When The Whip Comes Down

Peter Courtney, President of the Oregon Senate, has decreed that HB 4033 will not get heard during this legislative session.  HB 4033 is an OPRI-sponsored and supported bill that would stop PERS from releasing the names along with the information about retirement benefits in the future.  The media (principally the Oregonian and the Statesman Journal) are exerting tremendous pressure on the Legislature over this bill, and it appears that Peter Courtney is not willing to have the bill heard unless he has overwhelming bipartisan support to withstand the onslaught of the newspapers' lobbying and bully pulpit.  I'm hardly surprised by these tactics; I fully expected them.

At this point, I don't know how much help it will be to flood Senator Courtney's office with letters, but I think it wouldn't hurt.  I would also cc my own legislators (House and Senate) to dial up the pressure.  At the very least, the Legislature needs to know that constituents view this as a high priority.  Please make it clear that you are NOT opposed to the information release; you are ONLY opposed to attaching names to the individual pieces of information.

We should not allow one person to determine the fate of more than 100,000 individuals who've already been exposed needlessly by the Oregonian and the Statesman Journal.

You Win Again

After several email exchanges with the good people at PERS, I now have an answer to the question posed in my previous post "Hey, That's No Way To Say Goodbye".  Unfortunately for all the people retiring, the answer isn't the one they had hoped for, and I'm afraid that PERS is well-covered for what they do.  I won't bother with the first of the messages since it is largely unnecessary relative to the followup email.  From David Crosley, PERS' Communication Director:

"The IAP retirement application states: "IAP accounts are subject to earnings or losses. Your IAP disbursement is based on the account balance at the time PERS processes the payment, not the date you select to retire."

Tier One/Tier Two statute (Chapter 238) differs from IAP statute (Chapter 238A) regarding crediting.

For Tier One and Tier Two, Oregon Revised Statutes 238.300 states in part that interest is "credited at the time of retirement."

For the IAP, Oregon Revised Statutes 238A.350 states in part that "adjustments...shall continue until the account is distributed to the member or forfeited." "

Thus, the behavior PERS exhibits with regard to the distribution of the IAP account (however and to whom it is distributed) is entirely in conformance with the statute covering the IAP, written by the Legislature in 2003 and modified slightly in 2005.  If people are unhappy with the way PERS does things, it will require legislative action to change.  Like everything involved with the Legislature it is always wise to be careful what you wish for.  Moreover, PERS cannot be charged with failing to tell people as the application itself contains the key sentence (above) that describes exactly what happens at the time the account is distributed.

 

Hey, That's No Way to Say Goodbye

Some recent PERS retirees have discovered another potentially costly inconsistency with the way that PERS treats the IAP account.  I have numerous reports of members taking a December 1, 2011 retirement and wanting to roll their IAP into other tax-advantaged vehicles.  The problem they are encountering is that PERS has 120 days to effect the rollover, and when PERS does the rollover has a significant effect on the interest credited to the IAP at rollover.  For example, we have a member with a transferred IAP as of early January who received the November 30 earnings credit, another with a later January transfer who received the December 31 earnings credit (nearly a full 100 basis points different), while a third won't have the transfer until 2/8 and will presumably receive the estimated 1/31/12 credit.  This inconsistency is quite costly (or can be).  I suppose that the attitude is that "it all comes out in the wash", but some people would prefer you don't do their laundry<g>.

So how about it PERS.  Can't you establish a consistent administrative rule that gives retirees who roll their IAP's over and fixed interest rate that is effective the date of their retirement (assuming they make the request at retirement).  There is no reason that retirees should be subject to the whims and perfidies of how PERS operates to figure their final crediting on the IAP.

We Take Care of our Own

That used to be the motto of the group known as OPRI - the only group in Oregon dedicated exclusively to the welfare of PERS retirees.  I and many others are lifetime members of this organization.  Now about 28,000 retirees are confronting the issue of repaying benefits once thought to have been legally received, but now apparently are subject to the aggressive collection actions of PERS.  Where is OPRI?  We've heard neither hide nor hair of this organization.  The organization has been turned over to the lobbyists Mark Nelson and David Reinhardt (yes, *that* David Reinhardt) and all communications for OPRI go through the lobbyists offices.  How does a member of OPRI communicate with OPRI *without* going through the lobbyists?  We just want OPRI to take some leadership in directing PERS to offer something besides to ludicrous options they given to repay overpayments.  We don't ask for much.  We just want OPRI to get off their collective asses and actually do something.  For all we know, they may be, but communications are exactly ZERO between the organization and its members.  Jay Osborne, the new OPRI president, doesn't seem to respond to email or to outright pings on the PERS Discussion Group.

If this is the organization that I have to put my faith in to represent my interests, God help me.  I want my money back.  I've gotten nothing for my lifetime membership except an organization that doesn't respond, hides under the cover of a lobbyist, and only acts when it appears that someone on the Board's interests might be at stake.  I miss the late Russ Gregory, a Board member of OPRI who died unexpectedly last month.  Russ was always free with information and we had some idea what was going on.  Now that Russ is deceased, OPRI has gone dark.  OPRI no longer appears to care or to take care of its own.

OPRI WAKE UP AND SMELL THE COFFEE.  YOUR DAYS ARE NUMBERED UNLESS YOU COME OUT OF HIDING AND TAKE SOME AGGRESSIVE ACTION TO PREVENT THIS LATEST PERS TRAVESTY FROM COMING TO PASS.  If you need legal money, why don't you ask for it.  We are all getting tired of waiting, and angry that nothing evident is being done.  Earth to OPRI.  Where are you?

