In all that has been written and spoken about Wisconsin Gov. Scott Walker, public employees and their pensions, the two words that might provide the most insight have yet to be uttered:
What does a journeyman professional basketball player have to do with the political crisis that has dominated news for much of the last two months?
After the 1999-2000 NBA season, the Minnesota Timberwolves were discovered to have secretly given Smith a contract that violated league rules. At the time, the Wolves needed room to maneuver around a league-imposed cap on player salaries, but they didn't want to lose Smith. Consequently, the team covertly agreed to give Smith a lucrative future contract if he would take less in the near term, freeing payroll for other players.
What are the Wisconsin lessons learned from Joe Smith? Just about everything.
First, the Wolves were risking future success to hold onto a player who made little difference to the team's immediate fortunes, much less its long-term achievements. In the year of his secret contract, Smith averaged fewer than 10 points and seven rebounds a game — hardly the stats of a franchise player. Second — and far more important — the consequences of the actions set the stage for years of mediocrity for the Wolves. As part of their punishment, they had to sacrifice three first-round draft picks. In the NBA, draft picks — and especially the first-rounders — are essential to success.
And there is Wisconsin in a nutshell. Walker and the Republicans have gone to the mat for a solution that only marginally addresses the state's immediate crisis while jeopardizing the potential for a long-term fix to a much larger policy challenge.
In the short term, Wisconsin's fiscal problem is that it spends more than it receives in taxes. That dilemma has very little to do with the public pension system. In fact, the nonpartisan and highly respected Pew Center on the States has called Wisconsin a "national leader" for its fiscal prudence in managing long-term health and retirement liabilities. Asking public employees to contribute more to their health and retirement programs will help solve the state's budget problem by bringing more money into state coffers, but public employee benefits are not the cause of the immediate crisis.
Ultimately, Wisconsin will have to fix structural problems in how it spends and taxes, as well as address the same challenge facing Social Security and the public pension plans in Minnesota and elsewhere. We are living too long. Fifty years ago, the typical person died just before reaching age 70. Today, the typical person lives to be nearly 80. Adding to the problem are retirement ages that have been lowered in the public sector. According to the Wisconsin Department of Employee Trust Funds, the retirement age has crept as low as 55 for some public employees.
Wisconsin public employees did have a sweetheart deal, allowing them to contribute little and receive a lot. That's not a system that is fair to taxpayers. Walker and the Republicans were right to tackle this political predicament, and the unions were reasonable in agreeing early on to changes.
The more serious challenge, though, is an actuarial reality. A plan in which more and more workers will collect decent benefits for longer than they worked is not sustainable — and that's as true for private pensions as it is for public plans.
But here's where the Joe Smith factor comes into play: The Wolves risked their future for a player who — even if the under-the-table contract hadn't been discovered — wasn't going to be the difference-maker for the team. Similarly, Walker bet his political capital on a solution — severely curtailing collective bargaining — that won't fix the pension plan's underlying flaws. Not only that, but his actions likely will make good policy that much harder to achieve. It's true that with severe limitations on collective bargaining, Wisconsin public employees probably won't see their retirement benefits grow much. But with the divisiveness created by Walker and legislative Republicans, it's hard to imagine unions sitting down to craft the kind of long-term solutions that are needed to solve the real crisis that is looming.
Minnesota has the opportunity to learn that the lessons of Joe Smith aren't just applicable to the hardcourt. The retirement benefits earned by older workers and retirees should be guaranteed. Those who are at a stage of life too late to make alternative plans should be protected. Meanwhile, young workers — those who are just beginning their public careers — need to make the transition to the kind of defined contribution plans that are the rule in the private sector. That's not a matter of public employee bashing, but of actuarial reality.
Minnesota, to the credit of public unions and policy makers, has started on the path of pension reform. But the hardest work still remains. Republicans must be willing to spend more taxpayer dollars now to make whole the pensions of older workers and retirees. Democrats will have to work with their union allies to start transitioning younger workers to a retirement plan that is sustainable (benefiting workers) and affordable (essential for taxpayers). Compromise, not confrontation, is the only path to creating a long-term policy that works for everyone.
Joe Smith is still hanging on in the NBA, and even returned to play two more seasons with the Wolves after a one-year banishment. For their part, the Wolves made it to the play-offs for four consecutive seasons after the contract fiasco. Eventually, though, the price of a solution that never was became too high. Losing those draft choices contributed mightily to the team's dismal record in recent years.
That's likely Wisconsin's fate — short-term success that only temporarily postpones the inevitable collapse. Minnesota's NBA team finally is creating cause for optimism for the future. We can only hope that the cry is heard by Gov. Mark Dayton, unions, Republicans and Democrats and, most of all, taxpayers and public employees:
"Remember Joe Smith!"
Tom Horner, a former public relations executive and MPR News political analyst, was the Independence Party candidate for governor of Minnesota in 2010.