by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Wisconsin governor Scott Walker’s signature legislative achievement, Act 10, was one of the most polarizing and galvanizing pieces of state legislation in recent memory. The law, which severely weakens public-union powers and mandates public-pension sanity, is providing a blueprint for other Republicans around the country. Walker’s public-pension stewardship also demonstrates why he is on the short list of serious presidential contenders.
According to a Moody’s report last year, the funding gap for America’s 25 largest public pensions alone is approximately $2 trillion, equivalent to more than half of the entire federal budget. Other estimates that use lower discount-rate assumptions put the total closer to $5 trillion. There is increasing urgency about ways to address dangerously underfunded pensions, from local bankruptcies to federal bailouts to increased taxes. But there is one place where none of that discussion is necessary. That place is Wisconsin.
Although it’s not all attributable to Walker, Wisconsin’s public-pension system is the healthiest in the country, and the only statewide public pension that is fully funded. And Wisconsin does this with fewer accounting gimmicks than many other states, using a fairly realistic discount rate of 7.2 percent. …
… Even though Scott Walker inherited a strong pension system when he assumed the governorship in 2011, it has improved in both relative and absolute terms under his watch. According to Standard and Poor’s, in 2012, Walker’s first full year in office as governor, funded levels dropped for 38 states. That stemmed from a combination of increased benefits and lower returns on investments as a remnant of the financial crisis. The Wisconsin Public Employees Retirement System (WRS), the ninth-largest public pension in the country, was one of a handful that did not worsen.