Rae Ann McNeilly, Executive Director of Taxpayers United for America, was quoted in a story in the Wisconsin Reporter on Milwaukee’s police pensions.
B
y M.D. Kittle | Wisconsin Reporter
MADISON – Fewer cops, fatter pensions.
That appears to be the scenario playing out in Milwaukee and cities nationwide, a point Milwaukee Mayor Tom Barrett seemed to acknowledge this week on CNN’s Piers Morgan Tonight.
Perhaps lost in Tuesday night’s verbal gunfight between the ever-acerbic and anti-gun Morgan, Milwaukee County Sheriff David Clarke, and Barrett was the mayor’s contention that the city has to take police off the street in order to help meet a nearly $30 million contribution to their pension fund.
“We have three furlough days so that we can make a pension payment of $29 million for our police and have no layoffs,” Barrett said on Tuesday’s show.
The assertion isn’t quite true, and it’s certainly misleading, according to Barrett’s own budget chief. Mark Nicolini told Wisconsin Reporter the three furlough days for each of some 1,500 police officers, would save the fiscally constricted city of Milwaukee just $1.5 million.
“I don’t know if the mayor would want to link the $1.5 million to the pension contribution as an overall way to deal with” the pension payment, said Nicolini. Milwaukee has done a lot of things to rein in the operating budget, he noted, including tapping into the pension reserve fund.
But Barrett seems to echo the sentiments of mayors in many of 61 key cities buried under nearly $100 billion in unfunded pension liabilities, according to a new analysis by the Pew Center on the States. The report found that combined funding was 26 percent below the minimum needed to pay all pension obligations. That may be just the tip of the avalanche: the study draws on 2009 data.
Tuesday night’s heated debate on Morgan’s show focused on Clarke’s controversial public service announcement in which the sheriff advises Milwaukee County citizens to arm themselves in the event police do not – or cannot – respond quickly.
“You can beg for mercy from a violent criminal, hide under the bed, or you can fight back; but are you prepared? Consider taking a certified safety course in handling a firearm so you can defend yourself until we get there. You have a duty to protect yourself and your family,” Clarke states in the ad.
Fiscal fire
The sheriff has taken plenty of heat from gun-control advocates and those who describe Clarke’s message as tantamount to endorsing vigilante justice. Morgan, too, badgered Clarke on the show, shrugging off the sheriff’s assertion that an individual protecting herself is a personal decision.
“It’s not a personal choice when a sheriff in Milwaukee makes an advertisement directly telling the people in Milwaukee to go arm themselves. That becomes a law enforcement mission statement,” Morgan railed.
Missed in the debate is an equally stark truth: the trade-off between unaffordable pension systems and keeping cops on the street.
“With officers laid-off and furloughed, simply calling 911 and waiting is no longer your best option,” the sheriff says in the ad.
Milwaukee County laid off 42 officers last year, on top of what Clarke contends is a law enforcement roster shortage of about 200 officers.
The county and the city, like communities across the United States, have faced budget cuts in times of declining revenues and unsustainable expenses. Among the latter, increasing pension obligations top the list.
On Thursday, the city must make its 2013 pension plan payment of $60.7 million, Nicolini said. The brunt of the payment, $59.3 million, goes to general city operation employee pensions, and more than half of that, $29.95 million is marked for the police pension.
“It’s a large element, not only of our operating budget but for our pension benefits,” Nicolini said of the city’s law enforcement pension obligations. Every 23 cents of every dollar paid in sworn-police pensions goes to pay for the defined pension benefit, the budget director said.
Rae Ann McNeilly, executivedirector for public pension reform advocates Taxpayers United of America, said Milwaukee’s police furloughs to help pay for pensions is a perfect illustration of a response to ballooning pension obligations nationwide.
“We’re leveraging services we need today to pay the bill for services that were performed yesterday,” and leaving citizens in danger, McNeilly said.
The Chicago-based nonprofit fought against Illinois’ 67 percent income tax increase that was supposed to cover a mountain of delinquent bills to state vendors.
“Here we are a year and a half later and the vendors still are not being paid, but the pensions are being paid,” McNeilly said. Communities in many places are doing what Milwaukee, so far, has not had to do: layoff police and firefighters. Teachers, too, are losing jobs, in part to pay for teacher pensions.
Michael Crivello, president of the 1,700 member Milwaukee Police Association, counters that the pension is money owed by the city, bargained for in good faith over the years. He’s right. The City Council and Milwaukee’s present and past mayors made those deals – as unsustainable as they may be – with the city employee unions over the years.
Crivello, fighting for more cops on the street, said Milwaukee is “absolutely less safe” in a furlough program that would cut as many as 48,000 police man hours this year.
“It’s common sense that the less police coverage you have the more the opportunity a bad situation might fall upon you,” the union chief said. “Not only the community but the officers themselves will be less safe.”
Nicolini said the furlough days effectively are unpaid vacation days, and will be scheduled accordingly. More-than-minimum staffing requirements will be met, he said.
