The Media Isn't Telling You That Wisconsin Public Workers Pay for 100% of Their Pensions and Health-Care
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When it comes to improving public understanding of tax policy, nothing has been more troubling than the deeply flawed coverage of the Wisconsin state employees' fight over collective bargaining.
Economic nonsense is being reported as fact in most of the news reports on the Wisconsin dispute, the product of a breakdown of skepticism among journalists multiplied by their lack of understanding of basic economic principles.
Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to "contribute more" to their pension and health insurance plans.
Accepting Gov. Walker' s assertions as fact, and failing to check, created the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not.
Out of every dollar that funds Wisconsin' s pension and health insurance plans for state workers, 100 cents comes from the state workers.
How can that be? Because the "contributions" consist of money that employees chose to take as deferred wages – as pensions when they retire – rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.
Thus, state workers are not being asked to simply "contribute more" to Wisconsin' s retirement system (or as the argument goes, "pay their fair share" of retirement costs as do employees in Wisconsin' s private sector who still have pensions and health insurance). They are being asked to accept a cut in their salaries so that the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin.
The labor agreements show that the pension plan money is part of the total negotiated compensation. The key phrase, in those agreements I read (emphasis added), is: "The Employer shall contribute on behalf of the employee." This shows that this is just divvying up the total compensation package, so much for cash wages, so much for paid vacations, so much for retirement, etc.
The collective bargaining agreements for prosecutors, cops and scientists are all on-line.
Reporters should sit down, get a cup of coffee and read them. And then they could take what they learn, and what the state website says about fringe benefits, to Gov. Walker and challenge his assumptions.
And they should point out the very first words the state has posted at a web page on careers as a state employee (emphasis added):
- The fringe benefits offered to State of Wisconsin employees are significant, and are a valuable part of an individual's compensation package.
Coverage of the controversy in Wisconsin over unions collective bargaining, and in particular pension plan contributions, contains repeated references to the phrase "contribute more."
The key problem is that journalists are assuming that statements by Gov. Scott Walker have basis in fact. Journalists should never accept the premise of a political statement, but often they do, which explains why so much of our public policy is at odds with well-established principles.
The question journalists should be asking is "who contributes" to the state of Wisconsin' s pension and health care plans.
The fact is that all of the money going into these plans belongs to the workers because it is part of the compensation of the state workers. The fact is that the state workers negotiate their total compensation, which they then divvy up between cash wages, paid vacations, health insurance and, yes, pensions. Since the Wisconsin government workers collectively bargained for their compensation, all of the compensation they have bargained for is part of their pay and thus only the workers contribute to the pension plan. This is an indisputable fact.