Burden: Wisconsin's retirement system is a competitive advantage

The state’s retirement system was one of the things that brought me to Wisconsin.

When I was being recruited to be a faculty member at the University of Wisconsin-Madison in 2006, I was attracted by a few obvious strengths: a university with a superb reputation, terrific students and colleagues, and the livability and natural beauty of the region.

At the same time, I learned that, compared to peer universities, faculty and staff at UW-Madison earned lower salaries and shouldered heavier teaching and service responsibilities. These disadvantages cause us to lose some employees to other states.

But there’s one area where the state still has a competitive advantage: its retirement system. Although I didn’t know at the time what the acronyms ETF and WRS stood for, I was willing to make my career in Wisconsin in part because the system was equally invested in my long-term wellbeing through the state pension system.

The Employee Trust Funds (ETF) in the Wisconsin Retirement System (WRS) have been carefully managed by the State of Wisconsin Investment Board for decades. The Board manages a massive portfolio and generates solid returns for the roughly 600,000 current and former employees who take part.

The value of a predictable retirement has grown in recent years due to other changes that have rattled state workers. Raises — even those just to keep up with the cost of living — have been rare. From 2009 to 2011 state employees endured furloughs that further reduced salaries. State workers now pay more for their health insurance than they did a few years ago. In the university system where I work, tenure and shared governance have been weakened. In contrast to just about everything else HR-wise, the retirement system has remained a rock amid a sea of uncertainty.

These uncertainties make it harder to recruit and retain the best and brightest. In just the last couple of years, my department has been forced to fend off universities who tried to recruit a dozen of my faculty colleagues. Although it is flattering to have the top universities in the world trying to poach our professors, it is disruptive, and not in a good way. Our efforts to keep our colleagues in the state cost the institution a lot of time and money. Even if we hang onto employees, fighting off outside offers is a major distraction from our fundamental duties: teaching, research, and service.

Like other Midwestern states, Wisconsin suffers from a “brain drain” of young people and talented entrepreneurs going elsewhere. Even with these departures, the UW System has spawned hundreds of businesses, thousands of jobs, and billions of dollars in economic activity. Through the “multiplier effect,” each dollar invested in the university system generates more than $20 in return.

Bills have been introduced in the state legislature that would raise the retirement age and modify the formula for calculating benefits. Although some adjustments might be recommended by ETF in the future, it seems unnecessary to mess with a system that is working so well. As Gov. Scott Walker has noted, the state of Wisconsin has one of the best-funded, most solvent pension systems in the country.

It’s not that the policy makers have failed to consider other ways to structure the state’s retirement system. After careful analysis, a 2012 report recommended that the state ought to stick with the healthy WRS rather than move to an alternative such as a 401(k) or an opt-out system. And that endorsement came just three years after the Great Recession, which took down retirement systems elsewhere.

After tampering with so many aspects of state employment, let’s allow the retirement system to continue its successful history of providing for retirees and making the Badger State a magnet for productive workers.

Barry Burden is a professor of political science at the University of Wisconsin-Madison. Email: bcburden@wisc.edu.