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Wednesday, September 28, 2005

Detox Mansion

I'm off to detox mansion to catch up on some unfinished business. This seems like an ideal time to do so. There isn't much else going on in PERS land at the moment and I've implored, cajoled, and begged about as much as I have patience for right now. Unless something really significant occurs, I wouldn't look for another post here until next week at the earliest. I hope to be able to report in my next post that I've finished the next revision of my Lipscomb Calculator.

P.S. (early a.m.) I have posted an updated version of the Lipscomb Calculator. It mostly fixes an annoying bug that afflicted people who specifically retired 7/1/03. It also adds another interpretation of how PERS might implement the COLA offset. You can get a copy by clicking on the link to the left entitled Lipscomb Calculation Alpha Software. (Please do let me know - by email - of your experiences, good, bad, or ugly with this version). The next version will have more substantive additions including the actuarial reduction factors built in for payback of balances due to PERS. It is still weeks away. Anyway, back to detox mansion for that "unfinished business therapy".

Monday, September 26, 2005

They Sold Me Out

As I've been reminded repeatedly in the past few days, we need to radically change our way of thinking about what the PERS Board has proposed doing. On the surface, it appears that the "kinder and gentler" approach is winning a PR war against some common sense. Many people are viewing what the PERS Board has offered up as pabulum to the retirees as a relatively small "hit" to their benefits. The typical magnitude I see reported is about 2-5% depending on one's age and how long one has been retired. We need to think about the LONG RANGE implications of what is being done. First, PERS *is* cutting the base benefit for 85% of retirees since 4/1/00. Virtually all of those are from the period between 4/1/00 and 4/1/04. My benefit will be cut by $55 per month FROM A BENEFIT THAT HAS BEEN ILLEGALLY FROZEN for more than 3 years. Leaving aside that significant fact, the mere cut in my base benefit amounts to a lifetime cut to me and to my wife (joint mortality) of about $20,000.** In addition, PERS is going to collect an additional $45 per month from me to repay benefits they claim to have already paid me illegally. That's another $16,200 over our joint life expectancy. So, right off the bat, this kinder and gentler approach will cost me more than $36,000 over my remaining life. But that's only the half of it. If you believe that the combination of the legislature and the Supreme Court claimed that PERS couldn't freeze my COLA on my current benefit, the losses are staggering. At the very least, my current benefit is supposed to be approximately $400 per month higher NOW than it was when I retired in 2002. But PERS has been illegally withholding that increase and they won't pay it out now. So, if we treat that amount in the simplest possible way - as a fixed and invariant difference between what they are paying me and what they are supposed to be paying me, then the losses -- on top of what they plan to collect back from me -- amount to another $144,000 over my actuarial lifetime.

So, think about it. The kinder and gentler PERS is offering to buy my silence and my assent with an offer that sounds good to others, but represents a direct loss to me of about $180,000 over my lifetime. More to the point, PERS plans to recover $800,000,000 (that's $800 million) just from retirees lower benefits. Kinder and gentler my eye. That's a sell out on an Enron scale.

If you object to this, you need to put your money where your mouth is. Send your donations -- and send them large and now -- to OPRI - the group who represents all retirees from PERS. It is hard to motivate legal action when there isn't significant outrage. Benefit cuts of 2% don't generate the kind of outrage necessary to stop this travesty. But, don't be confused by the PR. The true cuts are much higher -- more on the order of 7-10% and add up to serious money over the actuarial lifetimes of retirees. If you believe the cut is relatively small, I've got a bridge to sell you. It only looks small to the myopic. (Again, the analysis will make it appear that the cuts are small; but this is misdirection and fiscal sleight of hand. Your attention is being diverted to one calculation while a second calculation is conveniently ignored, overlooked, and papered over).

Donations to:

P.O. Box 7325
Salem, OR 97303 -- 0065

It will take many hundreds of thousands of dollars to stop the $800 million freight train from squashing retirees beneath its wheels. Even if you think you're not being hit hard, remember this BIG number -- that's how much it is really costing retirees.

** this $55 per month is removed from the future COLA calculations as well. So to think about this correctly, one would have to project the future value of monthly reductions of $55 that are NOT subject to future 2% COLA increases. When figured with the 2% COLA for one's actuarial lifetime, it amounts to a lifetime cut of $36,227, not $20,000. If the actuarial reduction for repayment is also excluded from the future COLA adjustments, it also virtually doubles. So leaving out the issue of COLA adjustments to our current benefits -- which the Court ruled must happen, but isn't going to -- the long-term losses are still over $60,000. And the $800 million gorilla is still there.

Sunday, September 25, 2005

The Indifference of Heaven

For those who like to listen to audio transcripts of tedious meetings, here is the complete audio of the PERS Board meeting from last Friday. Beware, it is a big file (20 MB). Note also that this is only the segment of the meeting where the discussion and testimony on the implementation of Strunk/Lipscomb/Settlement took place. It is approximately 2 hours long.