 

Things I Don't Need

This should be treated as an open letter to PERS and to OPRI:

Dear All:

I've been spending a lot of time these past few weeks thinking deeply about the upcoming attempt by PERS to collect overpayments from PERS retirees from the period between April 1, 2000 and April 1, 2004.  Since I retired during that window of time, I am one of the people who will be tagged during the collections for about $14,000 in received overpayments.  And I'm really, really, really angry about the methods that PERS has put in place to recover the money.  One way is a hoax and the other way is an income tax nightmare.

During the recovery period that Judge Kantor stopped back in 2008, PERS offered affected retirees two ways -- and only two ways -- to repay money that was given to them THROUGH NO FAULT OF THE RETIREE.  PERS failed to warn any member considering retirement from April 2000 to mid-2003 that there was ANY possibility or likelihood that their benefit might be subject to change because of a (then) little-known and not-very-well publicized case involving the City of Eugene and other employers versus the PERS Board over the earnings crediting for 1999.  PERS provided estimates and benefits that noted NOTHING about this case, and counselors did nothing to warn retirees that benefits might have to be reduced because the 1999 earnings had been challenged and were not yet final.  So, many members retired in complete and total ignorance of this case, and were stunned in 2003 when the Legislature, following Judge Lipscomb's ruling, codified the earnings as 11.33% instead of 20% and provided mechanisms for collecting the amounts overpaid.

PERS, deciding to be generous, came up with a "friendly" (to whom?) way to repay the benefits.  They created the utter hoax called "actuarial recovery".  In this method, retiree overpayments would be divided by the number of months remaining in their actuarial life, and benefits would be reduced by that amount.  Seems simple, fair, and appealing.  They weren't planning to charge interest - kinda hard to do when the mistake is their fault, not ours anyway - and so this looked like one of the most friendly, least punitive ways to repay the amount owed.  UNFORTUNATELY, this description leaves out one of the unsavory aspects of the method that turns this seemingly user-friendly approach into a financial windfall for PERS.  The catch in all of this is that the payments continue for as long as the retiree and a beneficiary (if there is one) live, not when the bill is fully paid.  Thus, anyone who beats the actuarial odds will be paying considerably more than what he/she owes and PERS gets to keep and invest this bonanza along with all the other funds.  PERS' rationale for this is that not everyone would live as long as their actuarial life expectancy and so the ongoing reductions in benefits are needed to subsidize the benefits not repaid from those who die early.

The alternative to this unappealing choice is to repay PERS in a lump sum, which guarantees that you won't pay a nickel more than what you owe, although there are some tax implications that would require a CPA to untangle for you.

And, when you receive the final invoice, you'll have a grand total of 60 days to decide which poison you want to take.

I am deeply offended that PERS thinks I'm that stupid that I don't see the hidden costs of the actuarial recovery method.  It doesn't charge interest, but it charges payments for money you don't owe if you live long enough.  How is that different from charging interest?  Why can't PERS shut off the payments when the balance is paid in full?  Believe me, as a computer programmer, I know that it isn't difficult to do programmatically unless PERS' computer system is written in Sanskrit or Hebrew.  This is a trivial programming task.  What about the losses from people who die young?  Well, there is a simple answer to that question.  What about all the earnings from the people who decide to pay in a lump sum?  All of that money will be turned in within 60 days of billing and PERS has the rest of our actuarial life to invest that money and more than cover the losses from people who don't make it to fully repay their debt.

Furthermore, why aren't there more repayment options? The actuarial reduction method is a punishment to people who simply lack the funds to pay in a lump sum.   They are subjected to a lifetime reduction in benefits solely because they cannot pay all at once.  For the poorer of our brethren, there is NO choice on how they repay PERS.  This is akin to loan sharking because, as usual, the poor will get stuck paying more and for longer than the more affluent who can afford to pay the lump sum and be done.  Talk about economic discrimination.

PERS has methods on the books now to allow individuals to accelerate their repayments but only for the length of time it takes to repay the bill.  For example, ORS 238.715 offers the possibility that PERS can reduce member benefits by as much as 10% per month to repay a debt.  At this rate, most people would have repaid their debt in 3 or 4 years, rather than 20 or 30.  I suspect some people would take this option if it were available.

What about a 5 year payment plan where individuals who can't afford the lump sum could repay the benefit in 5 equal installments over 5 years (or 60 equal installments over 5 years).

There are many options that would lighten the burden on the less affluent, or encourage some of us to consider a shorter time payment plan than the lump sum.  In any of these cases, PERS would get its money back sooner, be able to invest it in securities that would more than indemnify against any losses due to early death and failure to complete repayment.

The bottom line is that PERS must consider some alternative repayment methods to the ones it offered the first group.  It is clear that if PERS continues to collect payments in perpetuity, it must be in violation of the Fair Credit Standards and Practices in a way that would make a loan shark blush, not to mention invite scrutiny from the same agency.

This whole issue needs careful input from legal advisors and those who are not thinking of taking the easy way out.  It would be nice if OPRI would get off its hind end and take an active role in pursuing alternatives to the ones available now.  When the first round of repayments began, OPRI was nowhere to be found except through the actions of the PERS Coalition in the courtroom trying to prevent repayment at all.  That's all noble and good, but now it is crunch time and most of us will be facing the invoice in a few months.  At this point, we need some legal hardball.  What I don't need is someone telling me how generous PERS has been.  That's bullshit and we all know it.

