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Pension Funding 101 – Exposing the Lies

March 2, 2011

Tax.com’s David Cay Johnston exposes the truth behind Wisconsin governor Scott Walker’s claim that unionized state workers get their pensions “subsidized” by the state, a claim that has been blindly repeated in the press from the AP to Politifact. This is a carefully argued, well-documented essay from a source that is hardly partisan for labor, and bears close reading.

Among the reports that failed to scrutinize Gov. Walker’ s assertions about state workers’ contributions and thus got it wrong is one by A.G. Sulzberger, the presumed future publisher of The New York Times, who is now a national correspondent. He wrote that the Governor “would raise the amount government workers pay into their pension to 5.8 percent of their pay, from less than 1 percent now.”

Wrong. The workers currently pay 100 percent from their compensation package, but a portion of it is deducted from their paychecks and a portion of it goes directly to the pension plan.

One correct way to describe this is that the governor “wants to further reduce the cash wages that state workers currently take home in their paychecks.” Most state workers already divert 5 percent of their cash wages to the pension plan, an official state website shows.

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