Friday, September 23, 2005

The Long Arm of the Law

Attended two events today. The first was the OEA "rally" before the PERS Board meeting. I met quite a few regular readers there and had an opportunity both to chat with Greg Hartman and to listen to Greg's take on what the Board was planning to do. Hartman stated that he believed that nothing would derail the PERS Board from proceeding with the plan outlined by PERS Staff. That said, he also pointed out that new litigation was already being planned and that the trigger would be pulled once the PERS Board made its final decisions or implementing the recovery plan. He is convinced that acting on behalf of "window retirees" is the first order of business and that the White case would probably cover everyone active, inactive, and who retired outside the "window". He revealed a bit of the legal strategy, but I would prefer to withhold any remarks until I better understand what the significance of the strategy is.

The second event was the PERB meeting itself. There was a fairly large crowd that extended out into the antechamber outside the actual PERS Board Room. I'd guess that there were about 150 members/retirees there along with a remarkably small press contingent - no TV cameras at all. I guess that this has become so "ho hum" that wire service reports are sufficient. The meeting began with a presentation by Steve Rodeman and Craig Stroud on the implementation plan outlined in the memo to the Board. Staff and counsel continue to believe that section 14b of HB 2003 is not legal, yet interestingly in the very same breath argue that section 14b2 denies them any ability to charge employers for this. I was left wondering how one could selectively decide which parts of section 14b were legal and which weren't legal. In any case, this was followed by brief presentations from Greg Hartman, Bill Gary, and Joseph Malkin. Hartman argued that the Board was taking an illegal path, prevented by the Supreme Court in Strunk; Gary argued that Hartman misrepresents what the Court said in Strunk and that he also misunderstands HB 2003. Malkin simply offered advice to the Board on the "box" they were in and that their options were really limited. All three lawyers (including Hartman) agreed that the approach that staff had come up with was the fairest and most humane way of dealing with an admittedly bad situation. This was then followed by a couple of named panels testifying both against and for what the Staff had recommended. Finally, the Board allowed about 12 retirees to give brief statements. After that the Board, at the request of Paul Cleary, gave the okay for the PERS Staff to further flesh out the proposal and offer a more detailed implementation plan that would be brought back to the Board in October and, if necessary, November. Final approval of the plan is still a month or two away. The public testimony revealed a couple of issues that the staff was directed to explore. Among them, to consider the potential tax implications for members repaying in a lump sum, to consider a request for an "installment plan" that extended over some fixed period of time (in addition to the actuarial plan), to consider a request to reopen the 60-day window for retirees to revisit their optional payment method. There were also questions raised about whether it was appropriate for PERS to collect more than what a member owed (i.e. the actuarial roulette), whether the reduction in benefit would extend to a beneficiary or alternate payee after a member died, and exactly how the amount owed would be calculated.

There was one surprise issue that I hadn't expected to be an issue. It has always been assumed that no member who retired prior to 4/1/00 would be affected. Apparently there are approximately 547 members who retired as early as 1996 or 1997 that could be affected. The effect arises because the earnings crediting for 1999 included anyone who had taken some form of lump sum payment and then withdrew the money in installments from the time of retirement until some point no more than 5 years later. If there was any lump sum money on deposit with PERS at the time the 1999 earnings were credited in March 2000, there would be some liability for repayment there. That came out of the blue to me.

All in all the meeting was conducted in an orderly manner and members/retirees behaved well. While the Board members fell all over themselves to express empathy and sympathy for the retirees' plight, they all -- including Tom Grimsley -- concluded that they were boxed in by the Courts, the statutes, and the settlement agreement. These expressions rang hollow in two instances: one was James Dalton's callous remark (disguised as an attempt to be funny) that some of the emails were clearly angry and reflected more of a desire to ventilate than to express much of a reasoned position. Dalton then commented that one needed to be a "human dialysis machine" at times to have the job of being a Board member. It was intended to be funny -- and many laughed -- but I didn't find it humorous. I found it insulting and offensive. The second comment was from Board Chair Mike Pittman. Before anyone was allowed to testify, he publicly stated that he doubted that anything anyone would say was likely to be new and that, as a result, he was going to limit testimony. Again, this was probably true to some degree, but it rubbed me the wrong way. It was Pittman's way of basically saying: "you're wasting your afternoon here. I've made up my mind and you might as well leave now". Against that background, professions of empathy and sympathy ring mighty hollow.

A fellow OPRI member recorded the entire meeting and will be making the audio available to me shortly. Hopefully I'll be able to post an audio transcript of the meeting on my website in a day or two for those who want to listen.

In the meantime, I've put in my request to PERS for more implementation information so that I can make the necessary revisions to my calculator. I don't support anything PERS plans to do -- if that weren't obvious -- but I want members to be as well-prepared as possible for whatever comes down the pike. There is little hope of derailing the Board's current freight train, so we might as well get a better description of its shape as it bears down on us. The lawsuits will come in due course.