Money Changes Everything

At the end of last year (2011), the Oregon Supreme Court ruled in its Robinson v PERS opinion that PERS could collect the overpayments that have been outstanding since as early as 2006 when the Strunk/City of Eugene remediation plan was implemented.  To refresh memories, the overpayments were the result of PERS calculating benefits for people who retired between April 2000 and April 2004 on the basis of the challenged 20% earnings crediting for 1999.  When the 2003 Legislature and the PERS/City of Eugene settlement agreement were finalized, the earnings order was vacated and replaced by one crediting only 11.33% for 1999. The overpayments resulted because PERS used the account balances that included the 20% crediting and then subsequently recalculated benefits using 11.33%.  Thus, from the time an individual retired in the specific window mentioned above to the time the benefits were corrected beginning in 2006, individuals were receiving more than they were legally entitled to receive.  (I'm stating facts here, not my individual opinion about the propriety or ethics of collecting on the overpayments).  For almost 20,000 individuals, they were overpaid anywhere from a high three figure amount to some healthy five figures.  PERS began collecting from some members before Judge Kantor ruled that PERS couldn't collect the money and so they are not affected by what PERS does now.

The most common question I receive is "how is PERS planning to collect the money".  Again, a brief history lesson.  When PERS decided to begin collecting the overpayments, it gave retirees two options to pay.  The first option was to repay the money in a lump sum and be done with it.  The second option was to take the balance due, compute the individual's life expectancy, and reduce the benefit an amount deemed to recover the overpayment by the time the retiree reached his or her actuarial life expectancy.  Because PERS intended to charge no interest on the repayments (it wasn't the individuals' fault that they occurred), the plan was to keep on collecting until the individual and his/her beneficiary died.  Of course, for individuals with long life expectancies, they would be paying significantly more than individuals whose life could be foreshortened by illness, or unexpected events.

It is unlikely that PERS will change the methods by which individuals can repay the benefit overpayment, but the time elapsed since the original collection invoice and now has been significant and many of us have had plenty of time to think about this and to come up with important questions about the process that have not been satisfactorily answered.   Yesterday, I sent a list of four questions to PERS.  Predictibly PERS was not ready to answer these questions, but they remain important and will demand answers before PERS starts collecting from anyone else.  For the benefit of all, I post my questions here.  I don't pretend that these are the only questions, but they are ones that have occurred to me and to others as the day of reckoning draws nearer.  People are not going to have a long period to decide what mechanism to choose, and the answers to these questions may go a long way toward helping people make the correct decision.  Of course, these presume that individuals actually have a choice.  For many people, paying in a lump sum simply isn't an option.

My questions are predicated on a simple fact.  The money owed is money we've already received and have already paid federal and, in most cases, state income taxes.  We are going to be required to repay the gross amount, not the after-tax amount.

Herewith are my questions, with an additional one not posed in my email.

1.  Under the actuarial repayment method (ARM), is the payment computed only once and then remains fixed for the duration?  In other words, are there circumstances under which the ARM payment changes (e.g. after a COLA or a pop-up following the death or divorce of a beneficiary)?

2.  Is the ARM payment taken pre-tax (as it should be), or is it taken post-tax, which means it will be taxed twice.

3.  Under a lump sum repayment, will the 1099R for the tax year in which the payment is made (presumably 2012), reflect the amount in box 10, 11, 12, 13, 14, where such non-taxable credits are typically reported?

4.  If the 1099R does not show the amount of the lump sum payment as an income offset for 2012, then will the invoice we receive be detailed enough that the amount of overpayments will be listed by calendar year of overpayment?  This level of detail would be critical should those of us who have sizable overpayments to make decide to file a "right of claim" (section 1341, IRS Code) on the amount as either an itemized deduction or a tax credit (lump sum greater than $3000) against our 2012 Federal and State income tax returns?  This should be mandatory of PERS.  The IRS isn't likely to take kindly to the typically uninformative bills and statements that we've gotten from PERS up to this point.  It is imperative to have complete documentation of what and why we are repaying so that we can take this to the lawyer or accountant of our choosing and file whatever papers we need with the IRS to facilitate a credit for the amount of taxes we've paid on money we're no longer entitled to.  No one is asking PERS for tax advice and no one is asking PERS to do anything extraordinary.

5.  Would it be permissible to pay the lump sum by taking money from an existing tax-advantaged account - IRA, 401K, 403B, 457, SEP - and negotiating a trustee to trustee transfer, thereby not triggering a taxable event?  In this circumstance I don't believe that there is a "right of claim" to be exercised and this might be the easiest method of all for many.

This is not an ordinary event in one's tax life.  Most people don't have to repay amounts that have already been taxed.  PERS should bend over backwards to provide ordinary, but complete, documentation of the when, how, why, and how much so that individuals can avoid the whammy of repaying a pre-tax amount with post-tax dollars.

