understand

In 2000, then Milwaukee County Executive Tom Ament and his administration were able to ram through a scandalous pension plan.  The plan, which was done on the pretense of retaining more senior workers and their institutional knowledge.

What is really was meant to due was enrich the pockets of Ament and his crew, who were planning on serving their last term in office and then cashing in on their retirement.  Ament was never able to cash in after all due to being forced to resign in the face of a recall.

It should be noted that the recall also took down many good county supervisors, even though later evidence would show that they were duped into thinking that it did not have the economic impact that it did.

(It should also be noted that the pension plan would have not had the problems it did if it weren't for the stock market crashing during the Bush/Cheney administration.  But that's not something the media, who loves to sensationalize the news, wanted the public to know.)

There were many factors to the pension scandal, but the two largest ones were a very generous pension enhancer for people hired before 1992 and the installation of an overly lucrative backdrop calculator.

The pension enhancer reached maturity in 2004, which led to a large exodus of county workers who only stuck around to cash in on this benefit.

The backdrop created the greatest furor with some county employees taking as much as a million dollars in their lump sum payments.  (Another thing the media doesn't like to mention is that most of these lucrative pay outs went to non-union workers.  That means Scott Walker and Chris Abele could have done something to stem this flood at any time, but chose not to for reasons known only to themselves.)

The county has looked and looked again at ways of dealing with the backdrop issue, with the legal opinions always coming back to the fact that the pension drop, whether they agree with it or not, is a vested property right and could not be taken away from existing workers, only future ones.

In 2006, the county passed a law that excluded anyone hired in 2006 or later from receiving this benefit.

Now enter Chris Abele, current county executive.

Abele was determined that he was going to do what couldn't be done and searched high and low until he found a law firm that would tell him what he wanted to hear. He got someone to say that there is a way to circumvent this where they can put a stop to future earnings.

This past Thursday, the Milwaukee County Board voted 15-3 in favor of capping the backdrop payments.

Supervisor Theo Lipscomb, who authored the resolution, had this to say on the vote:
Milwaukee County Supervisor Theodore Lipscomb, Sr., said today he is thankful the Board has done right by taxpayers by passing the resolution to “Cap the Backdrop,” which has a $15 million present value to the pension fund.

“I thank the Pension Study Committee for addressing this issue at its meeting last week,” said Supervisor Lipscomb. “Today, the Board’s action sends a strong message to taxpayers, who deserve trustworthy leadership and smart stewardship of shared resources.”

The vote in favor of reform was strong, with more than two-thirds approving the resolution (15–3).

The proposal authored by Supervisor Lipscomb does not take away any pension benefits already earned but does limit future accrual of the backdrop.

Supervisor Lipscomb first introduced his proposal in the fall of 2010 through a budget amendment, seeking further legal and actuarial analysis of the strategies to limit the pension backdrop.

Today’s action is the latest in a series of major changes adopted by the County Board to strengthen the pension fund and to save money.
Likewise, Supervisor Deanna Alexander, who doesn't know where her district is but does know where the Chick-Fil-A is, had this to say:
Milwaukee County Supervisor Deanna Alexander is applauding the Board for its passage of the “Cap the Backdrop” resolution, which stands to save taxpayers $1 million in pension contributions in 2013 alone and more than $15 million overall.

“This policy change successfully balances several goals: protecting a valuable employee benefit, saving the Milwaukee County pension system from bankruptcy and remaining cognizant of cash-flow in County operations to help ensure we continue to provide essential services,” said Supervisor Alexander.

The proposal authored by Supervisor Lipscomb and co-sponsored by Supervisor Alexander limits future accrual of the backdrop, which is an employee’s option for a cash payout of their pension immediately upon retirement, but does not take away any pension benefits already earned.

Supervisor Lipscomb first introduced his proposal in the fall of 2010 through a budget amendment, seeking further legal and actuarial analysis of the strategies to limit the pension backdrop.

The current resolution was laid-over several times in the Finance, Personnel and Audit Committee and went before the Pension Study Committee last week. By ordinance, the Committee must issue a report before the County Board can enact changes to the pension system.
Chris Abele, who is still smarting from learning that becoming county executive does not make him omnipotent, couldn't even enjoy the news without getting whiny:
"I'm frankly embarrassed that it's taken so long," Abele said.

Delays by the board in advancing the measure over the past several months were attributed to a need for additional study - unnecessary "for something that's so freakin' obvious," Abele said.

It took the board much less time to increase property taxes through changes to his 2013 budget, the county executive said.

"It seems like there are some decisions that get made awfully quickly and others that apparently take ridiculous amounts of time," he said.
Now, I can support about saving taxpayer money, but I wonder if this is actually going to do that or if this is just a lot of expensive political posturing, like we saw and still see from Scott Walker.

When the county dropped the pension multiplier from 2% to 1.6%, they used the same argument that it did not take away existing benefits and only altered future earnings.

The nurses union sued the county on this and won. The county had recently decided to appeal this ruling, against the legal advise they were given. Despite the appeal, I know that the other unions have either already filed their suits or about to.

I would suspect that the action the county has taken will end up with the same results. I know that the union will be suing the county on this one as well.

Given the history of these sorts of cases, I think it was awfully premature for our elected leaders to be making such rash claims.

There is a strong likelihood that the county will still be on the hook for that $15 million "saving," plus interest, plus legal costs.

If Abele and the county board were really interested in saving money instead of just showboating and grandstanding, they would take advantage of the demise of Act 10 and return to the bargaining table. I'm sure that both sides have much they're willing to give up for what they want.

The problem is that Abele has no interest in saving taxpayer money, but in trying to dismantle the county, no matter what it cost the taxpayers. He will try to drag out the inevitable lawsuit until it gets to point of breaking the county.

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