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June 7, 2012

Column #1,606

Walker Election: A Victory for Taxpayers

By Mike McManus

            The victory of Gov. Scott Walker in Wisconsin this week, overwhelmingly defeating the attempt to recall him - is also a victory for taxpayers everywhere.

            Gov. Walker had the temerity to ask state employees to start contributing to their pension costs. What a meany!  Some years ago, they paid .2 of one percent, but in recent years had contributed NOTHING for their own retirement.  Gov. Walker persuaded the Legislature to pass “Act 10” requiring that they contribute 5.9% of their salary for their pension. 

            He also increased the employee contribution for health insurance from 4.35% of the premium paid by the state, to 12.6%, while the state paid 87.4%, or $13,972 per worker annually.  Employees suddenly had to pay $308 million a year for their pensions and health care, due to Act 10.  That made them furious.

            Yet according to a study by Jason Richwine of the Heritage Foundation and Andrew Biggs of the American Enterprise Institute, even with the increased contributions by public workers, “pension benefits for Wisconsin public employees are roughly 4.5 times” larger than private sector Wisconsin workers.  And Wisconsin state employee benefits are 22% more than those of neighboring states.

            While Wisconsin wages of public workers are about equal to earnings of private sector employees with similar education – total compensation including benefits is a bloated $81,637 per public sector worker compared to $67,068 for private employees of larger firms. 

               Yet public sector employees were so incensed by having to contribute more for pensions and health - they gathered 900,000 signatures demanding a recall of Gov. Walker a year into his term.  It was only the third attempted recall of a governor in American history.  And it was the first to be defeated.

            Walker won his second gubernatorial race by 140,000 more votes than his initial election.  He even earned 38% of the union vote, many of whom felt it was not right to recall a governor who was guilty of no malfeasance.  He simply led the state to erase a $3.6 billion deficit without raising taxes partly by asking public workers to pay a fairer share of overly generous benefits. He also reduced unemployment to 6.7 percent – well below the 8.2% U.S. rate, and a point lower than when he took office.

            Taxpayers delivered a clear message: no more public sector free lunches.

            They delivered a similar message on the same day in San Diego, America’s eighth largest city with 1.3 million residents and San Jose, the 10th largest U.S. city (946,000 people). 

By a whopping 70% vote in both cities, the public changed the retirement plans for new public employees from open-ended entitlements to 401(k)-style retirement plans that caps what taxpayers are on the hook for. 

            Why?  San Diego’s pension benefits cost $87 million in 2004, but $233.6 million this year.  Similarly, San Jose’s pension costs jumped from $73 million a year a decade ago to $245 million - accounting for more than half of city payroll!

            The clear message in Wisconsin and California is that taxpayers think public employees are over-compensated.  

            What’s fair?  I propose three changes.

            First, salaries and benefits of public workers should be no more than earned by private employees with comparable skills and education.

            For example, why should taxpayers give $81,000 a year salary to AVERAGE federal employees, when private workers earn much less?  I suggest that the two-year freeze on federal salaries be extended for a decade.

            Second, public employees should be expected to pay for a fairer share of their health and pension benefits.  Wisconsin public employees now pay less for pensions than half the states.  Minnesota public workers pay 11% of salaries for pensions, double that of Wisconsin. 

Millions of us in the private sector have no pensions or 401ks.

            At present, federal employees pay a stunningly low .8 of one percent toward their pensions!  Former Wisconsin Governor Tommy Thompson is running for U.S. Senate by proposing that federal workers pay more for pensions and health benefits, saying they should be in line with comparable private workers.

There is no better way to begin cutting the federal deficit of $1.5 trillion. (Federal workers earn $200 billion.)

            A third issue is why has the Obama Administration added 140,000 federal workers in only three years?  There are now 2.2 million federal employees, not counting the military or postal workers.

            Government workers have always been far more secure in their jobs than those in the private sector. Why?

            It is time to write new contracts with public employees.

Copyright © 2012 Michael J. McManus, President of Marriage Savers and a syndicated columnist.

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