In pension and benefits, Wisconsin tops Minnesota

  • Article by: BAIRD HELGESON , Star Tribune
  • Updated: February 24, 2011 - 6:18 AM

Wisconsin governor wants state employees to pay more into pensions. Minnesota's workers already do.

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Minnesota public employees such as Dave Albien, a plant maintenance engineer, put 5 or 6 percent of their pay toward pensions.

Photo: Glen Stubbe, Star Tribune

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If Wisconsin Gov. Scott Walker wins his quest to force state workers to contribute more to their pensions and health care costs, he won't exactly plunge the state to the bottom on public worker benefits.

He will put it on par with Minnesota.

Wisconsin's 267,000 public workers pay next to nothing out-of-pocket toward their pensions. State and local governments are supposed to pay half the retirement contribution, with employees paying the rest. But in Wisconsin, many union contracts stipulate that the employer -- which means taxpayers -- picks up the employee's share.

In Minnesota, it doesn't work that way because it can't. Here, public employees pay 5 to 6 percent of their salaries into their pensions, with taxpayers kicking in roughly the same amount. The split is written into state law and can't be tinkered with in collective bargaining agreements.

"A key difference in Minnesota is that no part of the pension is negotiable," said Mary Most Vanek, executive director of Public Employees Retirement Association (PERA), which serves 250,000 current and former public employees from more than 2,000 local units of government across Minnesota.

Walker's proposal would raise employee pension contributions to nearly 6 percent. In making his pitch, he noted that amount is equal to what most private-sector workers contribute to their 401(k)s.

Walker also would double state workers' health care contributions to 12 percent -- slightly less than what many Minnesota government workers already pay for health care coverage.

According to a 2010 study by the Minnesota Taxpayers Association, a Minnesota government worker who retires after 30 years earning $56,368 would get an annual pension payout of about $26,000.

Minnesota and Wisconsin both have robust pension systems. The Wisconsin Retirement System is the nation's ninth-largest public pension fund and the world's 30th largest pension fund. Minnesota has 800 pension funds, second only to Pennsylvania -- though most are small, like local volunteer fire departments.

Such large pension systems can create a big bull's-eye when the economy slips and politicians look to focus their blame for state budget problems.

Several public employees in Minnesota and Wisconsin say they have endured unfair wrath for benefits they negotiated through collective bargaining agreements. They said there's a misconception that taxpayers are footing the entire bill for pensions.

Investment dollars important

For every dollar paid out in Minnesota public pension benefits, employees contribute 15 cents, taxpayers kick in about 18 cents and the rest comes from investment earnings.

"When you are in the dog-eat-dog environment we are in now, people don't care about preserving benefits for anybody other than themselves," said Therese Cowl, 60, a Ramsey County social worker. "And when they are suffering, they don't want to see other people who are doing a little better."

Another key difference between the two states' pensions: If the stock market struggles for a prolonged period, Wisconsin pension checks can automatically be reduced. In Minnesota, only the Legislature can take action on pension checks.

Last year, facing a multibillion-dollar pension shortfall, Minnesota legislators reduced annual pension benefit increases to beat down a large chunk of the system's unfunded liability.

"It's a very sound system," said David Bergstrom, executive director of the Minnesota State Retirement System.

Several union members in Minnesota say it's unfair to compare contracts with their neighbors across the border. Workers in each state made concessions based on the politics, financial outlook and values at the time.

"It's apples to oranges. We collectively bargain," said Mel Preczewski, 30, an administrative support staffer with the Minnesota Pollution Control Agency.

Baird Helgeson • 651-222-1288

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