The Thrill Is Gone

Yesterday marked the final business day of 2011.  Ever since 2000, PERS retirees and future retirees have been watching and waiting for the courts to unravel, untangle, and to clarify a variety of situations that threatened the hard-earned pensions of public employees in Oregon.  Starting with the City of Eugene case, filed in early April of 2000 up until December 30, 2011 - nearly 11 full years - retirees have lived in a state of perpetual anxiety that some component of their pensions would disappear either before they had a chance to retire, or even afterwards.  The final gavel on all the litigation surrounding the City of Eugene case, the Legislative reforms of 2003, the "infamous" settlement agreement between the City of Eugene plaintiffs and PERS, and PERS' hamfisted attempt to collect "overpayments" from those members who retired between April 2000 and April 2004 ("window retirees") came down yesterday.  The Oregon Supreme Court rejected the review of its own verdict in the "Robinson" case -upholding its own verdict - and it closed the door on all but a small piece of "White" case - that which charged PERS with a breach of its fiduciary responsibility in signing the settlement agreement.  The string has run out; the collection efforts for the remaining "overpayments" from the 1999 "over credit" will be permitted to go forth, and by Spring of 2012, "window retirees" will either need to write PERS a check to clear their accounts, or begin to see their monthly benefit reduced by some small, but unknown, amount in perpetuity.  I haven't decided what I am going to do.  It grates me no end to have to see my benefit reduced for my life and the life of my beneficiary; on the other hand, I'm in no mood to hand over a large sum of money to a bunch of people who simply don't deserve the money.  I did nothing wrong and I submit there was no error in my benefits regardless of what politics and the courts have said.

The only heartening thing about the Supreme Court's ruling in the White case is that the court remanded back to Judge Kantor the matter of PERS' transfer of $61 million from the contingency reserve into the accounts of the 8 employers responsible for the City of Eugene case.  The Supreme Court ruled that this was not a condition of the settlement agreement and that the amount bore no relationship to the amount the employers may have been overcharged as a result of retirements that occurred from the 8 employers during the period in question.  The Supremes ordered that the amount be actually computed, not just estimated, and this will likely result in higher employer rates for the employers who benefited from this arbitrary transfer of money.  This means that, hopefully, the City of Eugene plaintiffs will finally get hoist on their own petards in all of this.  While it was a small victory for members - one that won't make any difference to any individual - it at least punishes PERS and the City of Eugene plaintiffs for what appears to me to be a form of collusion.  Too bad there isn't any worse punishment.  But, I'll take a victory in any form at this point.

The last decade's worth of litigation has been extremely costly to all parties and PERS has played both sides of the street for too long now.  The time has come for this gamesmanship to cease and desist.  PERS must decide NOW whether it is a trust for the benefit of its members, or a slush fund that benefits employers.  We may all be stakeholders in the system, but the legislative mandate for PERS is clear.  It exists solely and exclusively for the benefit of members of the system.  The moment it ceases to exist for that purpose alone, it makes a mockery of trust law, and makes the notion of a fiduciary responsibility to the members a joke.  Finally, it is absolutely clear that PERS has become so heavily influenced by politics that it is impossible to get any sort of a fair hearing in Oregon.

From the very beginning of the decade, starting with the City of Eugene case, it has been clear that politics and economics would take priority over statutory duties.  The courts have been influenced by the ravings of the media, the media has pounced on any small or large PERS story with the gusto of a ravenous coyote.  And the citizens of Oregon, who have eaten up the mainstream media's reports like the starving in Ethiopia, have no interest in the truth of how PERS came into being, what its functions are, and who it is supposed to serve.  The public has swilled up the big lie that "…all money in PERS belongs to them, the taxpayers" and not to the people who actually earned and saved that money.  I hope that the 2012 Legislature will put an end to this bloodlust by passing a bill that declares retiree personal information, including benefits, is completely off limits.  There is no compelling need to know much of anything except the amounts of benefits, not the specifics of who gets them.

This is my last post for 2011.  While I wish I could have ended the year with cheerier news, I guess the "good" news is that 11 years of litigation have finally come to an end.  Now, let's hope the Legislature has the good sense to leave the PERS system alone for awhile and let it recover from these debacles.

I wish for all to have a safe, happy, and prosperous New Years.  I say that without irony.  I hope that the financial markets stabilize and people can get back to enjoying their retirements.  Some of us have wasted nearly 11 years hoping to get some closure on the crap of the past decade.  At last we have it; it is time to enjoy what time we have left.

 

 

 

Fruitcakes

OK. A bit of an inside joke for those who know Jimmy Buffett music.  Mea culpa, mea culpa mea maxima culpa.  In my last blog post, "Dark Side of the Moon", I made an error that Ted Sickinger of the Oregonian took the time to point out.  In the case of the "true up" of Mike Bellotti's final PERS benefit, the mismatch between his account balance plus the employer match is made up by the Employers' Rate Reserve fund, which is charged to all employers in the rate class, not just the University of Oregon. This means that, in Bellotti's case, the way the University of Oregon computed his salary (including all the top ups from outside sources) ended up strongly underestimating what his final pension benefit would be.  Thus, when Bellotti retired the bill for that underestimate is shared amongst all the employers in the State pool regardless of the source of the money.  This leads to a whole series of interesting questions about how things like taxes were handled on this income when it was being earned and how the University of Oregon and PERS could have been so off the mark in funding his benefits.  After all, if Bellotti's endorsement income and Nike income all passed through the University and some of it on to Bellotti, wouldn't the University have paid PERS premiums on the money at the time it was earned.  Or does this count as income and Bellotti is expected to pay his own taxes on it, but at the end the University of Oregon saddles other employers with part of the bill?

I stand by the rest of my piece, but the "true up" was most definitely wrong.  Because the University of Oregon only bore a small part of the bill for Bellotti's retirement, there is a scandal there.  But the scandal belongs at the feet of the University of Oregon, not PERS.  PERS just administers the system it is given and has to pass through the rules as they are applied.  I don't know when individual employers were let off the hook for these types of errors and omissions, but it had to be after 2002.