You've Got a Friend In Me

The PERB's *only* representative of workers, Tom Grimsley, has assured me that he "hears" the concerns of members and retirees, and he plans to vote against the PERS Staff proposal for "recovery" of the alleged 1999 overcredits. He also plans to push for the Board and Staff to look for other ways of recovering these funds without damaging the positions of active members, inactives, and retirees. I really appreciate Tom's willingness to respond personally both to my call and emails, but more importantly to his committment to act in what he believes are the interests of the stakeholders he represents on the PERB. Win or lose today, Tom has earned my gratitude and appreciation.

Hope to see lots of you at today's meeting.

Thursday, September 22, 2005

Call Me

Tom Grimsley, a labor representative on the PERS Board, is interested in hearing from each of you about the PERS Board's options at the meeting on Friday. Please review the information posted at here. And then he is asking you to call or write him but before Friday (tomorrow) at 541-729-3115, or email him at tgrim29245@aol.com. I've left Tom a message. Send him your direct input via email or by phone ASAP.

Ego Tripping at the Gates of Hell

OK. I couldn't resist that great Flaming Lips song title. It got your attention though, didn't it? Just a reminder that tomorrow (Friday, September 23rd) at 1 pm, the PERS Board meets to decide how to implement the "settlement" of the City of Eugene case. If you've been following along (see the past four or five entries to this blog), you know that some really important decisions will be made tomorrow. There will also be public testimony on PERS' plans. It is my considered opinion that it is really, really important that as many members and retirees be AT the meeting tomorrow. PERS and the Board needs to see the whites of the eyes of real people affected by these decisions. Let's not make it easy by apathy. Show up! PERS Headquarters is in Tigard, Oregon off exit 293 of I-5 (11410 SW 68th Parkway, Tigard, OR, 97223). Parking is tight. Carpool if you can. Here is an annotated satellite picture of the area immediately surrounding PERS with no parking areas annotated. Also note that this is an old picture. There is absolutely NO on street parking along 68th Parkway, from SW Atlanta to Pacific Highway. I plan to be at the meeting. I look forward to meeting you. If you want to read both the summary and the long version of the implementation plan proposed by PERS Staff, this is where you find them.

Wednesday, September 21, 2005

Math Suks

Especially PERS math. I've been dissecting the PERS implementation plan as outlined by Steve Rodeman's memo to the PERS Board (see yesterday's entry). It is hard for me to imagine that the PERB will NOT adopt this plan, especially since Rodeman's analysis essentially leaves them with no other alternatives. Memo to Steve: the Board likes options, even if you recommend they choose one in particular. You chose to leave them no choices. You even played judge and jury and ruled on the "illegality" of a statute that has never been tested in Court (14b). That makes folks like me really cranky.

But, no matter. Math is hard; let's go to the mall instead. Or not. Let's figure out what PERS has up its sleeve. Assume that after all the smoke and mirror calculations are done with COLAS and overcredits and overpayments, you find yourself owing PERS $15,000 on August 1, 2006. Let's further suppose that you are 60 years old when you get the bill (or whatever you get). If we look at PERS last study of life expectancies of PERS retirees, we see that a 60 year old retiree is expected to live an additional 24.4 years (293 months). Using PERS' method, your benefit reduction would be $51.19 per month for the rest of your life, whether you actually live 50 months or 400 months. If you have a beneficiary who will continue to receive a benefit after your death, the reduction would extend to that person's lifetime as well. This approach doesn't charge you any interest (good) and you get to repay the money in depreciating dollars (that's OK too). The cost for thisis that you and your surviving beneficiary could end up paying back far more than you owe. Since there are few of us around who actually believe we OWE anything, it is hard to work up any enthusiasm for a method used for no other reason than the fact that SOMEONE has decided that the Legislature's statutory remedy is illegal prima facie, before any judge has ever commented on it. That math and that calculus sucks.

Tuesday, September 20, 2005

If I Fall You're Going Down With Me

That seems to be the message retirees are planning to send to the PERB on Friday and thereafter. The PERS Staff released the agenda and packet for Friday's meeting yesterday. In the packet is the staff analysis and recommendation for implementing the settlement agreement for actives, inactives, and "window retirees". You can read the document on my web site here. I've extracted the 18 page memo from the full 155 page packet so that you can focus only on it and not the other issues that the Board has littered the meeting agenda with.

For those who don't understand these documents, here is my *take* on what the Board intends to do with "window retirees". The first thing they plan to do is to WAIT until the next COLA takes effect (July 1, 2006 for payment on August 1, 2006). This allows the recomputed benefit (the one computed as if 11.33% had been credited in March 2000, instead of the 20% we all got), to grow by another COLA and get closer to the current benefit. At that point, most, but by no means all, of the "window retirees" will have their "correct" benefit be very close to, or in excess of the benefit they're currently receiving. Then PERS will go back and figure out how much you've already repaid by the COLA freeze to date (this is really just "play money" because they're going to credit it against what you were overpaid since you've been retired). The net of the total amount of overpayments minus the total amount withheld via COLA freezes will be what you still OWE PERS. Repayment will be discussed below. You will HAVE to receive notification of your outstanding liability by no later than April 1, 2006 because the statute of limitations for notifying members of computational errors in their benefit calculations is 6 years from the data of the alleged error (error supposedly made at end of March 2000). PERS has to notify you in writing and you have to be given an opportunity to appeal the notice. Apparently the only members who will get "contested case" status will be those who have not received a formal "Notice of Entitlement". Those who have will be, no doubt, subject to the quickie appeal whose outcome is a mere formality - you lose!

