Pension Backdrop Costs Hit $354 Million

A review of Milwaukee County pension payouts since 2016 shows the infamous “backdrop” payment passed 20 years ago has cost taxpayers another $58 million, increasing the total bill to $354.4 million, an analysis by Urban Milwaukee has found. But some 800 veteran employees who are still eligible for the backdrop and have yet to retire could increase the total cost to at least $460 million.

These massive costs are the result of legislation passed by the Milwaukee County Board, which awarded lucrative pension sweeteners for non-union (and later union) employees in 2000 and 2001 respectively. The package included a 25% bonus that allowed veteran employees to collect as much as 100% of their final average salary in a pension and an added backdrop which gave eligible employees a generous lump-sum payment. To date 144 employees have gotten a back drop of at least $400,000, with seven getting more than $900,000 and a lucky 12 getting more than $1 million — all in addition to a monthly pension payment.  

By the end of 2016, the cost of the backdrop payments ran taxpayers $296 million, as Urban Milwaukee reported. A review of the county’s monthly pension reports since then shows the total now exceeds $354 million, paid out to 2,476 employees, who received an average backdrop of $143,000. The average payout has grown since 2016, when it was $133,000.

County projections show that about 800 employees eligible for the backdrop have yet to retire. If their payment averages $133,000, that would cost more than $106 million. If it averages are $143,000, the added cost would be $114 million. Either figure would push the total cost to more than $460 million. 

And that, again, does not include the cost of monthly pension payments to every backdrop recipient. 

Media Coverage and Public Backlash

The hike in pension benefits passed without media coverage until then-MilwaukeeWorld.com editor Bruce Murphy wrote about it for that publication, and later for Milwaukee Magazine. Murphy is currently Urban Milwaukee’s editor.

Following Murphy’s lead, there was extensive, multi-media coverage of the story, including front-page stories from the Milwaukee Journal Sentinel and nightly TV coverage, a political scandal that lasted for months.

This sparked public outrage that forced then-County Executive Tom Ament to resign from office after firing a number of his cabinet members. Ament would have earned a pension payout of more than $2 million, if he had served until 2008 as he planned, but he signed a waiver of the backdrop in the futile hope of saving his political career. In addition, seven county supervisors were recalled from office. In terms of the number of officials thrown out of office, it was the biggest political scandal in Milwaukee history. 

The scandal led directly to the election of Scott Walker, then a state legislator, who went on to serve as county executive from 2002 to 2010 and then ran successfully for governor. Outrage over the Milwaukee pension plan helped set the stage for passage of Act 10, Walker’s controversial state legislation decimating public employee unions.

The backdrop was rescinded for new employees by 2006, but could not be taken away from those employed when the provision was passed. Courts have typically ruled that once a pension benefit is given to employees it is a property right that cannot be taken away. The county has also made other reforms in its benefits structure to try to lower costs, but continues to face an ever-rising bill for the backdrops paid to veteran employees who retire. 

The county also sued Mercer Consulting, the company which advised officials on pension matters, and in May 2009, the company agreed to an out-of-court settlement of $45 million, less than one-tenth of what the pension backdrop will likely cost taxpayers. County supervisors declared that the settlement vindicated them and proved they were the victims of bad advice.

Supervisor John Weishan, Jr., who voted for the pension plan and still serves on the board, blamed the whole thing on Mercer Consulting. “Supervisors are everyday citizens … [who] don’t necessarily have actuarial experience,” he said. “The untold story is that of the elected officials who were ridiculed in the local media. It is unfortunate that they and their families suffered through the recall process that ensued.”

But courthouse insiders described the county government to Murphy as a place riddled with cronyism and which many viewed as “a cookie jar for employees.”

“The attitude permeates the place,” then-Supervisor Roger Quindel told Murphy. “Every time you turn around, they’re trying to get more.”

After the stock market gains of the 1990s inflated the county pension fund, officials in the Ament administration pushed a plan to give employees more money, Murphy reported. “We all felt very rich because the pension plan had done so well,” then supervisor Mark Borkowski told Milwaukee Magazine.

No board member asked Mercer or the county audit department to estimate the cost of the plan. And 19 of 25 board members voted for it.

Besides Weishan, one other current board member voted on the pension package: Willie Johnson, Jr. voted against the pension sweetener for non-represented employees but supported it for union employees. Borkowski, who quit the board to run for and win election as an alderman (he has served in that position since 2015) also voted for the pension plan.

In fact, multiple key players in the original vote ran for, and won, reelection after the scandal broke.

The Millionaires Club

In 2017, Mitchel Writt‘s follow-up story for Urban Milwaukee reported that nine employees had gotten backdrop payments over $1 million. 

Three new backdrop millionaires have been added to the list since. Gale Shelton, a former assistant district attorney, left with a backdrop payment of over $1.5 million. James Martin, a former deputy district attorney, got $1.4 million. And Richard Schmidt, former Milwaukee sheriff, collected $1.05 million. 

Seven of the 12 millionaires worked for the District Attorney’s office, where they prosecuted crime and corruption.

Schmidt, who served as acting sheriff after the resignation of David Clarke, ran for the office in 2018 and lost after Urban Milwaukee reported he was eligible for a huge pension that would grow bigger if he was elected to a four-year term. Schmidt repeatedly refused to say whether he would accept the backdrop payment, but did so, retiring not long after he lost the election.

In addition to the 12 who have gotten backdrop payments of more than $1 million, seven got more than $900,000, nine got $700,000 to $899,000, 25 got payments of $600,000-$699,999 and 89 employees got $400,000 to $599,999. 

They all also get a monthly pension payment, which has averaged about $1,900 a month, or nearly $23,000 a year, for the backdrop recipients.  

Take Jon Reddin, former deputy DA and member of the $900,000+ club, for example. He retired in 2008, the same year as his wife, Mary. Their combined pension added up to a $1.04 million backdrop payment, plus monthly pension payments that together gained them an added $99,000 a year for life, as Steve Schultze reported.

The last county report that calculated the remaining number of employees who would qualify for a backdrop payment was in August 2018. At the time, there were 1,053 employees left. That number has dropped to about 800 employees today, the review of monthly reports shows. 

So, two decades and $354 million later, Milwaukee taxpayers still aren’t done paying the price for the infamous pension scandal. 

Correction: the original version of this story reported that 14 employees have received backdrops of at least $1 million. The correct number is twelve. 

Additional research for this story was done by Hope Moses. 

Complete List of Backdrops