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Thursday, February 09, 2006

In The Rough

The propaganda machines are heating up again. First we have the filing of an amended complaint in the class action suit (Arken et al vs City of Portland et al) on January 30, 2006. In the complaint, the PERS Coalition alleges additional wrongdoing by the PERS Board and the employers in its plan, finalized at the January 27, 2006 Board Meeting, to begin the "recovery" process from "window retirees". You can read a copy of the amended complaint on the OPRI website. Next, we have the PERS Board considering a proposal by PERS staff to "redeploy" nearly $2 billion dollars in reserves, taking the contingency reserve from its current $1.9 billion balance to something around $100 million, to liquidate the capital preservation reserve (about $0.5 billion) and bulk up the "rate guarantee reserve" to nearly $1.0 billion. The purpose of this reallocation of resources appears to be to move funds that aren't currently part of the system valuation into places where the assets would be counted. The system valuation affects many things, not the least of which is the unfunded actuarial liability, the employer liability for the UAL, and the employer normal contribution rate. For employers, the upside is that this will have, as a result, the effect of lowering contribution rates. At the same time, lawyers for the PERS Board and lawyers for the employers have been attacking on two fronts: the first is to feign concern that the reserves might be taken down a little too much, while warning active members that if the PERS Coalition "wins" the class action suit on behalf of "window retirees", the estimated $800 million bill will have to come out of potential earnings of active members -- a clear attempt to foment FUD among active PERS members. What the PERB and employer lawyers forget to mention is that the Strunk decision guaranteed Tier 1 actives "no less than the assumed rate" (currently 8%) on Tier 1 regular account balances, and that the end result of the financial reshuffling will also result in a fully funded Tier 1 rate guarantee reserve, and that by statute Tier 2 members are guaranteed "market returns" less administrative expenses. Unless the lawyers are suggesting that the cost of losing the class action suit would be charged off to administrative expenses and then deducted from Tier 2 earnings, there is no way that active members could be affected by the outcome of the class action suit. What the employers and PERB lawyers also fail to discuss is why they ought to adamantly opposed to draining the contingency reserve, when a previous PERB Board was found to "abuse its discretion" for failing to fund the same reserve. So why did the same bunch of lawyers sue the previous PERS Board for its "abuse of discretion" for not funding the contingency reserve, while celebrating draining the very same fund after the current PERS Board fully funded it in compliance with a court order and a settlement agreement. I guess I'm a bit confused. It seems to me that it is one thing for these "wide boys" to be worrying to the point of blustering about the effects on members of the class action lawsuit, while simultaneously laughing all the way to the bank as the PERB prepares to plunder the very reserves that might be needed to pay for the loss. I don't get it. I'm playing golf and my ball keeps landing into the rough. The lawyers seem to have a problem with getting their stories straight - an example of what Jimmy Buffett used to worry about when he remarked that "indecision may or may not be my problem."

P.S. Thanks to all who called and emailed their best wishes for my wife's successful surgery and speedy recovery. The surgery went well and we were home quickly. I'm happy to report that my wife's recovery appears to be right on schedule. She's starting to feel well again and is anxious to return to all her pre-surgery activities plus more.

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