Still Defending the Infamous Pension Plan
County Exec Abele wants to cut back the lucrative backdrop provision. Why are supervisors delaying this?
Twelve years ago, the Milwaukee County Board covered itself in shame by passing a pension plan that turned ordinary county workers into wealthy people. It has so far cost taxpayers $200 million, could tally another $125 million in future costs, and has forced county officials to slash funding for transit, the parks and other services. So you would think supervisors would jump at any chance to trim these benefits. But alas, they haven’t.
It was back in June, 2011, that Milwaukee County Executive Chris Abele ordered an outside legal review of the “backdrop,” the lucrative lump-sum benefit that drove the high costs of the 2001 pension plan. Three months later he told the press the analysis by Foley & Lardner attorneys suggested the benefit could be cut back. Did then-County Board Chair Lee Holloway or other board members quickly embrace the idea? Not exactly.
“The board heard from me many, many times, I said ‘surely, if there’s one thing we could agree on, this is it,’” Abele says. “Every day we delay, we could be losing money.’”
Eight months later, in April 2012, Marina Dimitrijeviç won the post of board chair and was interviewed by Milwaukee Journal Sentinel reporter Steve Schultze, who reported that “she had no enthusiasm” for cutting back the backdrop.
“If that was such a good idea, then why didn’t Scott Walker do it” during his eight years as county executive, Dimitrijevic asked.
The answer is that it was never a big priority. As I documented in a column for Milwaukee Magazine, Walker repeatedly dragged his feet when it came to addressing the backdrop. Walker and the board did eliminate the backdrop for all new employees but waited until almost three years after his election to begin planning a legal suit against Mercer Human Resources, the actuaries who gave county officials bad advice (and ultimately agreed to a $45 million settlement).
Walker also made what seemed like a token effort to research the possibility of undoing the backdrop legally. He hired an outside counsel, Charles Stevens, who put in a grand total of 25 hours to analyze this extraordinarily complex issue. And nothing came of it.
As for the board, supervisor Theodore Lipscomb, Sr., did get a budget amendment passed in the Fall of 2010 asking the county corporation counsel to provide legal analysis of ways to reduce the impact of the backdrop, but concedes that nothing came of the proposal until Abele was elected and began pushing the issue.
Eventually, outside counsel was sought and Abele opted for the more conservative option presented by Foley & Lardner, with lower potential savings, but the greatest chance of being upheld by the courts. The backdrop freeze (which will essentially reduce the number of years during which compounded interest can accumulate and drive up the value of a lump-sum payout) is expected to save about $1.2 million this year and an estimated $15.5 million long-term.
Lipscomb introduced a resolution to incorporate this backdrop freeze in May. But Supervisor Michael Mayo, Sr., soon found ways to delay the proposal.
By law, any changes in the pension must be approved by the Pension Study Commission, which Mayo heads. So in June, Mayo proposed the commission delay a decision on this until the July meeting, and the two other county supervisors who are also commission members, Jason Haas, and Willie Johnson, Jr., agreed. Then Mayo proceeded to cancel the commission’s meetings for the next six months, which prevented the board from voting on this.
Why the delay? “I don’t know,” Lipscomb says. “I had asked him this several times.”
Mayo’s history might suggest an answer. He served on the pension board when the original backdrop was hatched and voted for it as a county supervisor. As a member of the pension board back then, Mayo also voted for an egregious plan to award pension credits (in violation of federal law) for county employees who worked in the old CETA program. And Mayo, as someone who has served the county since 1994, could see his pension reduced by a backdrop cap.
In short, it’s hard to imagine a worse or more conflicted appointee to the Pension Study Commission. “He probably wouldn’t be my choice,” Lipscomb says. Dimtrijevic did not respond to my emailed question as to whether Mayo is an appropriate appointee. (It’s possible he’s a holdover from the Holloway era.)
Meanwhile, representatives of AFSCME, the union that represents county employees, were pressuring supervisors to resist the backdrop cap. The union had success in the fall helping convince the board to resist Abele’s push to slash health benefits. Given the furloughs and salary freezes workers suffered under county exec Walker, you can understand their frustration. Moreover, it was not the union that conceived or promoted the infamous backdrop plan.
But AFSCME has now put itself in the position of defending an outrage. Four county employees have collected backdrops of about $1 million and dozens and dozens of others have collected six figure payments. In the last month alone, Schultze reported, the county paid a total of $2.6 million in backdrops to 26 retirees. In every case, these employees get a generous monthly pension payment in addition to the backdrop.
Given his frustration at Mayo’s delay tactics, you might have thought Lipscomb would have contacted the press or made a fuss about the need to act as soon as possible on this resolution. Or for that matter, how about county supervisors Mark Borkowski, James (Luigi) Schmitt and John Weishan, Jr., all of whom voted for the infamous pension plan a decade ago. Wouldn’t you think they’d leave no stone unturned to make up for passing this dreadful legislation? But no, they all sat on their hands while Mayo delayed the resolution.
Speaking as the reporter who broke the pension scandal, it’s been remarkable and depressing at times to watch how newly elected board members have quickly absorbed the views of older board members, who adamantly contended they weren’t at fault when they passed this legislation.
Supervisors are merely “everyday citizens” and don’t have “actuarial experience,” Weishan once declared, blaming it all on the actuaries at Mercer. But the resolution he voted for, in addition to the backdrop, gave a 25 percent pension bonus to veteran employees, allowing them to collect an incredible 105 percent of their final salaries. And that bonus, in turn, helps drive up the value of the backdrops. Anyone with eighth grade math skills should have been able to understand how questionable that bonus was.
Yet, when Abele pushed the state legislature in 2011 to create an independently elected county comptroller, modeled after the respected city comptroller, board members were outraged. Newer supervisors bitterly complained to me that they were elected as reformers and had “solved” the problem, and besides, the whole thing had really been the fault of Mercer. In short, the board quickly circled the wagons to condemn Abele, even as they dilly dallied over the issue of trying to reduce the backdrop’s impact.
All signs suggest the board cared more about protecting fellow supervisors — and Dimitrijevic cared more about keeping her board unified — than finding the fastest possible way to reduce the devastation caused by the county pension plan. The full board votes on Thursday on this issue, and Lipscomb predicts passage of the backdrop cap. I hope he’s right.
Update December 21: Yesterday, the board voted 15-3 in favor of the backdrop cap. Mayo and Weishan, both of whom voted for the controversial pension plan of 2001, were among the three supervisors who voted against its reform, with Weishan calling it the equivalent of “political pornography.”