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Public Pension Lessons from Scott Walker’s Recall Election

We’ll leave the posturing about the ramifications of Wisconsin governor Scott Walker’s recent recall election to those with a political axe to grind. There’s no doubt that the whole thing was a big deal. A REALLY big historic deal. Walker was only the third sitting governor in United States history to face a recall election and became the first to survive one when he beat back Democrat challenger Tom Barrett by about seven percentage points.

At Heroic Investing, we’re more concerned about the backstory related to public pension plans than anything else. Here’s a quick synopsis for those who may have missed it. One reason Walker found himself on the recall ballot was due to the hue and cry raised by opponents in labor unions who were outraged that his financial austerity measures included changes to public pension plans and collective bargaining practices.

In particular, Walker made it mandatory that all public pensioners would need to contribute about five percent to their own medical insurance costs, a level commensurate with the status quo for private pension plans. At the same time, Walker adjusted the collective bargaining power of unions to what he considered a more equitable level. Since he won the recall election, the majority of Wisconsin voters must support these actions at least to some extent.

Once again, leaving the political posturing out of it, the larger point to take away is that public pension plans are high on the list of budget drains faced by states today. As such, expect them to continue to be targeted for reduction by governors and state legislatures for years to come. The perceived richness of benefits, a level that rises above most other pension plans, and the unfunded nature of most public plans, leaves them at the mercy of debt-ridden state budgets looking desperately for places to cut.

Like it or not, fair or not, this is the reality of public pensions in America today, which begs the obvious question: Are you willing to bet your entire retirement future that politicians will decide to roll the dice in your favor? We wouldn’t. That’s why we continue to strongly recommend you take charge of your financial future with smart income property investments.

The Heroic Investing Team

 

 

 

 

 

Flickr / DonkeyHotey

 

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