Repayment. In an effort to be charitable, PERS is planning to offer retirees two options for replayment. Option 1 will be the "lump sum" method, in which you get to duke it out with your tax preparer and the IRS to figure out exactly how to recover the taxes already paid on this money, and how to insulate yourself from any penalty from the premature withdrawal of tax-advantaged funds. It the immortal words of the late Freddie Prinze, "that's not our job, mon". The alternative approach - here's where the charity is (not!) - PERS will amortize your repayment, interest free, over your actuarially equivalent lifetime. In other words, PERS will figure out how long you're expected to live based on their CURRENT mortality tables, and reduce your monthly benefit by an amount designed to exactly recover what you owe -interest free- if you lived your expected lifetime and not a day longer. If you die earlier, they get back less from you; if you outlive the tables, you pay back more. The generosity in this approach is that your COLAs will continue to be paid (on your REVISED benefit, not your current benefit) and so the "hurt" of the repayment diminishes with each COLA. This ain't no free lunch, believe me. You've lost 4 years' worth of purchasing power so far, you'll be effectively frozen or reduced for another year, and then the effect of the 2007 COLA might finally move your benefit past where it has been frozen for as many as 5 years. Morevoer, if you choose to play actuarial roulette (and who wouldn't do this if it were "interest free"), your benefit might still be less than it is right now -- in fact I don't know anyone whose benefit won't be lower on 8/1/2006 than it is now. (Wanna see what this looks like? Download my calculator from the link at the left. The net amount "overpaid" already includes the repayments PERS owes you and what you owe them. That's the amount that will need to be paid back over however long the actuarial tables think you have to live -- from 2006 -- not from the date of retirement).

Who will get dinged? Anyone receiving a monthly benefit check from PERS is guaranteed to get hit; anyone who took a lump sum and still has PERS holding an installment will get hit. PERS acknowledges that it might be difficult to collect from lump summers who moved and can't be located, and it doesn't sound like they plan to be too aggressive in trying to locate them. Indeed, they outline plans for offsetting those losses from the very funds they claim can't be used to resolve the whole shebang.

I can tell you that everything I've heard from all the key plaintiffs groups is that they ARE NOT going to take this without putting up one savage legal fight. Read the staff analysis carefully and read how they completely dismiss options the legislature lays out for resolving this by dismissing them as illegal. It's funny that PERB was disinterested in the Attorney General's opinions while the legislation and litigation was crafted; now they're using it selectively to make precisely the OPPOSITE legal arguments that were made during legislative hearings.

Plan to be at the PERB meeting Friday. Make sure the Board understands that they're gonna have to find other fools and that if we fall, they're going with us. Be nice, be polite, be politic, and be diplomatic. But the Board needs to understand that we haven't seen this much generosity from a public agency since FEMA's initial involvement in Hurricane Katrina. We are just overwhelmingly grateful (NOT!).

P.S. Keep the checks coming to OPRI's Legal Fund. Retirees and actives alike have huge stakes in this. See yesterday's post for address.

Monday, September 19, 2005

Its Money That Matters

There is a boatload of YOUR money at stake at the upcoming PERS Board Meeting (September 23, 2005). The action begins at 1 pm at PERS Headquarters. By this time, no one needs to be reminded of the stakes, but the central issue is the re-crediting of 1999 earnings for all PERS members (active members, inactive members, and retirees). The Board claims all sorts of authority for itself as a result of its “settlement” of the City of Eugene case with the group of 8 employers. My employer wasn’t a party to that suit, nor was it a party to the settlement. However, several different groups representing my interests were intervenors in the City of Eugene case, but they were denied participation in the “settlement” talks. In any case, the PERS Board intends to implement this legally questionable agreement for ALL members of the PERS system, whatever their status now, who had a Tier 1 Regular account at the end of 1999. The only published examples of how PERS would do this are on the PERS website. I’ve written a calculator that helps individuals understand the financial consequences of the PERS “floater” for members who retired during the 4/1/00 to 3/1/04 “window” – the only group for which there is the potential for a combination of benefit reductions and invoices for past alleged “overpayments” exists. Of course, there are many rumors floating around about what the PERB will actually do when faced with very unhappy campers who have sound legal reason to contest a decision of this sort. There are also political consequences as we have a sitting governor who promised reform that wouldn’t dig into the pockets of retirees, and people have continued to remind him of that as his HAND-PICKED Board continues its ham-fisted attack on members benefits.