One thing I find quite curious in this whole matter.  The IRS limitation on pension income passed in 1994.  It applied to all working people regardless of when they were hired.  I know this personally because my wife, who was hired in the same year as Mike Bellotti by a private employer, was hit by this and continues to be affected by it until she retires.  There was a limit in existence prior to 1994, but at the time it exceeded my wife's salary.  The change in 1994 set the limit back to $150,000 and increased by $10,000 chunks until it was at $200,000.  At that point, the limit went up in $5000 chunks where it rests at $245,000 today and will be $250,000 next year.  What I don't understand is how anyone who retired after 1994 could have escaped that limit, as Bellotti and all PERS retirees hired prior to 1994 seem to have been.  Call it envy or call it curiosity.  What IRS ruling did PERS get that permitted Bellotti to draw a pension of $500,000 on salaries that weren't eligible beyond $245,000.

I leave that for the investigative reporters in the group to figure out.

Dark Side of the Moon

Apologies to Floyd.  As we predicted, the folks at the Whoregonian could not wait to start their muckraking about individual PERS recipients within weeks of the first data release.  While the object of their rectal examination is former University of Oregon coach and Athletic Director Mike Bellotti, the reporters have not been satisfied to wait until the second data release (March 9, 2012) to start pursuing their charges of some sort of fiscal shenanigans with Bellotti's outside benefit.  You'll get no argument from me that Bellotti's benefit needs some scrutiny, but many of the answers could have been obtained with the second release of data.  Moreover, it proves the point that the analysis could have been done without exposing the names of any individuals since the reportwhores were bound to make information requests anyway.  If I had seen a $41,000 per month benefit showing up at the top of the list, more than $10,000 higher than the number 2 on the list, I'd probably start asking some specific questions about who that individual was.  And so they would have found out anyway with a special information request.  And in my world, a special information request for a name would have been a far better solution than the shotgun, throw every name against the wall to see what sticks, approach.

So what have we learned.  Well, we've learned that there are lots of unusual benefits that got to be counted as salary for PERS benefits than any of us could have imagined or any of us have access to.  It is nice to know that the use of a car, a country club membership, and certain kinds of endorsements can be run through the University and then be valued for salary purposes and included in final salary calculations.  What we don't know is exactly who paid for those benefits during Bellotti's career.  Duck boosters (no tax money), Phil Knight (no tax money), Duck Athletic fund (ticket sales and sales of merchandise, no tax money).  So, to the best of our knowledge, only a small amount of public money was used to pay Bellotti's salary while he was working.

To get to the final retirement benefit we run into another problem.  There is no question that Bellotti's actual salary did not generate the kinds of income to PERS to have covered a combination of a $2.5 million account balance and a $2.5 million employer match to fund the Full Formula benefit.  According to PERS, the money needed to fund Bellotti's stream of retirement payments amounts to $5 million dollars throwing off 8% interest for Bellotti's life.  Any mismatch between Bellotti's actual account balance (maybe $600,000 at retirement) and the employer match (another $600,000 give or take), would have to be made up by the employer at retirement so that Bellotti's working balance would make it to the initial $5,000,000.  This raises another question:  WHO actually paid the the "true up" to PERS?  We know it was the University of Oregon, but we don't know where the money came from.  I can guarantee that it DIDN'T come from taxpayer dollars.  I'm willing to bet that a donor (Phil Knight? again) or the Duck Athletic Fund (more donors) ponied up additional contributions to the DAF so that Phil's true-up payment could be made.  Thus, we have it likely the bulk of the money used as the corpus for Bellotti's pension DID NOT come from taxpayer money.  We don't know this for certain because the folks at the local rag didn't bother to ask where the money came from.  A straightforward question:  did any of the money required for the Bellotti "true up" payment come directly from taxpayer sources?  would have answered the question.

The only question I have is the curious and slightly unsavory appearance of the ex-Mrs Bellotti picking up nearly $50,000 per year as the result of a divorce degree with Mr. Bellotti, and then continuing to draw that money even after she and Mr. Bellotti remarried sometime later.  It does have a slightly funny smell to it.

But the thrust of the O's article is that the whole matter of Bellotti's pension smells funny and, by implication, there must be a bunch of other smelly cases too.  I'd hazard a guess that Mr. Bellotti's case is unique as all the other coaches and AD in the system were hired after the IRS salary limitation came into play.

So I say to the Oregonian.  Hope you enjoyed your trip to the dark side of the moon.  You probably won't find too many other cases like Bellotti's, if you find any at all.  When you scramble back into the light, I expect that you'll be left with only this story to tell.  The rest of us don't have tricks like these employed.  So, you've left 105,362 of us exposed just so you could tell the (non) story of Mike Bellotti.  And I am willing to bet that the Mike Bellotti story will result in a bunch of unnecessary sturm und drang at the next Legislature that will end up hurting a bunch of innocent people unnecessarily.  Virtually none of us have guardian angels like Uncle Phil.

One of Us Cannot Be Wrong

OPB is going for a second helping from the PERS trough on Tuesday December 13, 2011.  It is a follow on show to the December 5 episode featuring Dennis Thompson of the Salem-Statesman Journal.  Paul Cleary, Executive Director of PERS, yours truly, and one other former PERS member will be "guests".  Cleary will be in the studio, while the two of us commentors will be in the peanut gallery from the phone lines.  I won't have to call in.  They will call me and give me my 15 seconds of fame (or not).  Paul will, no doubt, be talking about the facts of PERS; hopefully those illuminated by the semi-annual publication called "PERS By The Numbers", which the Statesman Journal editor, Dick Hughes, seems to have just discovered although this publication has appeared twice annually since 2005.  It is really worrisome when the MSM cannot discover a document that would have answered virtually ALL questions since it first came into existence.  No wonder most of us have little or no respect for the MSM.

