Forbes: Taxpayers Don’t Fund Public Pensions (Seriously!)

Kyle Olson
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Posted: Mar 02, 2011 12:01 AM

The fount of business knowledge that is Forbes.com ran a bit dry this weekend when it published a blog by one Rick Ungar in which he made the case that taxpayers don’t actually fund public employee pensions in Wisconsin. Just let that marinate for a moment.

Ungar was attempting to disprove Gov. Scott Walker’s assertion that the state’s pension and health insurance systems for public sector workers are budget-busters that can only be fixed with the budget repair bill and the curtailing of collective bargaining privileges.

(The leading health insurance plan, WEA Trust, for example, is controlled by the state’s largest teachers union, the Wisconsin Education Association Council. But I digress…)

As his ace in the hole, he cites a blog written by “Pulitzer Prize-winning reporter” David Cay Johnston. A Pulitzer – wow – why even waste my time scrutinizing that one?

Writes Ungar:

“The pension plan is the direct result of deferred compensation - money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.”

If this is true – that pensions are simply “deferred compensation” – then why do taxpayers only ever hear about “low” teacher salaries, and not the teachers’ total compensation package? Because that wouldn’t fit the unions’ narrative that school employees are eating dog food and living one step above poverty.

But setting aside Ungar’s flawed logic, a simple perusal of the Milwaukee teachers’ contract reveals that the employee, currently, doesn’t pay anything. Consider page 208 of the 258 teachers’ contract:

Effective July 1, 1996, the Board will pay 6.5 percent of the individual teacher's gross salary to the Wisconsin Retirement System as the employee's share of the pension payment. Effective January 1, 1997, the Board will pay 6.4 percent of the employee's gross salary.

And that’s not all – note that it says employee’s share. That must mean there’s another part of the pension being paid by someone else. Yes, Sherlock is my middle name.

Does Ungar think the Milwaukee Teachers Association is picking up the rest of the pension tab? Or maybe the Lucky Charms leprechaun?

The Wall Street Journal – on the very same day as Unger’s blog – pointed out that not only do taxpayers pay the teachers’ portion of the pension obligation, but the school district pays an additional 6.8 percent. According to the Journal:

“Teachers belong to the Wisconsin state pension plan. That plan requires a 6.8% employer contribution and 6.2% from the employee. However, according to the collective-bargaining agreement in place since 1996, the district pays the employees' share as well, for a total of 13%.” (emphasis added)

Ungar’s argument can’t be taken seriously. It’s absurd to suggest that taxpayers aren’t funding (and ultimately on the hook for) government employee pensions. Clearly we are.

I’m surprised Forbes continues to include Ungar’s blog posted on its site, but I maybe the “Forbes” brand doesn’t mean what it used to.

Speaking of which, I spent all of ten minutes of investigating the issue before I was able to refute Ungar and Johnston’s argument. Dude, where’s my Pulitzer?