Now that I’ve painted a “sky is falling” scenario, what can YOU do (if you haven’t done anything already). FIRST, sit down right now and send a firm, but respectful letter or email protesting this action to Mr. Paul Cleary and all five members of the PERS Board (Mike Pittman, Eva Kripalani, James Dalton, Brenda Rocklin, and Tom Grimsley). Their email addresses can be found via a link to the left. You should also send the same, or a similar, email or letter to the Governor. In this letter you should remind the Governor of his commitment back on January 23, 2003 to not solve the PERS problem by reaching back into the accounts of members who’d already retired. Send these letters or emails by NO LATER THAN TUESDAY. The meeting is Friday, and they will have greatest impact if they’re there and included in the overall summary of mail prior to the meeting.

NEXT, you should sit down and write TWO checks. The first check should be written to OPRI (Oregon PERS Retirees Inc), which is the organization that has funded all the previous battles over PERS retirement benefits – taxation of PERS benefits, Ballot Measure 8, and Strunk/Sartain – the COLA freeze mechanism). Their dues are $5 per year; $50 for life. Send this check to:

PO Box 7325
Salem, OREGON 93703-0065

The SECOND – and more important check – should be to the Oregon PERS Retirees Legal Fund (OPRLF). Please give as much as you can. Litigation is expensive and the next fight won’t have the benefit of being “fast tracked” directly to the Oregon Supreme Court. I suggest that a good minimum donation ought to be the value of 2 months’ worth of lost COLAs. I also suggest that this shouldn’t be a “one-off” donation. Once litigation begins, the meter keeps running. The OPRI case in the consolidated Strunk matter cost about $300,000. The next one or ones will be more expensive. There are nearly 50,000 members who’ve retired since 4/1/2000 and the retiree cohorts are each affected a bit differently. Our interests are aligned and it is important that ALL contribute to the cause – even members still actively working. Just remember, today’s actives are tomorrow’s retirees. The actions we retirees prevent today become your assurances when you retire. So, make those checks out to OPRLF and send them to:

PO BOX 7325
Salem, OREGON 93703-0065

FINALLY, do everything possible to attend the PERS Board meeting on Friday. I cannot tell you how important it is to have a large crowd present as the Board wrestles with this decision. It is infinitely harder to make the kind of decision PERS has said it will make in a room full of hundreds (or thousands) of members who will be directly affected by their actions. I will actively discourage any bad behavior at the meeting. There is no need to be rude, disrespectful, or do anything that would endanger the cause we’re fighting for. Remember, the general public doesn’t hold PERS members/retirees in high esteem at all; let’s not turn this into a media circus that gives the public the stereotype they’ve already painted for us. Exhibit decorum. Let the speakers speak. A stony, grim, and laser-focused face communicates far more than any action that makes noise. Polite applause is OK, but fan-type whoops, hollers, and screams are appropriate at a sporting event, not at a meeting like this.

This may be one of the few chances MEMBERS and RETIREES have to influence the outcome of a decision that has enormous consequences to your personal financial future. Make your statements, be heard. It is “money that matters”.

P.S. If you donate to OPRLF and there is an excess, or court cases don't result, or the court awards fees, OPRI has a history of returning excess funds to their donors. The keep impeccable records and know exactly who donated how much, when, and for what. Rest assured that they use only what they need and return the excess.

Sunday, September 18, 2005

Find Another Fool

The rumor reported in Thursday's "Rumors" post appears to be the course the PERB is planning to take according to an email I received this weekend from a well-informed source. PERB seems to think that by stalling any action against "window retirees" for another year, that we retirees will perceive that our "hit" is nominal - i.e. our benefits won't be reduced and they can simply grab what we've already given them in withheld COLA increases. As Portland chanteuse, Rindy Ross once sang, find another fool. I doubt this will sit well with most retirees.

Thursday, September 15, 2005


AFSCME (one of the PERS Coalition union members) sent out an email yesterday that contained the following concerning the upcoming (September 23, 2005) PERS Board meeting:

" So what will happen? We don't know for sure, but there may be some good news for retirees. You will recall that Lipscomb declared that members — including those now retired — had received too much interest crediting in 1999 and that the "extra" money would have to be paid back. We are now hearing rumblings — nothing official, mind you — that PERS staff intend to propose to the board that it take no action with regard to retirees until August 2006. The reasoning, apparently, is at that point in time another COLA will have gone into effect, making those retirees' then current monthly benefit higher than the recalculated one. Therefore, retirees at that point could "pay back" what they owe without seeing a decrease in their monthly check — it would essentially stay the same instead.

Additionally, with regard to any lump sums that may be owed by retirees who took lump sum payments, the PERS staff may recommend that the board pursue the "actuarially determined" method with no interest, which would result in only a small subtraction of benefits over the life of the remaining payments. Again, this is not official but it is more than just an idle rumor. If in fact it works out this way, it's good news for our retirees for the immediate future and would hold them fairly harmless while our legal appeals continue.

