Progressive Thinking

More than one out of ten Wisconsinites participates as a current or former state or local government employee.  Senator Kathleen Vinehout writes about the Wisconsin Retirement System and the State of Wisconsin Investment Board.

MADISON - “What’s going on with the state retirement system?” the retired woman asked me. She’d started a business but needed retirement income to keep things going. “Wisconsin’s system is the best funded in the country,” I told her. “But we’ve got to carefully watch what happens there.”

More than one out of ten Wisconsinites participates in the Wisconsin’s Retirement System (WRS) either as a current or former state or local government employee. Countless more family members depend on a well-run system to keep their aging relatives out of poverty.

As reported by the La Crosse Tribune in June of 2012, “Wisconsin is the only state in the nation to receive high marks for its public employee pension system.” The article commented on work of the Pew Center for States. Over the years Pew has released several reports analyzing states’ obligation to their employees. Many states have a large funding gap but not Wisconsin.

Much confusion exists as to why Wisconsin is so far ahead of other states. The La Crosse Tribune article reminds us, “The ‘solid performer’ ranking is for fiscal year 2010. That’s before Republican Gov. Scott Walker and the Legislature required public employees to contribute more to their pensions.” Some of the action to protect funds happened late in the last decade despite the recession.

The answer to why Wisconsin is so far ahead of other states in funding retirement lies in the unusual ‘self-righting’ WRS formula that adjusts based on investment returns. Another success factor is the strict discipline WRS follows in collecting contributions. A third factor is action taken in 2003 when the Governor and Legislature authorized General Fund bonds to eliminate the WRS unfunded liability.

Cost to taxpayers is kept low – according to a 2012 state report – “the portion of state and local government budgets allocated to retirement costs was only 1.26%”. Compare this to 2.9% nationally using US Census Bureau data.

Recently the Audit Committee, of which I am ranking minority member, held a public hearing reviewing the agency that manages money in the state’s retirement system. We learned details of an important but relatively unknown part of government that oversees investments known as the State of Wisconsin Investment Board or SWIB.

The Investment Board is to – by law - “manage investment assets with the care, skill, prudence, and diligence that a prudent person would exhibit acting in a similar capacity with similar resources, and for similar types of funds.” As of calendar year 2013, SWIB had an operating budget of $34.9 million and managed assets totaled $101.3 billion. This is by far the largest fund in any part of state government.

Because the retirement system is a ‘mature’ system – meaning the number of retirees is expected to be increasing – the money in the system is necessarily very large. WRS funds make up most of the fund SWIB manages. WRS funds total $93.7 billion.

The role of the Audit Committee in overseeing the activities of the Investment Board took on new meaning when the Governor and the Legislature reduced legislative oversight of SWIB. Those voting for the 2011 budget gave SWIB power to create staff positions and set its own budget. This is highly unusual.

At the recent hearing, members quizzed SWIB officials about rising operating and investment costs, increased risky and expensive investments and poorer performance as measured by one-year and three-year returns compared to nine other states’ pension investments.

Money going to salaries, bonuses and other expenses comes out of investment earnings. SWIB saw a 55.7% increase in operating expenses over a 4 year period (from 2009 to 2013). This increase was during the Great Recession when many public employees saw no raises, took unpaid furloughs, and retirees took deep cuts.

A large part of the increase in the operating budget was due to increases in bonuses – one totaled $660,400! Officials argued that keeping good employees requires an investment.

I’d argue investing in good employees includes helping them through retirement. Changes in the autonomy of the Investment Board makes it doubly important the public and the Legislature keep a close eye on the money invested and those doing the investing.

Veterans leave the service much older and wiser than they entered. They don’t want a parade. They want a good job and respect and their dignity. They hope the girl or family they left behind will still be there. To honor them, you must do more than talk.

GREEN BAY - We used to call it Armistice Day, to mark the eleventh hour of the eleventh day of 1918 when an armistice, or temporary cessation of hostilities, between the Allied nations and Germany went into effect to stop the bloodshed of World War I. The Treaty of Versailles, which officially ended “The Great War” or the “War to End All Wars” was not signed until seven months later.

Many historians regard the Treaty of Versailles as the first event leading to World War II, since it put into place many of the social and economic factors in Europe that lead to that bloody event. It seems like we have been fighting ever since.

Today we observe Veterans Day to remember and honor the courageous men and women who have served our country in all of our wars. It is fitting we do that, at least. We owe them all our gratitude for a job well done.

But many veterans struggle to reenter civilian life after their service, whether it be finding a job, accessing health care, or finding the other services available to them.

Veterans leave the service much older and wiser than they entered. All the claims of patriotism and glory that they heard on TV before they entered are dulled now by the reality of war and the loneliness of deployment. Most now just want to go home.

But they don’t want a parade. They want a good job and respect and their dignity. They hope the girl or family they left behind will still be there. Many would like to go to college and better themselves. They hope for what all of those lucky enough to stay behind in civilian life take for granted.

So today is Veterans Day. Give them a parade if you like. But tomorrow, do something. Open some doorways to those good jobs or college educations. Be there for them, just like you would be there for your own son or daughter, husband or wife, if they were returning home.

