Wisconsin Press

Rae Ann McNeilly, Executive Director of Taxpayers United for America, was quoted in a story in the Wisconsin Reporter on Milwaukee’s police pensions.
By 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