This follow on show on OPB and "Think Out Loud" is the result, I'd like to think, of the loud protests evident on the OPB web site about having Thompson on before any facts were presented about the PERS system.  While I am optimistic that Cleary and I can present facts that will allow the public to understand better how benefits come into existence in the PERS system, I am pessimistic because my experience has shown that most people who have an ax to grind with the PERS system don't understand a whit about it and are, to steal words from my wife, "invincibly ignorant".

My counterpart on the show will be someone who can't understand why his friends or neighbors, teachers, can possibly get or deserve their $72,000 annual benefit.  I make considerably more as the nosy among you have probably figured out, but my benefit can be explained away easily.  My "opponent" on the show is wrong and I hope to be able to show him why.  Of course, "history is obdurate" so I may not be successful in convincing him or anyone else who simply refuses to know.  A friend from a past life used to say "people would rather believe than know".  I think truer words have not been spoken.

Tune in for yourself on OPB radio to Think Out Loud Tuesday December 13, 2011 at 9:00 a.m.  The PERS segment is scheduled to be at the top of the hour.

 

 

Don't Think Twice, It's All Right

The usually reliable radio show, "Think Out Loud" carried on Oregon Public Broadcasting will air a show tomorrow (December 5) to discuss the outing of PERS retirees and their benefits.  The ONLY guest on the show to the best of my knowledge will be Dennis Thompson, the flack for the Salem Statesman-Journal, who has written about PERS issues for the paper for the past several years.  Thompson is a comparatively fair guy who tries to print the truth occasionally, but mostly he gets caught up in the rhetoric about PERS where facts take a back seat to opinions.

I am a Cornerstone member of OPB.  That means I donate more than $1000 per year to public radio.  Part of my expectation for such a donation is that OPB present fair, unbiased, and objective journalism in their programming.  The "Think Out Loud" show tomorrow fails on ALL those accounts.  Thompson has already demonstrated his bias and lack of objectivity, and only barely meets the standards of fairness whenever he's been backed to the wall and has had to correct something he's published.  There are many people in Oregon, myself included, who could easily provide OPB with an effective counterpoint to much of what Thompson has tried to argue about the shortcomings of PERS.

As a public service, I'm going to offer some FACTS about PERS that Mr. Thompson surely won't present because they would contradict his opinion about the system.

• The MEDIAN PERS benefit is $1902.66 (less than $24,000 per year).  The median is used here because it is a robust statistic and a clearer indicator of the true state of PERS than the average or mean, which is something above $2300 per month.  The average is strongly affected by the outlier benefits of people like Mike Bellotti.  If you averaged my salary, my middle daughter's salary, and Bill Gates' salary, you'd come up with a figure of over a billion dollars per year.  Is that an accurate description of the average salary?  Of course not.  You'd argue that Bill Gates' salary exerts such a strong influence that it produces a misleading average.  Well, the same is true with the PERS statistics.  Out of 105,363 currently listed retirees, slightly more than 800 receive benefits in excess of $100,000 per year (less than 1% of the whole population), while there are about 13 members whose benefits exceed $200,000 per year.  Even averaging among the 13 members with $200,000+ per year pensions would be heavily weighted by Bellotti's outsized benefit.  So, there is no reliable way to estimate a measure of the "average" PERS benefit without encountering the effect of less than 1% of the population that leverage the average up by nearly $5000 per year.

 

• Concerning the 6% pickup.  Yes, this benefit was negotiated in 1979 in lieu of a pay raise that would have been in excess of 10% due to 16% inflation.  While pay raises resumed some years later, two things seem to have been forgotten.  The pickup in lieu of a pay raise was just that.  Nobody got a pay raise when that happened.  Salaries lagged behind and when pay raises resumed they were always less than the current rate of inflation and never restored the 16% lost to inflation in the year of pickup.  To suggest that the pay raises that resumed somehow negated the need for the pickup is to fail at basic economics.  The only way that the pickup could have been eliminated would have been to give the pay raise that the pickup obviated.  Since that never happened, the lost purchasing power of public employees still getting the pickup has never recovered.
• Employer rates are going to bankrupt Oregon.  This has been one of pet peeves since at least 1994.  During the go-go 1980's and 1990's the employers were banking as much as the employees were on their PERS accounts.  Because high earnings tend to lower employer rates, the employers failed to plan for the day when the gravy train would stop.  They took the low rates, failed to bank the savings, and then had to beg PERS for an installment plan to amortize rate increases over a longer period of time.  When even the installment plan didn't work, many employers went for Pension Obligation Bonds essentially betting on the same forces that got them into hot water in the first place.  The rates the employers are paying now are the result of employer greediness and spending patterns, the PERS Board's feeling sorry for the employers, and sheer stupidity borrowing to pay off what amounted to another loan.  The employer rates can be blamed almost exclusively on the employers.  Nothing PERS members did or could do caused the predicament the employers are in today.
• Taxpayers are entitled to know PERS benefits because they pay the salaries.  Yes, this is partly true, but not entirely true.  Let's take Higher Education as an example.  Higher Education's general fund budget comes to less than 10% of the operating costs of each institution.  Therefore, taxpayers are responsible for 10% of the salary budget.  At best, they are entitled to know approximately 10% of my salary.  When the issue comes to PERS benefits, the people receiving them are no longer receiving taxpayer money.  Roughly 25% of the money coming in to PERS comes from general fund sources.  The remaining money is from investment earnings.  So, my retirement benefit derives from 10% of my salary and a fourth of that to PERS, and the remainder from non-taxpayer sources.  I'd gladly reveal the 2.5% of my PERS benefits that can be traced back to taxpayer sources.  My academic salary came from grants, contracts, tuition, fees, indirect costs on grants and contracts, and only a small fraction from the taxpayers.  Thus, my retirement benefits began from those same sources, and then investment income funded the rest.  This argument holds true for many agencies that have a source of income other than the state.
• Whose money is the 6% pickup.  It is mine.  PERS and my employer always treated it as part of my salary and when my PERS benefits were calculated, my final salary always included an additional 6% as the pickup.  If there was ever any doubt about whose money that was/is, this is the needed confirmation.  If Thompson, or anyone else, wants to propose eliminating the 6% pickup, just remember that it would be a 6% pay DECREASE, plain and simple.  It isn't a matter of saying "well, we eventually gave you raises didn't we"?  Nope, not at all.  We never recovered any of the purchasing power lost to that tradeoff.  Taking it away now, or making employees pay it instead (the same thing, in effect) is a salary decrease plain and simple.

