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By Dominique Paul Noth
This all came about in May after the board's chairman, Jeremiah Hegarty, testified as an informational witness for a federal grand jury investigating the pension decisions. Hegarty had also heard Wisconsin Atty. Gen. Jim Doyle suggest that the lump-sum pension benefit may have been adopted unlawfully, and he also was told of the flood of requests to the pension office for retirement information. So Hegarty speculated aloud that maybe the board should freeze pension payouts. Then, acting without proper notice to the public or to District Council 48, and without advice from a county attorney, Hegarty brought the issue before the full pension board. And at that meeting he received advice from two private law firms, Foley & Lardner and Reinhart Boerner Van Deuren, that there probably was a method to freeze the payments. Just bringing the issue up in this manner caused outrage. Even the new county executive, Scott Walker, called the action ill-advised. The deputy corporation counsel said any vote would probably violate the open meeting laws. And speaking for District Council 48, policy director Patty Yunk berated the board for its failure to notify the union and pointed out that all this was just spreading further hysteria among workers. "This is a negotiated benefit, " said Yunk. "You can't just pre-empt a contract. "
Davis quickly agreed and issued the order. Davis pointed out to the county's lawyers that the union contract must be presumed to be legal and be carried out as agreed to. He also said any freeze would mean individual retirees could suffer greatly by being blocked from payments they had planned their finances on. A further hearing won't take place probably until August and that will be before Thomas Gallagher, the judge handling the civil suit over the pension. AFSCME's lawyers want a longer-lasting order from him, an injunction against county tampering with pension benefits before he makes any legal determinations. It was a shame in the long view that the pension board was suddenly a part of the issue of benefits, since to this point its activities actually represent one of the great success stories in Wisconsin government. Its job has been to build the pension fund and oversee its administration. In that role, it has proved adept and successful. Changing financial managers as needed, monitoring investments carefully, sometimes gaining a 13% return but always ahead of the game, it had a great decade. From $761 million in 1991, the fund grew to $1.7 billion by 2001, virtually doubling in size and relieving taxpayers of the responsibility of large investments to keep it healthy. Requests from the property tax to contribute annually to the fund shrunk from $19.3 million in 1991 to $ 2.8 million in 1999 to absolutely nothing in 2001. Jac Amerell, the highly regarded manager of the pension retirement system and secretary to the pension board, has also pointed to a study a few years ago by the Wisconsin Legislative Audit Bureau. It credited Milwaukee County's pension with the highest return and least administrative expense of any of the state's pension systems. Success breeds temptation, though, and the runaway growth of the pension fund, plus the realization that payouts from so strong a fund would not impact the property tax directly or immediately, led to general acceptance at the county of the pension enhancement concept. Using sweetened calculations of pension payouts for years spent in service past first opportunity of retirement, combined with the "drop back" lump sum option, was perceived as a way to give workers something for the future, keep them in service longer and get them to accept lower wage increases and higher contributions to health coverage. Had these enhancements excluded elected officials and imposed limits and yearly caps on high-paid veteran employees, the uproar would probably never have occurred and the gains of the pension fund would have been more clearly understood and probably universally applauded. Had the supervisors done the same homework on actuarial details that AFSCME did before agreeing to a contract, the taxpayers probably wouldn't be facing such a large financial outlay in the costs of litigation, special elections and the like - now combined with the need to contribute again to keep the pension fund successful. The courts have yet to determine whether any criminal activity occurred. The Pension Board, however, must now cope with the aftermath of the community outrage, the scramble of elected officials to look belatedly in control and the continued public confusion about just what this fund is, does and what it will cost and why. The realities have not been widely or clearly reported. For instance, the main issue for the taxpayers is not the lump-sum payouts, according to Amerell, who has been fielding all the calls for information and trying to explain a complicated process to the uninitiated. The main cost to the taxpayers is simply because the economy went south and the high returns the fund had enjoyed shrunk. The board to fulfill its fiduciary obligation to keep the fund