The Wisconsin State Assembly's budget bill passed early Friday would require most public employees in the Wisconsin, Milwaukee City Employes' and Milwaukee County Employees retirement systems to contribute half of all annual required pension contributions, according to a report of the Wisconsin State Legislature.
The bill, which now goes to the state Senate, passed 51-to-17 with 18 not voting.
The bill would generally end the collective bargaining process now used to determine how much most public employees contribute to the three systems, giving that authority to the state legislature, although police and fire employees would continue to enjoy collective bargaining, enabling employers to pick up their pension contributions.
If passed by the Senate and signed by Gov. Scott Walker, the bill is not expected to impact the investment allocation or strategy of the State of Wisconsin Investment Board, which oversees the Wisconsin system's $79.8 billion in assets, said Vicki Hearing, public information officer. She added that it's too early to make a conclusive determination.
At the $4.5 billion Milwaukee City system, Bernard J. “Jerry” Allen, executive director, said it is too early to determine the bill's impact.
The legislation wouldn't change the total contributions going to the three systems. In 2009, WRS contributions totaled $1.3 billion, based on a total required annual contribution rate of generally 11.6%, according to the state Department of Employee Trust Funds' latest comprehensive annual report. Employees paid $16.4 million of the contributions. Benefit payments totaled $3.8 billion.
The bill generally bans state, local and other public employers from paying the public employee share of the contribution. It exempts only police officers and firefighters, whose contributions would continue to be subject to collective bargaining.
For the WRS, the payroll pension contribution rate would be 5.8% for teachers and general state employees, who together make up most of WRS' participants. That's half of the generally 11.6% of the total required pension contributions to the WRS for 2011. The formula and total contribution rate differs for other public employee groups participating in the WRS, ranging from 13.3% to 17%. Most state, local and other public employers pick up the employee share of the contributions now, although the share of the employee contribution they now pay vary by public employers.
For WRS participants, the entire 5.8% would be credited to employees accounts, vested, and for most employees increase their separation and retirement benefits, according to another ETF report.
The state and most other public employers has been paying the entire employee share for teachers and state general employees in the WRS, although employees generally have been paying a 0.2% of their pay as a contribution adjustment that is not credited to their accounts and doesn't increase their WRS benefits. The bill eliminates that contribution adjustment.
The city of Milwaukee has been paying the entire 5.5% employee contribution share for general employees and 7% for police and fire employees, contributing a total $34.6 million in calendar year 2009, the latest data available, Mr. Allen said. The city didn't have to pay the employer share of the contribution because of the system's strong funded status. The Milwaukee city system was 113% funded in 2010, Mr. Allen said. The 2011 actuarial funding report isn't expected to be available until midsummer.
A fiscal estimate with the Assembly bill projects the employee contributions would decrease WRS' employer cost by $708 million annually, although the amount would be less for calendar 2011.
The state Senate hasn't been able to vote on the budget bill because it does not have a required quorum; Senate Democrats have temporarily fled the state in hopes of changing terms of the legislation.
Republican state Senate leader Scott Fitzgerald and state Reps. Scott Suder, Republican Assembly leader, and Dan Knodl, Republican Assembly assistant leader, couldn't be reached for comment.