According to a Milwaukee Journal Sentinel report, lower than expected investment returns and fatter benefits resulting from a 1999 pension sweetener prodded the state Employee Trust Fund Board (ETFB) to boost contribution rates and warn of another such hike in 2005.
Local governments won’t find out exactly how much their contributions will rise for about another week, Julie Reneau, administrator of the Division of Retirement Services in the state pension agency, told the newspaper. But, based on 2002 payrolls, Racine would be faced with coming up with another $366,700 in contributions, Waukesha would see a $211,100 jump, Green Bay would have to pay another $383,186 and La Crosse would pay $182,600, Reneau said. Those numbers are likely to be higher because of increases in payrolls, she added.
Because almost all local governments are part of the Wisconsin Retirement System, the increase means cities, counties and school districts will have to shell out millions more in employer contributions to the plan. Local officials say that could force them to make budget cuts elsewhere.
Property Tax Limit
The jump in contribution rates comes at a time when the Republican-controlled Legislature has passed a 2003-05 budget that slaps strict limits on local property taxes, enabling them to grow only to accommodate new construction or if voters approve an increase in a referendum.
Rich Eggleston, spokesman for the Wisconsin Alliance of Cities, said the contribution rate increases – which were approved Friday by the trust fund board – come at a difficult time for local officials. “It’s another element of pressure on the property tax that makes it difficult for all levels of government to cope with a possible property tax freeze,” he told the newspaper.
The Wisconsin Retirement System includes current and retired public employees of the state and nearly every county, city, town and village, as well as the University of Wisconsin System, vocational-technical colleges and public schools. Only the City of Milwaukee and Milwaukee County, which have their own pension systems, are not in the state plan. Labor contracts in almost all Wisconsin communities call for taxpayers to fund both the employer and employee costs of pension contributions through their local governments. State government also pays the entire contribution for its workers.
The trust fund board increased contribution rates for the 240,990 “general category” workers in the system by 0.4% next year. That category includes teachers and represents 91% of all active workers covered by the system. Rates for firefighters will go up 1.6% and those for police and prison guards will rise by 1%.
Reneau noted that the economy and stock losses were the main reasons behind the contribution rate increases. Reneau also acknowledged that the 1999 decision to improve pension benefits, partly as a consequence of market windfalls from the 1990s, played a “minor role” in the higher contribution rates.