More officers on the street, though, comes with the added legacy costs.
The highest paid Milwaukee city employee in 2010 was Kenneth Grams, a police lieutenant who earned total pay of $174,154, according to a salary and pension analysis by Taxpayers United of America. Based on the organization’s estimates (the state does not release individual pension data), Grams’ total pension payout was calculated at $2.92 million, in accordance with IRS life expectancy table. Several police administrators make the top 100 list of highest paid city employees, taking home $130,000 or better, with pension payouts projected at $2.3 million or more.
Critics dispute the figures, arguing that standard pay is much lower for rank and file patrol officers. But deals bolstering pension payouts over the years have weighted down public retirement funds.
“The fact that any public servant can be making multi-millions not to work while we need to pay someone to do that work is insane. It’s unsustainable,” McNeilly said.
Milwaukee’s public pension plan ranks among the best in the nation, according to Pew and city officials.
The Milwaukee Employes’ Retirement System, was 113 percent funded in 2009, based on pension industry valuations. ERS is about 96 percent funded today, with about $4.4 billion in assets, according to the city. Moody’s ranked it in the top 5 percent of public pension funds last year.
Big deal, says Andrew Biggs, public pension expert at the American Enterprise Institute, a Washington, D.C.-based free market think tank.
Milwaukee’s public pension system relies on investment projections — called the discount rate — that are more optimistic than most plans, at 8.25 percent. Biggs said the higher risk makes the plan look better today, requiring smaller contributions. Any gap in funding will land on the backs of future taxpayers. He joins a chorus of critics who assert public pensions need to bring their return assumptions more in line with the private sector in order to stave off looming financial disaster.
Biggs begs an important question.
“If you’re so well-funded, why are you having furloughs to pay for your pension?”
Contact Kittle at mkittle@wisconsinreporter.com
Jim Tobin, President of Taxpayers United for America, was quoted in the Chicago Tribune on turning the Elgin-O’Hare into a tollway.
The federal government has signed off on an agreement allowing the Elgin-O’Hare Expressway to be converted into a tollway, officials said this week.
The decision will give the Illinois Tollway the authority to include the 20-year-old highway in its Elgin-O’Hare Western Access Project, according to officials in Washington, D.C., and Illinois.
The $3.4 billion project calls for building a tollway running along the western border of O’Hare International Airport. The tollway will link the Jane Addams Memorial Tollway (I-90) and the Tri-State Tollway (I-294).
This “bypass” tollway will connect with the existing Elgin-O’Hare Expressway, which will be widened and extended east along Thorndale Avenue. The decision by the U.S. Transportation Department allows tolls to be charged.
In addition to federal approval, the tollway agency said it also needs approval from the state and is working on a General Assembly joint resolution to include the Elgin-O’Hare plan.
The U.S. has the authority to make the Elgin-O’Hare eligible to be a tollway under terms of the transportation bill that President Barack Obama signed into law in July, said a spokesman for Transportation Secretary Ray LaHood.
“I am pleased that we found a solution, so that when built, this project can provide mobility for the people of Illinois for generations to come,” LaHood said in a statement.
The decision was hailed by U.S. Sen. Dick Durbin and Rep. Tammy Duckworth, who represents the area, as well as Gov. Pat Quinn and tollway Executive Director Kristi Lafleur.
The 12.5-mile Elgin-O’Hare was built in 1993 for $220 million. Despite its name, it connects neither Elgin nor O’Hare. It runs between U.S. Highway 20 (Lake Street) near Hanover Park and Interstate 290 in Itasca.
Backed by an advisory council’s report, Quinn in 2011 called for the project to be built to help stimulate the regional economy and potentially create thousands of jobs. At Quinn’s urging, the tollway authority later adopted the project.
But the move to turn the expressway into a toll road has stirred some critics.
James Tobin, president of Taxpayers United of America, called the plan an example of “empire-building” on the part of tollway officials.
“The road already exists as freeway,” Tobin said. “The tollway was set up to build new roads. … It’s a new revenue source and allows them to line their pockets, get pay raises and retire in pension glory.”
Tobin’s group took the tollway to court last year in an unsuccessful challenge of the near-doubling of tolls to pay for the agency’s $12.1 billion rebuilding program, called Move Illinois. The Elgin-O’Hare project is the centerpiece of that effort.
The new Elgin-O’Hare is expected to take 12 years to complete. To begin work, the tollway plans to spend $95.6 million this year. Potential construction includes noise walls along the existing Elgin-O’Hare, a Rohlwing Road (Illinois Route 53) grade separation and the construction of a new bridge to carry southbound Elmhurst Road traffic over I-90.
As part of the project, the tollway plans to build a $30 million ramp via York Road to access O’Hare property.
There are, however, no plans to construct a western terminal, as once hoped, because of the lack of an agreement between the city of Chicago and the major airlines at O’Hare, led by United and American.
