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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.

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