Sudden Retirements Wreak Havoc in Wisconsin

Sunday 27 February 2011

by: Ruth Coniff | The Progressive | Op-Ed

On Friday night, the eve of a massive rally in Madison, Wisconsin, against Governor Scott Walker's union-busting "budget repair bill," a few state employees gathered for a hasty retirement party at Jenna's, a downtown bar directly across from the Capitol building.

Over pitchers of beer, a group of lawyers from the state public defender's office were saying goodbye to Patrick Donnelly, longtime attorney at the agency.

Donnelly decided to retire on Wednesday--24 hours after he and his colleagues were informed by labor lawyers at the Boardman law firm that a provision in Governor Walker's bill could mean he would lose health care benefits worth tens of thousands of dollars, unless he gave notice immediately.

Two days after he made his decision, on Friday, he walked out the door for the last time. (He is taking a long-planned vacation and using furlough days to make up the rest of his two weeks' notice.)

"I'm as angry as I've ever been in my life," Donnelly said at his retirement party.

Across the state, record numbers of public employees are requesting retirement papers. Many, like Donnelly, have been advised that if they don't get out quickly, they stand to lose hundreds of thousands of dollars in benefits they were counting on for retirement.

The effect on the state could be devastating. The number of people retiring from the public sector in the next two weeks could easily dwarf the 12,000 lay-offs the governor has threatened, if Senate Democrats don't return to pass his bill ending collective bargaining for public employees.

The Wisconsin Department of Employee Trust Funds reports that, during the week of February 14-18, 2011, it received more than three times the num ber of requests for retirement estimates than it did the same week in 2010.

At the top of the Department web site is a special link for state and local employees: "Retiring on Short Notice? What Members Should Know and Do."

The volume of requests for information is so high, the web site notes, that it is having trouble keeping up with demand.

Walker has promised to make all state employees contribute 12 percent of their pay to their health care premiums and 5.8 percent to their retirement benefits, which will mean $500 to $600 out of pocket each month for many staff who already don't make much money. "The less you make the harder it is to pay," Donnelly points out.

So all public employees are looking at very lean times to come. But those close to retirement age are heading for the doors if they can, because they stand to lose benefits they had accrued and counted on for years.

"I get to walk away from this. I was close to retiring anyway, and, as attorneys, we operate at the highest level of state salaries. But for the young people and the clerical staff in our office, these cuts are going to be devastating."

Then there are the longterm issues for the state: jobs that will likely go unfilled as experienced people leave, and brain drain as public sector work looks increasingly unattractive to people who had been considering a career in public service.

Donnelly mentions some friends who helped draft Wisconsin's clean air and water standards in the early 1980s--brilliant lawyers, all of whom have gone on to other careers. "Never again will we be able to hire people like that," he says.

Or, as Steve Phillips, a colleague of Donnelly's in the appellate division of the public defender's office put it, "You'd have to be an idiot to go into public service now--or be independently wealthy."

"I've been with the state for 33 years and that whole time I've been planning for a pension and we've been negotiating contracts," Phillips says. "Compared to the private sector, our base pay is much less and partly that's because we get decent benefits."

But, Phillips says, "If I was just graduating from law school now and thought I'd like to be a DA or public defender, it would be pretty scary. You'd be taking a huge economic hit."

The trigger for Donnelly's sudden retirement was a memo he and his colleagues received on Tuesday, February 21, from the Boardman law firm, which does labor law and advises the union on contract matters and benefits.

Written by attorney Steven C. Zach, the memo advised union members in the public defender's office that "the only way to guarantee receipt of the SHI [Supplemental Health Insurance] benefit [accrued sick time that converts to health insurance premiums after retirement--worth tens of thousands of dollars in many cases] will be to resign State employment. Receipt of the benefit is conditioned upon retirement, death, or layoff."

In bold type on page two, the Boardman memo stated:

"[T]here are no assurances that, as of March 13, 2011, the SHI benefit will be available under the terms of the current colective bargaining agreement. . . . The worst case scenario is tha WSAA members would lose that benefit both retrospectively and prospectively on that date."

That is because the union contract terminates on March 13. Workers had to give notice 14 days before March 13 or risk losing health care benefits in retirement they had been counting on throughout their careers.

Another memo, from the state's Office of State Employment Relations-- sought to reassure employees that the state was only studying the issue of changing retirement benefits and that employees need not worry that they would lose benefits.

The lawyers at Jenna's were not reassured. "I didn't want to gamble on these guys' good faith," says Donnelly.

"Who trusts them?" says Phillips. "By the time we find out what they are planning, we won't be covered by a collective bargaining agreement."

And that's not the only threat.

"If you think the budget repair bill is bad, wait until the Governor's biennial budget comes out," says Phillips.

On a list of frequently asked questions the Department of Employee Trust Funds includes this question: "There has been a lot of media coverage about the funding of pension systems across the nation. Is the WRS [Wisconsin Retirement System] fully funded and able to pay benefits? Yes, the WRS is fully funded and able to pay benefits to current and future WRS members."

In fact, Wisconsin is a national model for its fully funded pension system, which segregates the funds so they can't be raided as has happened in private sector firms and other states. But some analysts are worried that Scott Walker's budget repair bill may change all that.

Blogger Kristen Emery points to what she calls a "pension theft provision" in Walker's bill:

On page three of the bill, "third paragraph from the top, there is very interesting language that leads to the very important question for Governor Walker. The paragraph mandates that a study of the existing Wisconsin Retirement System be performed and it must “specifically address establishing a defined contribution plan as an option for WRS participating employees” and the deadline for completing this study is June 30, 2012. I don’t think that Walker would be adding retirement benefits for workers - so I am wondering if the Republican Governors that are trying to get rid of collective bargaining of retirement benefits, so that they can terminate the existing plans and recover excess assets for their state balance sheets.

"If Governor Walker’s bill passes, and collective bargaining of retirement benefits is eliminated, then next year when Governor Walker decides it is in Wisconsin’s best interests to get rid of the existing plan and replace it with something less valuable for the employees. And the employees would have no say and no one can keep Walker from raiding your retirement savings."

Over beers at Donnelly's retirement party, Phillips agrees: "ETF has $78 billion in retirement funds--it has got to have occurred to someone in the Governor's office to use those funds," says.