tax.com: Really Bad Reporting in Wisconsin: Who ‘Contributes’ to Public Workers’ Pensions? by David Cay Johnston

I’m definitely guilty of getting it wrong. I’m glad that this guy is online, getting—and putting–it right. But, The New York Times I’m not. However, now that I know, I need to put it right. I don’t have the economic knowledge to put this in my own words. Here are his, and here is where you can find the whole article, which you should definitely read. (Emphasis, in bold or underlined, is mine (unless the original author claims it).)

Even though I’m only displaying excerpts, this is a long blog post. If you’re interested enough in Wisconsin’s collective bargaining/Scott Walker to have read this far, you’re probably discussing this matter with at least one other person. Read it to either correct your wrong statements, or to correct their wrong statements. Whichever you prefer.

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.

Among the reports that failed to scrutinize Gov. Walker’ s assertions about state workers’ contributions and thus got it wrong is one by A.G. Sulzberger, the presumed future publisher of The New York Times, who is now a national correspondent. He wrote that the Governor “would raise the amount government workers pay into their pension to 5.8 percent of their pay, from less than 1 percent now.”

Wrong. The workers currently pay 100 percent from their compensation package, but a portion of it is deducted from their paychecks and a portion of it goes directly to the pension plan.

One correct way to describe this is that the governor “wants to further reduce the cash wages that state workers currently take home in their paychecks.” Most state workers already divert 5 percent of their cash wages to the pension plan, an official state website shows.

Gov. Walker says that he wants them to “contribute more” via deductions from their paychecks. But since the workers already contribute 100 percent of the money going to the pension plan the real issue is changing the accounting for this to reduce cash wages.

Once the state has settled on the compensation package for its workers then how the cash flows is merely accounting for how the costs are divvied up. If the workers got higher cash pay and diverted all of the pension contributions from their pay it would be the same amount compared to having the state pay directly into the pension funds.

By falsely describing the situation the governor has sought to create the issue as one of the workers getting a favor. The Club for Growth, in broadcast ads, blatantly lies by saying “state workers haven’t had to sacrifice. They pay next to nothing for their pensions.”

Here are some other examples of inaccurate reporting of the issue, followed by a critique and a simple solution.

  • Todd Richmond of the Associated Press reported on Feb. 20 that the governor wants state workers “to contribute more to health care and pension costs.” Richmond has repeatedly used variations of that phrase.
  • On Feb. 18, Michael Cooper and Katherine Q. Seelye of The New York Times reported that the legislation sponsored by Gov. Walker would “require workers to contribute more to their pension and health care plans.”
  • Jane Ford-Stewart of the Milwaukee Journal-Sentinel’ s on-line community news service reported Feb. 22 on “an effort by Gov. Scott Walker to get state employees to contribute more toward their health insurance and pensions so that the costs are more in line with contributions by workers in the private sector.”
  • Politifact.com has a Wisconsin operation and it was also among those that got it wrong – 100 percent dead wrong — because it assumed the facts as stated by Gov. Walker and failed to question the underlying premise. Further, contrived assumptions make it is easy for the perpetrators of the misrepresentation to point to data that support a false claim, something Politifact missed entirely, on at least two occasions, in proclaiming false statements to be true.

Given how many journalists rely on Politifact to check political assertions, instead of doing their own research, this is, by far, the inaccuracy likely to have the greatest (or most damaging effect) on subsequent reporting. (Examples of Politifact’ s inaccurate assessments can be found here and also here.)
Again, the money the state “contributes” is actually part of the compensation that has been negotiated with state workers in advance so it is their money that they choose to take as pension payments in the future rather than cash wages or other benefits today.

Next, journalists should ask how elected officials are treated by the pension system. The pay of elected leaders is set by the legislature without collective bargaining. Here it is also true that any money withheld from paychecks to fund the pension plans comes from the employee (the elected leaders) but this is not the result of a negotiated compensation package so there is a colorable argument that pension benefits that are received by elected leaders beyond the wages deducted from those employees’ compensation package are a gift from taxpayers.

The payroll deduction –- again, a mere accounting measure – – was 5 percent last year for “general participants,” official state documents show, a rate that is 56 percent higher than the 3.2 percent rate for “elected leaders.”

The rates were adjusted for 2011 and now the elected leaders pay 3.9 percent, still well below what the “general participants” collectively bargained to divert from their cash wages through this accounting device.

The rest of the money going into the plan is also wages the workers diverted, it just does not show up in paychecks as a line item, the same way that half of Social Security and Medicare taxes do not show up on paychecks, but are still part of total compensation to each worker in those plans.

tax.com: Really Bad Reporting in Wisconsin: Who ‘Contributes’ to Public Workers’ Pensions?

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