LIBRARIANS DESERVE RETIREMENT SECURITY
I was a librarian for a total of 30 years in Wisconsin and spent the last 23 years working in La Crosse schools. Becoming a librarian was definitely a calling. I enjoyed teaching others to read and appreciate literature, the challenge of research and teaching children to do it, and mastering and teaching the new technologies as they came along. Not everything is easy in this profession. Each day presented a new set of challenges, but when working with children, there is never a dull moment. Librarians often take home low pay, but have the promise of a guaranteed secure retirement through our defined benefit pension – the Wisconsin Retirement System (WRS).
Unfortunately, there is a constant barrage of attacks on pension systems nationwide, Wisconsin included. In South Carolina, the state legislature recently rejected an amendment to switch all newly hired public employees into a defined contribution 401(k) plan. Although a completely fiscally irresponsible measure, multiple legislatures and even municipalities have tried to make these types of changes over the years. Closing pension systems and moving new hires to 401(k) plans is not the right thing to do and here are three examples why.
- We need not look farther than next door to see how this mistake has transpired over the last two decades. In 1997, the Michigan State Employees’ Retirement System(MSERS) pension plan was closed and new hires were placed in a 401(k)-style plan. The move at the time didn’t really make sense, considering the pension system was funded at 109%. As one would expect, with no one paying into the fund, plan costs soared and as of 2012 MSERS was only funded at 60.3%. Now, since MSERS is closed, the median 401(k) balance is only $37,260.
- Two other states have made the decision to close their pension plans without much research. In 1991, West Virginia closed the West Virginia Teachers Retirement System after decades of underfunding. Teachers contributed 6% of every paycheck to the system, but the state didn’t contribute anything. When the system became underfunded, the state closed the system and moved all new employees into a 401(k)-style plan. Fast forward fourteen years, the funding level plummeted to 25%. After realizing the pension plan was half the cost of the 401(k) plan, the state reopened TRS in 2005. The system’s funding increased and is now in good fiscal health.
- In Alaska, the state used settlement money to close their pension system and move all new employees to a 401(k)-style plan. With the plan closed, no money was coming in, so naturally the plan cost and unfunded liability skyrocketed. The state has consistently refused to pay fully into pensions which, paired with an aging demographic, has caused the unfunded liability to double in less than a decade. The state is also suffering from a major retention issue – teachers moving on after only a couple of years of service. This is something that having a strong pension system can resolve. Our past experience and these two examples from other states should be enough of a warning sign to legislators that closing any pension fund is a horrible idea.
On a national scale, the Trump Administration has made access to a secure retirement more difficult by repealing an Obama era rule that enabled cities and states to create their own IRA programs. Using the Congressional Review Act, the Senate, including Wisconsin Senator Ron Johnson, voted for the rule change. Not taking retirement security seriously, and not encouraging states to set up retirement systems for their citizens is the wrong move.
Here at home, the Wisconsin State Legislature should establish a retirement system for the private sector to encourage retirement savings and offer a path to retirement security for the hard working people of our state.
Pensions are the most secure retirement vehicles available to not only public employees, but workers in the private sector as well. Pensions provide higher returns on average, are well-regulated, professionally managed, and have lower fees than 401(k)s. It’s also important to note that offering a secure retirement gives us a leg up when recruiting and retaining the best and brightest employees.
Here in Wisconsin, our pension system is 100% funded and pays an average of $23,430 annually to retirees – a modest amount that helps firefighters, teachers, librarians like myself, and other public employees retire with dignity. Each year, we spend that money on gas and groceries and taxes. Compare that to the average Michigan retiree, who might only have one payment of $37,260 to contribute to their local economy.
Unfortunately, we’ve seen a threat to our pensions here at home. State Senator Stroebel introduced legislation that would raise the retirement age for all public employees, including teachers, as well as change the way pension payments are calculated. This type of legislation is not only wrong for Wisconsin, but also is completely unnecessary due to the 100% funded status of the Wisconsin Retirement System. I urge the legislature to reject this type of legislation and to focus on more pressing issues in Wisconsin.