That’s what veterans day should really be about.

This week Senator Kathleen Vinehout writes about the upcoming deer hunt and changes made to deer hunting rules.

ALMA, WI - “What happens if I have a public permit because I’m not rich enough to afford a private one?” the deer hunter asked me. “I shoot a deer and it runs across the road. There’s my deer. It’s not dead. But I don’t have a private permit to go get it.”

“It just seems to me that the new rules are set up to force people to lease hunting land because there are more permits on private land than public land.”

Deer hunters taking to the woods in Wisconsin are facing a slew of new hunting rules. Hunters will experience the long-talked-about rules of the Texan ‘Deer Czar’ James Kroll.

In the DNR’s words, the new rules change the “season framework, management units and antlerless deer hunting permits”. DNR press releases tout their “robust public outreach” and the “Deer Trustee Report” guiding this year’s changes.

Gone are “management zones” setting deer overwinter population goals. Gone are free tags & $2 tags in highly populated or CWD areas; gone are landowner deer tags. Soon-to-be gone is registering your deer at the local bar or convenience store.

Deer management units – usually set by natural boundaries and major highways – are replaced by county borders and four major ‘management zones”. Urban areas have their own “metro units”. DNR is pilot testing deer registration on-line. Next year all registration will be on-line.

Rules about antlerless tags are the biggest rule changes affecting hunters. Everyone who purchases a license will receive one buck and one doe or youngster (antlerless) tag. Many hunters, including our family, hunt for food. Filling the freezer with many critters, especially with hamburger prices rising, can make a real difference in the food budget. Buying tags was easy, cheap and –when deer were plentiful – families could easily fill up freezers for the year.

Now those ‘extra tags’ are limited. First, you do not get an extra tag when you buy archery and then a gun license. The new deer-hunting license is not weapon specific – meaning you can shoot an antlerless deer in archery season - that’s it for the year.

Second, tags are more expensive (6 times more expensive), limited, and depend on whether you hunt a private or public area.

Many times Secretary Cathy Stepp repeated, “The rules have changed, but the tradition remains.” Hunters whom I’ve spoken with wonder if all we’ll have years from now is the fond memory of what used to be Wisconsin’s very equal deer hunting tradition. Many things are changing. New rules could hasten the loss of our populist deer hunt.

For years those who live in the Northwoods have hunted paper mill land. Now the companies don’t need the pulp and they are selling off the land. Hunters concerned about the deer rule changes reminded me, “open for public hunting” is different than “public land”. Mostly land up north is corporate owned but “open to the public”.

What happens when the land is sold?

Cash strapped counties up north are contributing to the problem. As one Eau Claire hunter whose family hunts up north told me, “Starve local government and things suffer. Local government looks for cash. The state isn’t giving them enough to keep up with the demand for services. So they clear-cut the county forest. The deer are driven out of the forest because the forest isn’t there anymore.”

Convenience store owners and hunters are also concerned about on-line registration. Storeowners are worried folks won’t stop for coffee and a doughnut if they register deer on-line. Hunters tell me: change the rules, make it hard to get public tags, expensive to hunt in private land and leave folks on their own to register a deer? Isn’t this asking for trouble?

Murmuring among hunters I’ve heard deals with the ‘artificial’ boundary between public and private. Deer don’t know who owns what. “If I shoot a deer on public land and he wanders across to private land, do I go get him and break the law, or let him suffer?” The general consensus was…. You can imagine.

If you put aside all the political ads and smears and judge them on their resumes, sitting before you in the final job interview are two candidates, Scott Walker the politician and Mary Burke the businesswoman. Past performance is the best indicator of the job they will do in the future.

GREEN BAY - The long Wisconsin Governor’s race will finally end tomorrow, Tuesday, November 4th 2014. We are selecting a chief executive officer to run the largest single business entity in our state, a company with a multi-billion dollar budget and over 65,000 employees, and you are a member of the evaluation panel that is being asked to pick just one for the job.

As the Wisconsin State Journal, typically a conservative newspaper, said in it’s endorsement of Mary Burke today “State politics is far too divisive under Gov. Scott Walker. Wisconsin lags on jobs and faces its third largest budget shortfall in two decades.” The State Journal goes on to say “Mary Burke, a former Trek Bicycle executive and state Commerce secretary, offers our state decades of business experience on a global scale.”

If you put aside all the political ads and smears and judge them on their resumes, sitting before you in the final job interview are two candidates, Scott Walker the politician and Mary Burke the business woman.

You look at their resumes and see Scott Walker is a college drop out. Burke earned a finance degree from Georgetown, ranking number one in her class, and a master's degree in business administration from Harvard.

After graduating from Harvard, Burke quickly becomes an entrepreneur, launching Manhattan Intelligence, a service for consumers in New York City. Later on, Burke joins Trek Bicycle, her family's growing Wisconsin company in Waterloo. She serves as director of European operations for three years, living in three different countries and opening offices in five. Trek reports that its European sales soared during her tenure. She later serves as director of forecasting and strategic planning for nearly a decade.