 

So, I challenge my friends at OPB who've happily taken my Cornerstone gift every year for the past four or five years to honor my expectation of "fair, impartial, unbiased".  Failure to deliver on this basic promise will cost you my cornerstone membership, and possibly more.  I wouldn't spend too much time thinking about it.  The show airs tomorrow.  If you have to think about it a second time, you're done from this household.  I'll continue to listen, but you won't get those membership dollars from me.

 

 

 

When The Whip Comes Down

When will they ever learn?  The PERS Coalition has had a dreadful record of inserting themselves in legal proceedings at exactly the wrong time.  I have no idea which genius decided to *not* intervene in the original legal proceedings between PERS and the Oregonian and the Statesman-Journal.  By taking the "high road" in that case, the parties reached a settlement (does that sound achingly familiar?) that permitted the newspapers to have somewhat free reign over the lives of PERS retirees.  So, at the last minute (relative to the length of this case), the PERS Coalition pulls a goal-line stand to enjoin PERS from releasing the information (today) to the newspapers.  And the legal response?  Too late.  You don't have any standing.  You could have had standing, but you sat on your hands while the real action was taking place.  Too bad, so sad, way too late.

Argh is all I am capable of saying at this point.  The Coalition has been defeated again by its own poor sense of timing.  Rhetorical question:  does PERS ever switch sides in litigation?  Does it rain in Oregon?  Does this "lack of standing" have a familiar ring?  It does to me.

So, when you wake up one of these mornings with your name plastered across one of the newspapers or find your name in some whipped up database, you can blame both the PERS Coalition and Attorney General John Kroger, and for good behavior, you can add PERS itself to the list of people selling us out right, left, and center.  The whip has come down again, and we are again the whipping people.  How fun.

God Willin' and the Creek Don't Rise

Nothing like taking things down to the wire.  The PERS Coalition's lawsuit against PERS to prevent the release of retiree names with the data dump on November 21, has been scheduled for a hearing at 1:30 on - you guessed it - November 21.  Judge Vaughn Day of the Marion County Circuit Court has been assigned the case.  Day, a recent Kitzhaber appointee, was previously a plaintiff's attorney and also the state chairman of the Oregon Republican Party from 2005 - 2009.  I have exactly zero information on the few rulings Judge Day has made since his appointment in August 2011.

There are some legitimate concerns about the timing of this hearing.  While I can believe that Judge Day's calendar prevents him from hearing the case until THE day, one has to wonder about how this will play out.  For the sake of argument, let's assume that Judge Day holds with the plaintiffs and enjoins PERS from releasing the names along with the current benefit.  How does this work if PERS has already given the newspapers the information and they've already done something, albeit small, with it.  Suppose the Oregonian jumps in immediately and publishes the names and benefits of all who have retiree benefits in excess of $100,000, which was their request.  Since there are less than a thousand of these people, the data could be extracted quickly and easily and this could be published almost immediately, even before the Judge's ruling comes down.  What if PERS turns over the data earlier than November 21 so that we wake up on the morning of November 21 and find something far greater on the front page of both the Salem and Portland papers?  How would Judge Day handle that, particularly if he is inclined to support the plaintiffs' case?  Would the Oregonian and the Statesman-Journal be that ballsy knowing they would be at a hearing on the same day?  Are bullfrogs waterproof?  Does it rain in Oregon?

The logical and rational thing to do would be for PERS to hold back turning over the data until Judge Day rules on the 21st.  Since his decision must be issued in a timely matter, an injunction or not will almost assuredly come down nearly immediately after or during the hearing.  PERS should prepare two sets of data - one containing names and benefits of all 110,000 retirees or their beneficiaries, and a second containing only the benefits.  This way, they could meet the terms of the settlement agreement one way or the other by providing the mandated (by Judge Day, not by the settlement agreement) data no later than November 21st.

It is hard for me to imagine that PERS would let loose of any data until this legal obstacle is overcome.  At least that is the point of the title of this post.  I don't have any faith in the integrity of either newspaper, but I still hope that PERS has at least an ounce of integrity remaining in its rapidly depleting bank.

