State of Wisconsin Department of Employee Trust Funds 2009 Annual Report is available at this site:
http://etf.wi.gov/about/2009_cafr.pdf
It pays to read the facts before you put your turtle in the race.
The number of employees, and annual earnings were as follows at the time this report was prepared:
Number of employees Average Earnings
General | 140,303 | $35,722 |
Teachers | 102,519 | $50,631 |
Elected Officials/Judges/Execs | 1,453 | $64,686 |
Protective/with Social Security | 20,279 | $51,520 |
Protective w/o Social Security | 2,740 | $63,975 |
Total | 267,293 | $43,107 |
Retirees | 150,671 | |
Inactives | 148,353 | |
Total | 566,317 |
1) Contribution rates in effect during 2009 by employment category were:
Employer*
Cur Prior Employee
Elected Officials, State Executive Retirement Plan 8.5% 0.0% 3.0%
Protective Occupation with Social Security 8.1 .1 5.0
Protective Occupation without Social Security 10.6 0.3 3.2
General and Teachers 4.5 0.2 5.0
* The employer prior service contribution rate is a weighted average of individual employer rates
Certainly the rates of pay are not unreasonable.
2) The assumed investment rate of return is 7.8%
3) The retirement age is 57 with 30 years of service for non- protective jobs and 53 years with 25 years of service for protective jobs.
4) The plan was 88% funded, and 12% unfunded as of 12/31/09. The fair value-based funded ratio for the WRS increased from 76.5% funded to 88.2% funded.
This increase was the result of the investment gains in 2009.
5) The fund’s investments lost $22,744,110,000 in 2008 due primarily to the sub-prime loan fraud.
2009 revenues reported on age number 96:
In 2009 ($000) ($000)
Employee contribution (5.8% of payroll) 736,689
Employer contributions (5.6% of payroll) 705,997
Investment Income 13,024,986
Other income 1,117
Total 14,468,790
My conclusion on this review is that the subprime loan fraud did severe damage to almost every State pension portfolio in 2008. This fund like most other State Pension Funds has yet to recover completely from the subprime loan debt torpedo. The math is brutal. When you lose 50% you need to gain 100% to recover. People talk about the unfunded portions of State Pension Plans, and it is in reality a discussion of the impact of the Subprime loan fraud.
This fraud was originated, orchestrated, and enabled by the Federal Government.
The subprime loan fraud originated in the 1960’s in response to the social unrest at that time. Major parts of Chicago, Detroit and Los Angeles were set on fire. Conditions were not unlike the social unrest we are now witnessing in the Mid-East.
Most of the areas of the USA that were destroyed were never rebuilt. The Johnson Administration and local politicians like Mayor Richard J. Daley of Chicago caved. President Johnson offered FHA and VA financing for anyone looking for homes. Mayor Daley allowed teams of realtors to go door to door to bully, intimidate, manipulate and extort homes from the civil-servant class people on the south side of Chicago (except for the sacred cow ward of Bridgeport, which is where he lived.) This practice was later called “block busting” and is now illegal. I refer to this as the birth of BIME socialism (Bully, Intimidate, Manipulate, and Extort). http://en.wikipedia.org/wiki/Blockbusting
After passing the Civil Rights Act of 1968 (commonly known as the Fair Housing Act) http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1968
President Johnson did a masterful job of making the debt and bad debts disappear. He converted Fannie Mae and Freddie Mac into quasi-governmental institutions to remove the debt from the books of the Federal government. http://en.wikipedia.org/wiki/Fannie_mae. At this point in 1968 Fannie and Freddie became publicly traded companies.
Bankers unloaded the risk from mortgages on Freddie Mac and Fannie Mae.
Other politicians fed the problem. For example:
President Carter gave us the Community Reinvestment Act of 1978. This, coupled with the Fair Housing Act, placed the subprime loan program on steroids. http://en.wikipedia.org/wiki/Community_Reinvestment_Act
In 1999 President Clinton signed into law the Gramm-Leach-Bliley Act, a bank deregulation bill that repealed a Depression era law known as Glass-Stegal. http://en.wikipedia.org/wiki/President_Clinton.
This allowed commercial banks, investment banks, security firms, and insurance companies to consolidate. Stock Brokers masqueraded as bankers. They sliced, diced and bundled these mortgages for sale to the public.
By the time the subprime debt torpedo hit, about 40 years later, millions participated in the fraud including BANKERS, REALTORS, CONTRACTORS, INVESTMENT BANKERS, and STOCKBROKERS AND FINALLY THE PERSON APPLYING FOR THE LOAN. NIJA loans were a joke (no income, job or assets) you get a mortgage.
Now the joke is over. Pension plans may never recover from the losses. In the private sector people accepted the losses and the consequences. Public sector employees are not willing to accept the losses and, based on union contracts; expect taxpayers to pay for these losses as well as the losses they experienced in their private portfolios, 401ks and IRAs.
After the birth of BIME socialism the attitude of entitlement thinking continued in the union movement. Emboldened by the success in the subprime loan fraud, union members gained control of the Democratic Party. They are the primary financial sponsors of these union puppet politicians. The puppets sit on the taxpayer side of the negotiating table. They never saw a contract presented by the union that they would not sign. As a result public sector employees have received better compensation packages than employees in the private sector.
Now the financial well is running dry in most states. As a result union members may be losing their collective bargaining rights. If this happens the liberals in the Democratic Party will lose their source of campaign financing— Union PAC money. Since liberal Democrats introduced, originated, orchestrated and enabled the sub-prime loan fraud, it will be poetic justice when their union funding disappears.
I only have two suggestions for resolution of the Wisconsin situation:
1) Increase the retirement age from 57 to 67 to reduce the life expectancy for paying pensions from about 30 years to about 20 years.
2) Replace the defined benefit pension plans with defined contribution programs.