The tollway authority, meanwhile, announced that 10 financial firms will be the underwriters for the first $1 billion in bonds for Move Illinois. An additional 10 firms will underwrite $500 million in refinanced existing debt.
The underwriting fee will not exceed $2.50 per $1,000 worth of bonds, tollway finance chief Michael Colsch said.
Tollway officials also announced Thursday a proposal to give motorists a total of three months instead of two to respond to toll violation notices.
Officials said the plan would be fairer to customers and is in line with toll agencies in other states. The proposal will need further approval, however.
The tollway board also approved a $1 million contract with Gilbane Building Co., of Chicago, to review construction practices and work that has been performed, officials said.
Findings from TUA’s pension project on Dekalb, Illinois, are featured in this story from the Daily Chronicle. To see video of the story, click on the image below.
DeKALB – Jim Tobin says the state’s pension system will collapse unless it switches from a defined-benefit system to a defined-contribution, 401(k)-type system, similar to what many private-sector workers have.
The president of Taxpayers United of America, who spoke Wednesday in DeKalb, said the current pension system was helping to make a number of DeKalb County retirees into multimillionaires.
A 2011 investigation by the Daily Chronicle showed 101 people who had retired since 2000 and worked at a public agency in DeKalb County collected six-figure pensions annually.
“Illinois’ government bureaucrats have been feeding off taxpayers in DeKalb and all across the state for the last 30 years, receiving gold-plated pension benefits in return for the votes they give politicians,” Tobin said.
Several proposals have been made to address the shortfall in the state pension system, but state legislators have yet to make sweeping changes.
Ideas have included shifting the burden of teachers’ pensions from the state to local school districts, as is the case for Chicago Public Schools. Reducing the amount of pension payouts to which an annual cost-of-living adjustment applies has been proposed, along with increasing the retirement age for workers and increasing the amount employees must contribute to the pension system.
However, any changes that effect those already receiving benefits likely will be challenged in court.
Not everyone agrees with Tobin’s portrayal of retirees. Cathy Hill, president of the DeKalb County Retired Teachers Association, said it’s a disservice to assume every teacher receives a lucrative pension payout.
“We just don’t make that much,” Hill said. “All we want is what we were promised.”
Tobin and Taxpayers United want to change the promises in the state’s pension system. They want to raise the retirement age to 67, increase employee contributions by 10 percent, increase health care contributions by 50 percent, eliminate all cost-of-living adjustments and switch to a defined contribution system.
“They can still get their million-dollar pension payouts,” Tobin said. “We’re not cutting their pension payouts. They are just paying a little bit more. Instead of paying 3 percent or 6 percent, they’d be paying 10 percent or 12 percent.”
The group also wants to eliminate pensions for new hires and replace them with a 401(k)-style account.
Despite repeated calls for action on pensions, the 97th General Assembly adjourned without addressing the problem. This led to Fitch Ratings downgrading the state’s financial outlook from stable to negative earlier this month.
Using a Freedom of Information Act request, Tobin compiled a list of the top 100 pension earners at Northern Illinois University and local school districts, respectively. He also compiled a list of the top 20 pension earners at the city of DeKalb and the top 25 in the DeKalb County government. The lists can be found online at www.TaxpayersUnitedOfAmerica.org.
The lists include a retiree’s employer, their annual pension, how much they contributed to it and their age at retirement. Tobin and his staff created the list making the assumption of a cost-of-living adjustment of 3 percent compounded annually, and that a retiree lives to be 85 years old.
By Tobin’s count, some of the teachers and other government retirees will have collected millions of dollars. Kevin Hickey, who retired as deputy sheriff of DeKalb County in 2010, tops the county list, collecting a lifetime pension payout of more than $5 million by the time he’s 85.
“I don’t think any of these people are deserving of what they are receiving,” said Tobin, who later described the payouts as immoral. “These people are receiving million-dollar pension payouts. It’s ridiculous. It’s absurd.”
Dave Urbanek, the public information officer for the state’s Teachers’ Retirement System, said teachers outside of Chicago must contribute 9.4 percent of their salary to their pension, although some school districts pay a portion of that requirement under union contracts.
Increasing the contribution requirement would mean less take-home pay, he added.
“You have to weigh the current needs of the teacher versus their retirement needs,” Urbanek said.
Urbanek said the average teacher pension is $48,000, and that if it were extended over time, it would be $960,000. But it’s not that simple.
“The money is not put in somebody’s mattress. It’s spent … all over,” Urbanek said. “To say people are getting rich on pensions is simply not correct.”
Top local pension earners
Name last job annual pension contribution age at retirement amount collected
Joel Milner NIU research professor $261,396 $429,142 63 $1,341,262
Robert Hammon School District 427 superintendent $145,925 $149,037 58 $954,285
Kevin Hickey DeKalb County deputy sheriff $109,864 $129,874 56 $258,493
Kim Williams City of DeKalb information and technology director $94,671 $85,137 56 $238,526
