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Milwaukee has its debt in check
Milwaukee has its debt in check
MILWAUKEE (WITI) -- As Detroit struggles with the fiscal fallout from its bankruptcy filing, collapsing under the weight of its debt, Milwaukee is at the other end of the spectrum. The city has one of the best-funded pension systems in the nation due to fiscal discipline and good planning.
Pension funding is important, because it's the key indicator of whether a city can make good on its legal promises.
When cities can't keep promises, credit is downgraded, borrowing becomes more and more difficult and eventually benefits and services are cut.
It's happening in Detroit, but not in Milwaukee.
The city of Detroit filed for bankruptcy on Thursday, July 18th -- the largest municipal bankruptcy filing in American history.
The Motor City collapsed under the weight of its $18 billion debt, acknowledging it can no longer keep its promises to pay for services and pensions.
"I'm very thankful Milwaukee will never be in that position," Milwaukee Mayor Tom Barrett said.
From his office in City Hall, Mayor Barrett can sit comfortably, knowing Milwaukee's pension system isn't simply in good shape. It's the best funded system in the entire country.
"There are people who love to rip Milwaukee and rip the city. People should understand this city has been a very well managed city fiscally," Mayor Barrett said.
According to a Pew study, Milwaukee's pension system is the best, with 113 percent funding. That means it's able to meet all of its obligations and then some.
By contrast, Chicago's pension system is the worst funded at only 52 percent -- meaning it can pay for roughly half of promises it has made. That kind of mismanagement can eventually lead to cuts in services, like in Detroit, where on average, it takes police an hour to respond to emergency calls.
"I can't imagine that. I can't imagine you call the police and wait an hour on average," Mayor Barrett said.
So how did Milwaukee fare so well?
For one thing, Mayor Barrett began setting aside $25 million to $30 million a year in a reserve fund years ago. He also resisted the pressure to increase pensions when the economy was doing well.
"I felt, 'OK, the market's in a good place right now, but what if things go south? And sure enough things went south," Mayor Barrett said.
For Mayor Barrett, the city's fiscal stewardship isn't just political. It's personal.
"I've got four kids and I feel very strongly about that -- that I don't want my kids to end up paying the credit card bill that we're leaving them," Mayor Barrett said.
The statewide pension system and the city's pension system are separate. However, Act 10 allowed the city to ask public employees to contribute more to their pensions and benefits.