strong is now poised to request $20 million to $28 million from the taxpayers to keep it healthy. Amerell points out that 80% of that, by current figures, can be blamed on the lower investment returns and would have happened in any event, and only 20% or so is related to the influx of early retirements and payouts. But obviously, if the actions of the new administration and the supervisors, not to mention the courts, create new waves of panic, a new run on the bank as it were, such estimates could change. It's a further irony, commented several lawyers involved in the case, that the idea of the pension enhancements was to keep people working longer for better rewards but that the fear of losing something promised has suddenly changed the game to more retirements than anyone expected. "We knew under the original plan that there would be a heavy wave of retirements in 2004, the last year of the union contract, " said Amerell. "We did not know we would be handling so many requests in 2002. " Most have been from non-union employees and may actually reflect higher-paid county employees and hence more considerable payouts. Amerell also notes that way back in 2000 when this was all approved, his office explained the "drop back" procedure to anyone who asked, including the media. "I remember one young reporter from the Milwaukee Journal Sentinel I explained it, too, and I don't think it was understood, certainly wasn't written about, " Amerell recalled. "I think it's certainly true that the fund has been in such good shape that no one in the community or in the media was worried about it then. " The civil lawsuit plaintiffs contend that the current situation is drawing down dangerously a once healthy pension fund, though that view is disputed. The plaintiffs also attack the idea that lump-sum payouts are actually good for the fund because they reduce the amount of monthly pensions dispersed. The plaintiffs argue that the lump-sum payouts lower the amount of money available for investment. Others argue that lower monthly pension amounts give the fund an easier road in planning and recovery. Amerell and others point out that right now the fund remains very healthy. The request for taxpayer contribution aims to keep it so. Technically, the fund has grown so large that even $17 million or $27 million in retirement payouts wouldn't badly dent its one and a half billion dollar strength. There have even been observers who say the fund is strong enough to just absorb the current influx of payouts and not even ask the taxpayers to contribute. Amerell doesn't agree. "Pension boards have been sued for less things than that, " he said. "We have a fiduciary obligation to maintain the strength of the fund as we analyze the figures. "Besides, it is just such a sense of someone playing with the fund for advantage that got us into all this trouble in the first place. The laws are strong that allow us to keep people from tampering with this money. Do we really want to open this fund up to political expediency? "
Earlier Story-- February 2002 in County Pension Uproar January turned into pension month for Milwaukee County. There seemed nothing else to talk about, to get angry about, to be embarrassed about, to try and explain. Suddenly people who had never heard of actuary tables, or thought "dropback" was something a quarterback did, were debating calculations and arguing pension regulations as if they had degrees in accounting. They may have also gained a new respect for the sort of details that daily plague union bargainers and the sort of questions these negotiators know to ask - while elected officials apparently don't. If you can find a measure of amusement in events that stirred such outrage, consider these factors: It was clear from news reports that union leaders were sharper - and more forthcoming - than elected officials in realizing what a cushy deal the pension was for the highest paid folks in the county system. Another point of amusement was the sudden protests of ignorance and outrage by elected officials. Karen Ordinans, chairman of the County Board, is a former labor negotiator (with Council 48), yet she was quick to say she hadn't comprehended the amount of money involved in lump sum payouts. She also forgot the rules of the union road when she sent a letter January 11 to all county employees painting the County Board as the only place where potential pension changes would be debated and made. Such a letter, which Ordinans described as trying to reassure workers that the county would take no precipitous action, actually seemed to propel workers to flood the pension office with inquiries on early retirement. The letter forced District Council 48 to defend its rights by filing a Prohibited Practice complaint with the state. The letter, the Council said, is a direct violation of Wisconsin Statute 111.70, which prohibits an employer to communicate directly to represented employees (rather than through the legally recognized exclusive bargaining agent) on wages, hours and working conditions. Council 48 is that bargaining agent for the preponderance of county union employees, and pensions are delayed compensation.
