Friday, December 19th, 2014
Mostly True
Walker
Says his "Act 10 reforms" have "saved the taxpayers some $3 billion."

Scott Walker on Monday, July 21st, 2014 in a news article

Scott Walker says union reform law that brought massive protests has saved taxpayers $3 billion

Scott Walker’s signature accomplishment as governor, the Act 10 collective bargaining reform law, curtailed the powers of public employee unions, reduced the take-home pay of most public workers and caused months of protests in Madison.

In a July 21, 2014 article in the Milwaukee Journal Sentinel, Walker defended the three-year-old law, and made a claim that he’s already begun to repeat ahead of the November general election.

"I support our Act 10 reforms," he said, "because they saved the taxpayers some $3 billion."

Walker has long been touting how the state and local governments have used the "tools" in the law to reduce spending on pensions and health benefits for public employees.

But Act 10 wasn’t a tax cut. So have taxpayers really saved some $3 billion?

Billions and billions

We’ve heard from Walker before about billions in savings.

In March 2014, he claimed that once his Blueprint for Prosperity plan was signed into law, "we will have delivered $2 billion" in tax relief -- a claim we rated True.

But that statement was about tax measures that have or will come about as a result of actions taken during Walker’s four-year term.

The new claim refers to taxpayer savings as a result of Act 10. The law requires most state and local government employees to pay a larger share of the cost of their pension and health benefits -- which is where Walker’s claim of savings to taxpayers comes in.

There was never a question that the financial impact would be large. In criticizing the law, the liberal Institute for Wisconsin’s Future said in December 2011 that the higher benefit contributions would cost public employees $700 million per year in take-home pay.

And public employees, of course, are taxpayers, too.

Pension contributions

Pension savings make up the lion's share of Walker's claim.

All state employees and nearly all local government employees participate in the state pension system. Only the City of Milwaukee and Milwaukee County run pension systems separate from the state.

For years in the state system, state government and municipalities paid not only the employer share of pension contributions but -- primarily due to collective bargaining -- essentially all of the employee contributions. Act 10 requires that for most public employees, pension contributions be split equally between employees and employers.

Contribution rates are adjusted each year, based on investment returns and other factors. For 2015, the rates are 6.8 percent of salary for most public employees and 7.7 percent for elected and executive employees. In other words, under Act 10, most public employees contribute 6.8 percent of their salaries for their pensions and their employers contribute the same amount.

Walker puts the pension savings at $2.35 billion -- $1.56 billion from local government employees, plus $794.8 million from state employees (including those working for the University of Wisconsin System).

That’s his tally for how much employees have contributed to their pensions from the time Act 10 took effect in 2011 through 2014, with the figure for 2014 being an estimate.

We obtained figures from the state Department of Employee Trust Funds. They show $1.59 billion in state and local government employee pension contributions from 2011 through 2013. And, more than half way through 2014, the department expects the 2014 employee contributions to be at or slightly above the $761 million they were in 2013.

So, even if the employee contributions in 2014 turn out to be the same as in 2013, the total savings to taxpayers would be $1.59 billion plus $761 million, or a total of $2.35 billion -- the same total Walker claims.

But it bears repeating -- it isn’t as though those pension costs disappeared. Rather, they were transferred from taxpayers as a whole to public employees.

Health insurance

The next-largest Act 10 savings cited by Walker is from health insurance. It’s similar to pension savings in that public employees are picking up a greater share of the cost, easing the burden on general taxpayers.

Act 10 requires most public employees to pay at least 12 percent of their premiums, which translated into a big increase for many employees and a savings for state and local governments. In addition, Act 10 gives public employers flexibility to change benefits, which can also result in additional savings for the unit of government involved.

Walker says school districts statewide saved $200 million in health insurance costs just in 2011-’12, the first year after Act 10. That calculation comes from the nonpartisan Wisconsin Taxpayers Alliance.

Dale Knapp, the group’s research director, told us the figure is conservative.

Meanwhile, Walker says state government has saved $482 million on health insurance savings as a result of the higher employee premium contributions and changes made to health coverage -- $264 million for 2012 and 2013, plus $218 million for 2014 and 2015. He cited figures the State Budget Office uses to help create the state budget.

The $200 million in school district health insurance savings plus the $482 million in state savings equals $682 million in health savings. Added to the $2.35 billion in pension savings makes $3.03 billion in total savings.

The figures don’t take into account health insurance savings seen by municipalities, nor health savings seen by school districts after the first year of Act 10, so the actual number would be higher. Knapp said he’s not aware of any savings calculations for municipalities.

Moreover, there is anecdotal evidence of other savings throughout the state.

For example, a Milwaukee Public Schools actuarial report in 2012 said Act 10 enabled the school district to shave $1 billion from its long-term benefit obligations to retirees. MPS used the law to raise eligibility requirements for retirement benefits other than pension and changed the design of health care plans.

Similarly, we found in a previous Act 10 factcheck that the law saved Milwaukee County $22 million in pension and health benefits in 2012, although that didn’t fully offset a reduction in state aid.

That leads to an important point before we close.  

The Act 10 savings aren’t a dollar-for-dollar a tax cut for taxpayers. Rather, they are savings in the context of a budget and what would otherwise be spent for a particular purpose or program. Indeed, Walker himself has often said that easing the employee benefits burden on state and local governments has given them flexibility -- whether that’s using the savings for property tax relief, shifting money to other spending or offsetting cuts in state aid.   

Our rating

Walker says his "Act 10 reforms" have "saved the taxpayers some $3 billion."

Requiring most state and local government employees to contribute more to their pensions has saved public employers more than $3 billion, including $2.35 billion in pension costs, and there are more savings that haven’t fully been tallied.

Those costs haven’t simply been eliminated, however. They’ve been taken on by public employees, who are also taxpayers.

We rate the statement Mostly True.