Of course, there can never be all good news when it relates to PERS. Despite objections from our legal counsel as to the legality of taking any steps on this whole payback issue, it appears the PERS Board will move forward with some implementations that we oppose. Rather than speculate, we'll report back to you as soon as we can after the fact. The PERS Board meetings are open to the public, and several members of our AFSCME Retirees Chapter intend to be on hand to monitor the proceedings; we will have staff there too, of course."

As others have commented, it's disturbing what some people consider "good" news. It is also distressing to read that AFSCME expects "several members of our AFSCME Retirees Chapter" to attend the Board meeting. I'm concerned that if too FEW people show up, it might give the PERB reason to suspect that less of us are interested and concerned about the outcome than they are. There is strength in WELL-BEHAVED numbers.

I'm also concerned that if PERS chooses to implement in this particular way, it would be impossible to figure out, in advance, exactly what the "hit" will be, to figure out what COLA benefit any member might be entitled to now or in the future (what is the base benefit?). I would agree, however, that if this were the only alternative after the litigation has run its course, it appears to be better than the "just hit 'em hard with an invoice and reduce their benefits approach". But good news really seems to me to be relative. In case you don't understand what is being rumored for non-lump sum retirees, the rumor suggests that the PERB is simply going to do what the legislation proposed -- and was struck down -- and call it something else. It does appear that they *might* not try to get money they don't already have from retirees, and they might not reduce benefits from their current levels, but I'm not really sure this is what the law says. Clearly, the intent here is to exchange those withheld COLAs for the "invoice" and call it square. Again, if this were my only option, I'd prefer it to the punitive approach of the settlement, but personally I still don't feel PERB has any legal authority to do even this. [NOTE: there are considerable disagreements about what the 'real' meaning of this rumor is, what it is suggesting that PERS might try or not try to do. At this point, it is useless to speculate. The only information anyone has put out is the rumor I've posted above. Read it and draw whatever conclusions you wish. Mine is simply MY OWN reading of the words. I have NO other information.]

Tuesday, September 13, 2005


I've learned about one approach the PERS Coalition plans to take with the PERS Board should the board continue to pursue its efforts to recover alleged 1999 overpayments and reduce benefits for the 36,000 +/- members who retired in the "window" between April 1, 2000 and April 1, 2004. The loose outline is that Greg Hartman, on behalf of the Coalition, has sent a firmly written letter to Paul Cleary, Executive Director of PERS, urging him to recommend to the PERS Board that they NOT pursue recovery on the grounds that the Strunk opinion concluded that the Legislature had clearly defined a new "fixed benefit" for those "window" retirees which, contrary to the Legislature's wishes, must include statutory COLA increases. This, according to Hartman, precludes the Board from applying any remedy of the "settlement" agreement and also makes ORS 238.715 inapplicable. While the letter lays out the legal argument, there is no evidence that the PERS Board is, or will be persuaded by the argument. If they aren't, and pursue their recovery efforts, the Coalition plans to file for a temporary injunction to prevent the PERS Board from proceeding with implementation, while they file a new lawsuit in Multnomah County against the PERB. Do keep in mind that this citadel strategy is for those particular retirees in the window. The Coalition has not revealed its plans for actives, inactives, or post-window retirees, other than to indicate that the White case -- already in Multnomah County Circuit Court -- might be fine-tuned and expanded. We also do not know what what plans OPRI might have. Moreover, OPRI continues to need legal funds because it will almost surely participate in the legal actions either in combination with the Coalition and/or separately. Either or both of these strategies will require megabucks.

Saturday, September 10, 2005

Consider This


The September 23, 2005 PERS Board meeting is about two weeks away. While the agenda hasn't been published, we know that the Board intends to take up the question of how to implement the "settlement" agreement in the wake of the Supreme Court's ruling that the City of Eugene appeal (the "Lipscomb case" appeal) lacked any active controversy and was moot. This meeting has generated a ton of interest from active members, inactive members, and most significantly, from retirees. Attendance at the meeting is expected to be at record highs, and PERS members/retiree emotions are predictibly very high, nerves are raw, and the potential for an incendiary flashpoint great. It is pretty common knowledge by now that PERS has been trying to take the pulse of the various organizational entities who have dogs in this fight to determine how many members they expect to show up at the meeting, how many people expect to speak, etc. I've heard rumors of possible changes to the meeting venue, of the possibility of trying to televise the meeting on either cable channels or in closed circuit to meeting rooms away from the main site, and of potential security issues that may compel parking management, and, quite worrisomely, personal security pmanagement.

Please consider this as a very important request:

If you are planning to go to the PERS meeting, keep a close watch on this site for news of possible changes to the meeting location. The meeting is currently scheduled for PERS Headquarters in Tigard at 1 pm on Friday September 23.