The letter did echo a familiar pattern at the County Board of action and then denial of understanding the consequences - W-2, child welfare, you name it. Now, faced with public anger over backdrop provisions that could make millionaires out of County Executive Tom Ament and other top officials, many supervisors say they didn't understand what they had approved. Ament also said he did not ask the right questions and had now lost faith in those officials who fashioned the pension because, he claimed, they failed to fully inform him of the potential windfalls. He asked and got the resignations of county personnel chief Gary Dobbert and labor negotiator Henry Zielinski and pursued the departure of Corporation Counsel Robert Ott. Ament's chief of staff, Thomas Mollan, also resigned. (County insiders, off the record, have varying views of Ament's culpability. Said one, "It's hard to believe that a shrewd politician wouldn't ask the first self-serving question, 'What will this look like to the public?' " Said another, "He didn't dig hard about actual payout numbers because he was sure the real issue in re-election would be keeping the property tax down. He thought doing that would keep him in office until at least 2008, so why worry about your own retirement numbers now? ") How this will all conclude, or if it will conclude, is unclear as we continue be drowned in recall petitions, media speculation, investigations, and scrambles for early retirement. It is also likely that the press will now poke into every nook and cranny of county cronyism. Because of their contracts, union members can rely on provisions laid out ahead until December 21, 2004. But the turmoil, the departures of management types, the future of all the elected officials whose reputations have suffered - all that is inevitably going to impact the image, size, scope and services of the county workforce for a long time to come. It may be almost three years until the next contract, but the pension issue is going to hover over discussions and decisions from now on, which is why Council 48 leaders are compelled to start thinking today about the future. There has been an unseemly quality to it all. There is no question that the outrage in the community stems from the feeling that "somebody tried to pull a fast one, " that government officials tried to put their hands in the public's wallet. What makes the term "scandal" strange, though, is that it took place in full view. The facts were there, the numbers could have been run since the fall of 2000, but the outcry took a year to develop. Independent journalist Bruce Murphy did a story on his website and then a follow-up for Milwaukee magazine. That triggered television and newspaper coverage that swept the news through the community. Many things kept the story kicking beside the media. Timing, for instance. Our national economy is in trouble, so suddenly the optimism and tolerance about our own household spending, much less the way governments spend and tax, have evaporated. Then there is the magic threshold our culture affixes to a "million dollar number, " be it quiz shows, reality shows or the biggest survivor show of them all - paying taxes. Millionaires? On a county payroll? The fury did not subside even when recalculations emerged, due to a belated awareness that IRS rules limit lump sum payments balanced against continuing monthly pension payments. Those lesser amounts still looked mighty rich for Ament and company and the recalculations made people wonder how those who fashioned the pension plan could have been so dumb as to not know the IRS rules in the first place - because if they had know they would have leapt forward with that explanation.. Also keeping the stories alive was an endless round of recriminations, political maneuvering and finger-pointing. Despite what they kept saying about getting together to solve the actual problem and the image thing, elected officials were clearly scrambling to pass the buck. All this was understandably embarrassing to county union workers. Many members of our locals - in fact, many members of any public service union, whether they worked for the county or not - described how difficult it was to explain their actual economic situation to sarcastic neighbors. Anyone who has worked at the county long enough to be vested in the pension knows full well what sacrifices the union has made to keep services going and the tax burden down. The enhanced pension system does not at this point add to the tax base, because the fund has been well managed and grown mightily. And pension money can be used only for pensions. A genuine part of the county's strategy, whatever you think of the motives of those at the top, was to offer retirement improvements to hold off increases in taxes. The pension became a way to sell raising the employee share of medical benefits and getting acceptance of wage caps. The pension plan was more than the union had expected the county to offer - it has been passed for non-represented employees before it was offered to any bargaining unit - and it reflected a real gain the county can't take away for long-term union employees, who have suffered in an environment where services have been eliminated and the workforce has shrunk. These union workers have also been pressed regularly to give up benefits and take wage hits to keep taxes down. At the county, employees in earlier contracts were not vested in the pension until 10 years of service, which is a significantly longer time frame than in many private industries. Moreover, there is nothing but the pension as retirement benefit for county employees - no profit sharing, stock options, or employer-matched 401K type plans. So the unions did indeed welcome the pension plan for its members, whose pay averages $15 an hour. It doesn't take much work with a calculator to figure out that what's reasonably good for them can escalate to the outrageous when applied to high-salaried administrators.
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© 2002 AFSCME District Council 48 Your e-mail feedback welcome!
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