State Agrees to Settle Act 11 Lawsuit

The state’s interpretation of a 1999 pension improvement law is a first step toward providing additional funds that could be used for WEAC member salaries.

The state Department of Employee Trust Funds last week agreed to settle a suit filed by WEAC and the Milwaukee Teachers’ Education Association, challenging the agency’s interpretation of the employer credit in Act 11, the 1999 law that increased retirement benefits for thousands of public workers.

The provision in question requires the DETF to require municipalities and school districts to take their employer credit on a monthly basis, as a holiday from payments. However, the DETF told employers they could choose to take the credit as a holiday as was originally intended, hold on to the credits and delay their use, or use them to pay down principals on liabilities.

“That interpretation was a clear violation of the law,” WEAC President Stan Johnson said. “The state was allowing employers to avoid the payment holiday that would free up funds that could go to employee compensation. The result is even fewer resources for teachers and support staff.”

Johnson said the law was perfectly clear from the beginning.
“Gov. Scott McCallum last summer vetoed QEO changes in the budget, saying the employer credit would provide school districts with what he called an ‘$84 million windfall,’ which could go to compensation for teachers.”

Johnson said the settlement will lead to a challenge at the Wisconsin Employment Relations Commission over whether reductions in employer retirement contributions attributable to employer credit must be calculated in QEO costings.

Under the terms of settlement, the ETF Board will not be required to recalcuate the employer contributions but agreed to a stipulation that, in effect, stated that any employer use of the sums to pay down unfunded liabilty could be deemed a voluntary extra payment. Staff Attorney Tony Sheehan cautioned that the settlement, although important, is simply the first stage of a potentially long litigation battle.

Resource page on Act 11