If you are planning to go to the meeting, PLEASE plan to behave respectfully and business -like. You can wear your grimmest faces, and you can be angry, but control your anger and stick to the facts. The media will be there in full force and you will be on display to TV cameras and to the print media. It does the cause no good to be hurling profane epithets at the Board or anyone else; it does no good to organize "picketing events with bumper-sticker signs". THE MOST POWERFUL FORCE MEMBERS EXERT IS BY SHEER DINT OF ATTENDANCE AT THE MEETING. Being there in legions, and squadrons, and platoons and sitting stony-faced while listening to the many who will speak against the PERB's planned actions will do more to support our cause than any act of civil or uncivil disobediance that any individual or group might have planned. Don't give the PERB political cover to make its bad decisions by letting the public sees us as "crazies".

In the meantime, not everyone will get to speak and not everyone has something different to say. Whether you plan to speak or not, EVERYONE should write or email PERS Executive Director Paul Cleary, and the members of the PERS Board to express their opinions, concerns, and opposition to the Board's planned course of action. You can find the needed email addreses in a link to the left. Do not wait until the day before the Board meeting to do this. Note also that "fairness" is not a precise legal term, but there are plenty of perfectly good examples of letters that cover the range of issues that the Board has not, so far, taken into consideration as they proceed. If you are looking for such examples, go to the Oregon PERS Discussion Group (OPDG) link to the left.

Remember: the strategy for letters and for attendance at the meetings is to be firm, grim, but most of all business-like and reasonably respectful. Don't do anything that would undermine our credibility or make the public dislike us more than they already do.

Friday, September 09, 2005

Thin Line Between Love and Hate

This is a slighted edited version of a post I made over on the BlueOregon site. The title of the blog entry pretty much says it all, but it doesn't hurt to explain it a bit.

I'd be willing to hazard a guess that if the whole issue of the 1999 earnings crediting decision were left alone, and that if PERS and everyone else agreed that the 2000 PERS Board made a stupid, but not illegal, decision and that no restitution is due from innocent PERS members and retirees, most of the legal disputes would disappear and many PERS members would come onboard with the rest of the reform. The 1999 earnings crediting edecision has become the beach on which everyone is willing to spill blood and die. Since the legal theory on which the current Board's actions rest have never been tested, there is no end to the litigation will follow from the Board's attempt to "go there". No matter the outcome. Everyone loses if this battle goes on much longer. There is NO way for the employers to WIN even if they win. They've already got a totally demoralized work force, an energized and demanding set of unions who are finding a whole new set of issues, and factions within employer groups and employee groups that are fighting with each other. There are huge political consequences for both parties if this battle goes on much longer. A sitting Governor is vulnerable because he has brought the wrath of public employees down on himself. He further damaged his credibility by avoiding any significant participation in the fractious budget debates in this year's legislature.

The earnings on the PERS Fund were about 34% in 2003. All of that is sitting in reserve funds except for what was paid out to Tier 2 members. According to the actuaries, the combination of funds reserved from 2003 plus the excess above the 2004 assumed rate are nearly enough to take care of the 1999 earnings decision and we could just move on. The legislation accomplished creating a new retirement tier for new public employees, it stopped employee money from flowing into Tier 1 and Tier 2 accounts, it eliminated further money going into the variable, it approved a new mechanism for implementing mortality table changes every two years, and new mechanisms were put into statute to prevent the PERS Board from paying out more than the assumed rate until some very strict reserving tests are met (and with the global economy, post 9/11 and post Katrina world, it is highly probable that the PERS Board would rarely be in a statutory position to pay more than the assumed rate anytime in the future). Moreover, the PERS Board has been restructured completely and new rules permit and require the AG's office to stay out of legal advice to the PERB where it has a conflict of interest. There is a new actuarial firm that doesn't have 30 + years of history with PERS. These changes alone account for about half of the savings from the reform, and serve to prevent PERB from making the kinds of misjudgements it made in the past. Moreover, the Oregon Investment Council is now meeting with the PERS Board and Staff much more regularly so that the goals are more fully aligned. The Supreme Court has spoken on several issues crucial to PERS members and retirees and effectively "divided the baby" on the PERS Reforms. To be sure PERS members and some retirees lost more than they might have gained, but the net effect was to allow both sides to declare "victory" and move forward.

So to the PERS Board, to the Legislature, to the Governor, and to the group of 8 employers, I ask that instead of seeking the punitive recovery for 1999 earnings, 6 years after the fact, why not just let it drop? It isn't the biggest piece of the pie. The employers and the public accomplished major changes to PERS. Why not quit while you're significantly ahead?

The 1999 earnings decision has become such an incendiary flashpoint that it threatens to tie this matter up for many more years as multiple major lawsuits are planned, there is one in the pipeline in Multnomah County Circuit Court, and there is still a US 9th Circuit Court of Appeals case pending.

Silly ideas like terminating PERS will become so economically and legally unpalatable that they'll never fly. Even sillier ideas like firing all public employees one day and rehiring them the next day under a new 401-k system are so moronic as to defy comment.

