ON-Lion Letter

"Many state and local public-employee pension funds are struggling to make up large gaps in their funding -- which cratered in the aftermath of the 2008-09 recession.  The one exception is Wisconsin, which, through responsible management of Wisconsin Retirement System (WRS) finances, has successfully maintained close to full funding of its retirement system since 2001," begins a November paper by Jagadeesh Gokhale from the National Center for Policy Analysis (NCPA) in Dallas and the John K. MacIver Institute for Public Policy in Madison, Wis.

Gokhale is a senior fellow at the Cato Institute in Washington, D.C., and a member of the Social Security Advisory Board.

His paper reviews Wisconsin's pension system to explore the reasons for its successful financial stewardship.

"Similar accolades are not warranted, however, for Wisconsin’s Health Insurance Program, which provides pre-Medicare retiree coverage at subsidized premium rates," according to Gokhale.  "This benefit is funded on a pay-as-you-go basis. Evaluated on the same basis as WRS (under the reporting rules of the Government Accounting Standards Board), this other post-employment benefit (OPEB) program has an unfunded actuarial accrued liability equal to a burdensome 29 percent of all the future wages of active participants.

"Wisconsin would be better served by reducing its OPEB commitments and by introducing a new system of health saving accounts to fund OPEB benefits for younger and future employees," he writes.

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports NCPA, MacIver, and projects at Cato.

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