Somewhere There Is A Someone

Who waits eagerly to get his/her hands on the names and benefit amounts of PERS retirees.  It may be an identity thief who, with a few keystrokes, could easily access the rest of the information needed to pull off a rather simple theft of identity.  It may be someone who hates PERS retirees and their benefits who simply wants to do harm to someone doing better than he/she.  Same ease of gathering the needed information.  Or perhaps an ex-spouse or a child would just love to know how much the "old man" is bringing home in retirement.  Maybe we could just confuse him and get him to sign over some of that "unneeded" money to a worthy (not) cause.

 

These are just a few of the scenarios both the Oregonian and the Statesman Journal will face if they release the information that PERS seems to be obligated to turn over to them in two installments.  If nothing changes between now and November 21, the first wave of information will hit the desks at both newspapers.  It will include the full name of the retiree and the amount of the current benefit, uncorrected for any court rulings that have recently taken place.  In short, for 38,000 of the retirees who retired between 2000 and 2004, their information will be overstated.  On March 8, 2012, the remainder of the information will be turned over.  This will include FAS, method of retirement (Money Match, Full Formula, Formula plus Annuity), initial benefit.  It won't include any additional "personal" information as if this weren't enough.

 

Fortunately, the PERS Coalition is taking this matter quite seriously.  Earlier this month the members of the Coalition voted to seek a temporary restraining order to prevent the initial release of the information on privacy grounds relating to some (and more) of the issues raised in my first paragraph.  The Coalition is collecting names of potential plaintiffs and a filing will take place in sufficient time for a court to rule on the restraining order before November 21.  I think the objective is to prevent any release of this information until the Legislature, which convenes before the next data dump would be scheduled to clarify its legal intent of the current records law.

 

As I get more information, I will post it forthwith.  I suspect that the Coalition might seek some contributions from retirees.  I'm all in with whatever I can afford to contribute.  This is a really, really, really important issue.  Whether you believe in open government or not, I have NO problem with the release of benefits individually provided no names are attached to the particular benefits.  It provides nothing significant and furthers only one agenda - harassment of retirees - which is not the intent of the open records law. There is no public "need to know" any of our names.  They are welcome to my benefit amount so long as they don't know whose specific benefit it is.

No Banker Left Behind

The Oregon Supreme Court delivered its final body blow to any semblance of contract law in Oregon today.  It ruled in favor of PERS and the employers in the Arken case, and it ruled in favor of PERS in the Robinson case, overturning the lower court's ruling in the latter.  Basically the court gave window retirees the middle finger when it wrote that, in effect, we were stupid if we believed our Notices of Entitlement since the City of Eugene case was so public, so prominent that we couldn't possibly have not known that the 1999 earnings were not final.  While this might have been true for anyone retiring after the early part of 2003, those who retired prior to the City of Eugene case ruling coming (i.e. before October 8, 2002) wouldn't have had any reason to expect that the 20% earnings crediting in 2000, for 1999, was in jeopardy.  Based on my lengthy experience with PERS retirees, very few people paid (or pay) attention to the minutiae of PERS court cases or the minor changes that affect people in a myriad of different ways.  If nothing else, the rulings in these cases should tell people that their PERS benefits are subject to the whims of the legislature and the courts.

People may wonder about the ruling in the White case - the PERS Coalition challenge to the settlement agreement between PERS and the 8 employers in the City of Eugene case.  The arguments in the White case took place some time after the arguments in Arken/Robinson, and the ruling will probably be handed down next month if the spread holds.  However, anyone holding out the slimmest of hopes for an affirmative ruling in White need only read today's decisions to realize that there is no possible way that this court will overturn the settlement agreement.  Today's decisions relied almost entirely on the fact of that agreement.

I am not going to bother to summarize the rulings today.  They are 71 pages long, and the ruling in Robinson is so infuriating that my blood boils just thinking about it.  The court essentially agrees with the plaintiffs legal arguments, but dismisses them in favor of an argument that wasn't actually made, and uses that reasoning to overturn the trial court's ruling (Kantor).  Both cases have been remanded back to Kantor for final implementation.

What does this all mean.  Arken was a long shot.  Losing it doesn't do anything to change the status quo.  Robinson, on the other hand, is the case that argued PERS had no authority to try to collect the "overpayments" we received before the Strunk decision was finally implemented in 2006.  If you can scrape your memory banks and go back to 2006, you will recall that you received a bill from PERS telling you that you owed them money - in my case, about $14,000 -which could be paid in either a lump sum or via a method called actuarial reduction at zero interest.  Assuming that offer remains, anyone who received one of those bills will now be obligated upon notification by PERS to begin the repayment process, either by writing PERS a check, or by accepting a small reduction in your monthly benefit.  Of course, we are all about 6 years older since those bills came out so that the actuarial reduction payments will be larger than they would have been had they started in 2006.

It is clear that the days of the PERS Coalition's success in fighting against changes in the PERS system are over.  It is clear that the Court is no longer persuaded by the stunning logic of the legal argument, but instead seems to bend over backwards further and further to rule in favor of PERS and the employers.  The more you read the Court's arguments, the more convoluted they appear, and the hidden forces behind them all are politics and economics.  Contracts aren't worth the paper they are printed on.  To me, this says that PERS and the employers are no different today than are the bankers and Wall Street firms who have skated by.  The new motto is "No PERS retiree gets ahead", or "No Banker Left Behind".

 

P.S.  If I weren't feeling crappy enough about the erosion of contract rights in these rulings, Steve Jobs' death hasn't left me in a better frame of mind.