This battle could be a lot closer to over if the 1999 earnings issue were taken off the table. At this point, the PERS members have nothing more to lose by pursuing further legal action, while the public has an enormous stake whether it wins or loses these legal battles. Just remember that the thin line between love and hate is drawn on the 1999 earnings credit decision.

Tuesday, September 06, 2005

Eyesight to the Blind

It’s the day after Labor Day – the official start of ‘silly season’ and the sillies are out in full force. Over on BlueOregon – a reputedly ‘progressive’ political website, a Hillsboro lawyer named Robert Harris published his screed on PERS benefits. To get on BlueOregon, Mr. Harris had to claim his liberal credentials, which he did by admitting he was a Hubert Humphrey liberal. No matter that Mr. Harris was probably a teenager or younger during Mr. Humphrey’s span as a senator, a Vice President of the US, and the democratic Presidential nominee (who lost to Richard Nixon in 1968). All this is really irrelevant to Mr. Harris’ polemic, which is to call for further reductions to Tier 1 PERS member retirement benefits. Mr. Harris repeats the tiresome canard that PERS members retire at 55 and draw 105% of their final salary in retirement. Mr. Harris even adds to the calaloo of misinformation by implying that retirees somehow get Cadillac medical benefits – a point on which I demand to see proof (there isn’t any, by the way. Retiree medical benefits are paid for entirely by retirees and they are expensive, increasing in cost, and anything but lavish).

I want to point out that Mr. Harris’ (and the Oregonian's) continued perpetuation of the myth that PERS members retire at 105% of FAS is misleading in extremis. First, Mr. Harris speaks of the retirement benefit of 105% as an average. This is technically correct, but FIRST: it only applies to PERS members who retire with 30+ years of service. According to the PERS Comprehensive Annual Financial Report (CAFR), 30+ year service retirements only account for about 10% of ALL PERS retirements. Mr. Harris and every reporter who has recited this or similar statistics are ignoring 90% of the data to get to this particular “fact”. SECOND: while the CAFR only reports averages, averages are completely misleading and are strongly affected by “outliers”. To give a simple example, suppose we have 10 people, each of whom earns $25,000 per year. The average salary is $25,000; the median salary is $25,000. Now, suppose we add Phil Knight to the room with his $50,000,000 annual salary (I don’t actually know Phil Knight’s salary, but it hardly matters to make my point). Now, the median remains at $25,000 but the average salary has risen to $4,568,181. Which figure more accurately portrays the typical salary of our group of 11 people? So, the PERS figures for 30+ year retirees may be computationally accurate, but totally misleading. Why is it that the Bureau of Labor Statistics normally reports medians rather than averages. I submit that this is one of the primary reasons.

I also want to publicly ask Mr. Harris and all the various reporters for the Oregonian who’ve covered PERS issues (Jim Mayer, Betsy Hammond, Brent Walth) why they never include information about the benefits of the 90% of PERS retirees who don’t put in 30+ years before retiring? Is it because your argument would be undermined by all those folks who retired at something closer to 40 or 50% of FAS? Why don’t you dig deeper to find out why PERS insists on using averages instead of medians? Why aren’t you interested in figuring out whether the 105% average is applicable only to members who participated in the variable program, and whether anyone who participated only in the regular PERS Tier 1 accounts ever retired at more than 100% of salary. There are lots of interesting stories out there, but none have done more unnecessary damage to Tier 1 members and fueled public policy decisions than the most misleading of all statistics – the continued assertion that typical PERS members retire at more than 100% of their salaries. This is NOT TRUE of typical PERS members. It applies to a tiny subset of retirees in any given year. People who continue to perpetuate this untruth fall into the category of “lies, damned lies, and statistics”. Time to put your glasses back on and see again.

Friday, September 02, 2005

Gimme Back My Bullets

As reported earlier, the intervenors in the City of Eugene case filed a motion with the court to "vacate" the City of Eugene judgement. A copy of the motion to vacate can be found here. Note in particular, footnote 4, which seems to put the plaintiffs in the City of Eugene case in an interesting predicament. If they contest the motion, it seems to say that the City of Eugene case is precedential, which the Supreme Court seems to be denying in mooting the City of Eugene appeal. I'd like to think this is the legal equivalent of the "heads we win, tails you lose" position that the employers and the PERB thought they'd have with the "settlement". We're taking back the bullets now.

P.S. Thanks to JRS from the OPDG group for tracking down this motion. I put it into pdf form, which makes it more universally easy to read.

Thursday, September 01, 2005

Rise Up

I've just learned that Greg Hartman, on behalf of the PERS Coalition, has sent a letter to the PERS Board asserting that the Strunk decision protects retirees from the actions contemplated by the PERS Board at its September 23, 2005 meeting. Here is a copy of the letter.

I'm now back from a wonderful vacation, fully energized and raring to go. Hopefully I'll be able to stay on top of the developments a bit better from home than from our vacation home. Time to start rising up.