Meanwhile Walker has never held a significant job in his life outside of elective political office. He works at getting himself elected, first to the State Assembly and then as Milwaukee County Executive. At Milwaukee County, he directly supervises a staff of 19 in the Executive’s office, at least 4 of which later end up being convicted of misconduct. He says he doesn’t know what they were doing. He encourages labor strife among county employees by breaking their contracts and hiring outside temporary employees to do their jobs. He throws out the employment contracts of nearly 300 top level managers and forces many to resign or retire. He can offer no evidence that his administration did anything exceptional to improve the business climate in Milwaukee County as a whole during his six years in office.

Walker then goes on to four years as Wisconsin’s Governor, pledging to foster private-sector job growth and balance the state budget. Walker fails on both. He again encourages labor strife by trying to break the unions with ACT 10. He cuts $800 million  out of revenue sharing to our local schools and governments, passing the discord on to them. The record of Walker’s signature jobs agency, the Wisconsin Economic Development Corp. (WEDC), has been sloppy and disappointing. State exports slipped last year, and job growth has been slow, less than half what the governor promised and trailing the rest of the states in the Midwest during the national recovery. The budget faces a 1.8 billion dollar deficit.

The Wisconsin State Journal says “Our editorial board met with both candidates for governor, and we've closely followed their public lives and careers. Our endorsement of Burke isn't a prediction of who will win. It’s who we believe is best to lead Wisconsin forward.”

The State Journal concludes “Mary Burke is that candidate”.

You have to decide who gets the job offer and who gets that nasty rejection letter, and you have to live with your selection for the next four years. In Human Resource Management, “past performance is the best indicator of the job they will do in the future”.

For Wisconsin Governor, do you want more of the same or a change? All the polls still say the race is a toss up. Tomorrow is your last chance to vote, to make your selection heard.

Senator Kathleen Vinehout writes about a question she is often asked on the state’s budget – is it in the red or in the black. She explains the process by which the estimate is generated and has been for decades.

ALMA - Are we in the red or in the black? What’s the truth? What’s the reality?” The rural Trempealeau County woman was clearly frustrated.

“What do the figures really mean?” she asked me. “Is there a big hole? Or not? Is it all smoke and mirrors?”

Fresh off the rhetoric of the campaign trail, people are rightly confused about where the state is headed and what numbers are real. It’s hard to find someone who is not just outright frustrated at what they see as intentional distortions.

But when spring comes, lawmakers will be working hard trying to balance what is sure to be a $70 billion-plus spending plan. Somehow, they will have to balance the books.

How can we tell what’s real?

Let us begin with hard cash: money coming into state coffers. In a two-year budget, what’s real – money actually coming in – can be found in the tax returns of the first year. The state’s budget year runs July 1 through June 30. It takes a while to tally things and pay year-end bills. So numbers change a bit while accounts are tallied and then audited.

Preliminary tax returns show that individual income tax collection is down by about 2½% and corporate income tax is down by over 9%. Individual income tax makes up over half of the general fund. This puts the actual total down about 2% over the budget estimate.

A sharp drop in corporate income tax collection is important. There are different theories why. Perhaps companies are not making money; or too many dollars were given away in corporate tax breaks.

Just one tax break – the manufacturing and ag tax credit – cost taxpayers almost half the amount by which corporate income tax collection dropped. (Tax breaks passed in the last four years total over 50 separate items and will cost taxpayers an estimated $1.1 billion next fiscal year.)

So we know things did not go well in the last fiscal year. Will they get better?

This depends on with whom you talk – but let’s take the least politically minded entity in the state budget process – the nonpartisan Legislative Fiscal Bureau (LFB).

When allowed to do the math without any partisan driven assumptions – and this is important – the LFB estimates Wisconsin will begin the next budget process in the red by about $1.766 billion. You may have heard this number rounded up to $1.8 billion.

This is how much money is needed to fund the commitments in the coming budget.

The number is an estimate – as all budget numbers are estimates. But it is based on the best nonpartisan assumptions going forward and follows the conventions used in estimating past budget ‘starting points.’

In the final weeks of the campaign there were several other numbers tossed around. One used by the Governor was that Wisconsin was $535 million in the black.

The Governor used a memo prepared by LFB to buttress his claim. In this memo the nonpartisan LFB was directed by Finance Co-Chair John Nygren to make several assumptions. Namely, “let us assume Wisconsin brings in more money and spends less.” Not surprisingly, the numbers were better.

Politifact in the Milwaukee Journal Sentinel analyzed the ‘$535 million in the black’ and rated it False.

Other factors loom large in balancing the next state budget. Not included in this analysis is the mismatch between money coming in for roads and bridges and money going out.

The Governor and lawmakers voting for the last budget put nearly a billion in new spending on the state’s credit card. The transportation fund cannot support this level of borrowing.

Balancing the next budget will be a challenge. Needs are great. Tax money given away in the form of tax breaks cannot be spent on vital services.

To begin an honest budget discussion, let’s start with the best information and agree on the facts. To paraphrase Ambassador and former US Senator Daniel Patrick Moynihan: You can have your own opinion but not your own set of facts.