MPS finally discontinues “sweetener” pension

At its March 29 full board meeting, the Milwaukee Board of School Directors voted to eliminate a 30-year-old perk its teachers enjoyed, which is a second, supplemental pension often called the “sweetener.”  It’s a necessary move that I don’t really oppose, but it raises significant questions about the Board’s new communication systems and commitment to supporting its teachers.

The history of this supplemental pension begins back in 1982, back when, if you can believe it, MPS had too many teachers and wanted to encourage retirement.  The problem then was that the Wisconsin Retirement System, which held the entirety of MPS teachers’ pensions, had early-retirement penalties.  If MPS wanted its surplus older teachers to retire, there had to be some kind of enticement.

(Note that this was back in the glory days when the cost of one retiree plus one young teacher was less than the cost of one veteran teacher.  Really!  Such a world once existed!)

Over time, WRS changed its early retirement formulas, and no longer penalized teachers retiring before 65 years old.  Over the course of the last few decades, WRS slowly changed from an age-related model of benefits to a years-of-service model of benefits, so that even if a teacher retires at 57 years old, as long as she has 30 years of service, there are no penalties at all applied.

What MPS did back in 1982 was add a supplemental pension that allowed MPS teachers to retire without incurring the penalties WRS applied then.  However, MPS did not change this “sweetener”–so called because it sweetened the pot for older teachers to retire early–as WRS changed its benefits.  So as teachers got more back out of their WRS pension, there was no corresponding change to how much teachers got back out of their supplemental pension.  And eventually the “sweetener” stopped being necessary at all but remained a feature of the MPS contract.

MPS and MTEA did do some adjustments to the “sweetener” in 1998:  Rather than immediate vestiture in the program upon hiring, it took fifteen years of teaching in MPS to earn the benefit.  Early retirement was changed to 57 years old, and MPS required that teachers had to retire from MPS to earn the benefit–so no spending their golden years in the burbs and still expecting MPS to sweeten their retirements.

The problem with maintaining the “sweetener” is the cost.  At the beginning of the program, even well before the restrictions put on it in 1998, MPS contributed just about one cent for every dollar of salary, according to Chris Toth, MPS’s Director of Benefits and Insurance Services, at a Board committee meeting in March.  (You can listen to an audio of that meeting here (opens as an MP3).  Discussions of the “sweetener” start about an hour and fifteen minutes into the meeting.)  Today, MPS contributes nearly five cents to the supplemental pension for every dollar it pays in salary.  Yet and still, there remains a projected unfunded liability of up to $138 million, according to Alex Rivera, an actuarial consultant with the firm Gabriel, Roeder, and Smith who also spoke at the committee meeting.

This liability is future liability over decades, so not a cost MPS would under normal circumstances immediately need to bear.  But circumstances are not normal, and MPS faced massive cuts last year in state funding (plus a shrinking of its revenue limit), and is facing exactly the same predicament for next year.  So the Board moved to stop offering the “sweetener.”

The changes to the supplemental pensions are spelled out in a FAQ that MPS sent to its teachers.  We’ve made it available here (pdf) if you want to see it.  The short version is this:  When the teachers’ contract expires on July 1, 2013, several things happen.  One, all benefits accrued to teachers up to that point will be honored.  (Assistant Milwaukee City Attorney Ellen Tangen testified at the March 20 meeting that without this guarantee, the plan would be legally vulnerable.)  Two, no new benefits will accrue to anyone, and new hires–or rehires–will be excluded from the pension.  Three, anyone who is in the plan, but who has not yet reached their 15 years of service to be vested, can continue to earn years of service to get that fifteen years, but their payout upon retirement will only be based on years of service before July 1, 2013.

In all, according to testimony at the committee meeting and a news release from MPS, the district will cut nearly $20 million of its unfunded future liability and save $5 million annually of contributions to the plan.

To be clear, this move was not in reaction to the MPS teachers’ recent vote against concessions–the committee’s unanimous recommendation of the plan on March 20 and the full Board’s vote on March 29 preceded the news April 2 that teachers rejected the concessions.  At any rate, the deal teachers had worked out with MPS was that those finds would go entirely to class size reduction and saving specialist teachers; since the concession would not have reduced base salary, in fact, it would not even have made a dent in what MPS set aside for the “sweetener.”  The committee discussion didn’t mention the vote at all.

Here’s what gets me about the way the Board went about this:  No one knew it was happening.  At the committee meeting, there were exactly zero speakers from the public or among teachers who spoke about this to the committee.  There was no information communicated from MTEA, the MPS teachers’ union, to its members.  The first anyone heard about this was an email from Superintendent Gregory Thornton to teachers late Monday, April 2, long after discussion and votes had happened.

I believe this is because the Board has changed the way it communicates the agendas for its meetings.  There used to exist the “blue book” system, in which one could download the agenda and all relevant attachments from the Board’s main website.  In combination with the clearly available notices of upcoming meetings, members of the public could get a good sense of what was to be discussed at each meeting, what the recommendations of the administration and Board committees were, and, basically, when to show up to comment about issues that were important to them.  Since the beginning of March, it takes additional clicks–after intuiting which link is the right one–to find the “Electronic School Board” page.  From there, it’s another click (though, careful, one of the links just sends you back to the old Board page) to finally find the agendas.  Once you’re there, stuff is as thorough as the old blue books used to be (here’s the page for the March 29 meeting, for example–click on any agenda item for the full information and additional documentation), but getting there is surprisingly tough.

Not that getting anywhere on the MPS “portal” is a piece of cake–the whole thing is a bundle of bad design–but at least from the old Board page what the Board was up to was obvious.  Had this happened a few months earlier, I would have seen it, the media (if that’s not being redundant) would have seen it, the union would have seen it; as it is, this vote, while in public, was a surprise to a lot of people–and could have gone a different way.

Different how?  In the FAQ, MPS explains that they don’t expect this change to affect teacher recruitment: “Informal analysis shows that today’s 22 to 25 year old candidates are not thinking about a second pension 35 years down the road at age 55 or older. The MPS benefit package for new employees remains attractive and competitive.”  Given that action by the Board last November will cut new teachers’ pay by 15 or 20% come 2013, the package hardly seems that way at all.  Further, Dr. Thornton’s email specifically thanks those of us who “have stayed on the team,” knowing very well that continuing to teach in MPS is getting harder and harder to justify–the recent pointed “no” vote from the union, though short-sighted in my opinion, is a good gauge of that.

Instead, MPS could have re-worked the pension to keep it in some form, and make it more attractive to teachers, both current ones thinking of leaving and new ones thinking of joining the team.  I have argued for years that the “sweetener” was outdated and needed to be eliminated.  However, I always argued that it would should be either a bargaining chip for the union or, in the last year as Governor Scott Walker’s “reforms” devastated school budgets, that converting it to a voluntary contribution would be a way to save jobs while still benefiting teachers–and keeping some of us here who might otherwise think of leaving.  For young teachers, it could have been re-worked to become an offset for student loans:  take the pension payout now as a payment toward student loan debt, with a promise to work the 15 years needed for vestiture or else owe that debt to MPS.  There are any number of other tweaks that could have been made to make it a deal with teachers rather than something done to us.

If this (and November’s vote on a proposal that wasn’t even discussed at a committee meeting that took public comment) is a harbinger of how the Board will make decisions regarding employee compensation, then MPS teachers are in for a really tough time when our contract expires.

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