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Thursday, December 25, 2008

Tuesday, December 23, 2008

Holly, Jolly, Christmas

Here's wishing you the very best of the season. May your holidays be filled with warmth, light, family, and joy. Thank you for your devoted readership as we mark the 6th holiday season for this blog. My wish for the new years is that PERS ceases to be news and that I am put out of "business." I have significant doubts this will happen, but I do not dream small dreams.IMG_0467.JPG

Wednesday, December 17, 2008

Working On A Dream

My blogging colleague, Jack Bogdanski, is holding his annual "buck-a-hit" day today. The purpose is to donate money to five local charities that do lots of good in the community. My wife and I have offered to help Jack out this year by donating a substantial sum of money to the Oregon Food Bank, a charity that inspires us and reminds us of the lessons our mothers taught us. If you would like to help out in this worthwhile endeavor, just head on over to Jack's site. Each unique visit triggers a $1contribution to one of these charities, up to 5000 unique "hits". Just spending 20 seconds clicking through the link above will get you the good feeling of contributing a dollar without having to reach into your own pocket. Of course, if you are feeling charitable yourselves, you can click links on Jack's site to send specific dollars (yours) to any of these five groups Oregon Food Bank, Children's Heart Fund, Human Solutions, Virginia Garcia Health Clinic, and Sister's of the Road. If you find my blog useful, consider it a favor for me to visit Jack's site. This is an extremely tough year for every charity. Anything we can do to help out, whether it is spending about 20 seconds of today, or spending a few dollars of your own money, helps those charities work on their dream. My dream is a world where no one is hungry.

Saturday, December 13, 2008

Sleep Through The Static

Questions recently posed on two different PERS newsgroups suggest that people remain interested in the status of the Arken/Robinson cases (remember them?). It has been so long since Judge Henry Kantor ("I will rule quickly ..." NOT!) announced his final ruling in these cases that most of us have let them fade from memory. These cases remain important in the annals of PERS retiree history, and may eventually reach some sort of ultimate resolution. In any case, nothing new has been posted about these cases and several questions prompted lead plaintiff Michael Arken to share an email he received last September, to a poster over on OPDG. I am quoting from the email here: "I thought you would have heard about Arken/Robinson. The following is from Hartman's office. Received by me on Sept. 29th:In the Arken case, Judge Kantor has signed the judgment and the Multnomah County Circuit Court has issued a notice of entry of judgment. Yesterday, we prepared for filing the Notice of Appeal to the Court of Appeals. We are still researching the possibility of asking the Court of Appeals to certify the appeal to the Supreme Court. As we learn more about this option, we will let you know. (He signed the judgment in the Arken case dismissing all the claims. That judgment has now been appealed to the Court of Appeals.) In the Robinson case, Judge Kantor has asked the parties to decide whether it is necessary to certify a class at this time. Jim Coon,counsel for Robinson petitioners, is reviewing that option. Once a decision is made we will notify you."

Thus, it seems that there is an appeal filed with the Oregon Court of Appeals in Arken. In Robinson, the issue is primarily whether the case is certified as a "class action." Recall that the PERS Coalition lost on all counts in Arken, but won a significant victory in Robinson. There is no doubt in my mind that the defendants in the Robinson case (PERS), will appeal Kantor's verdict, but that is on hold until and whether the Robinson plaintiffs and attorney decide to pursue the verdict as a class action.

In the meantime, the White case, which challenges the entire settlement agreement in the City of Eugene case (Lipscomb), is still occupying space in Judge Kantor's office. He decided in late September that no hearing was necessary and that he would rule on the basis of the substantial factual record before him. If Judge Kantor is true to form, it will be somewhere near the summer solstice before he issues a ruling.

So, please enjoy your holiday season. You can go back to sleep for about four or five months before any new information is likely in these various cases.

Thursday, December 04, 2008

The 7% Solution

Is unlikely to happen. There has been much recent discussion about the likelihood of PERS dropping the actuarially assumed interest rate ("the guarantee") from 8% to something lower. While the current economic climate suggests that a rate guarantee of 8% is probably too high, there are many forces in play to argue that such a change is unlikely in the near future.

Without getting too technical, suffice it to say that the actuarial rate guarantee plays into many aspects of the PERS system. PERS has the legal authority and the fiduciary responsibility to use an assumed interest rate that is attuned to economic realities and fiscal experience. The 8% rate was established in 1989 and so it has been in force for 20 years. Prior to that the rate was lower. There is no precedent that I can find where the system *lowered* the assumed rate. Actuarial tables and their associated mortality factors, which drive the optional benefit forms PERS retirees can select from, are built from the assumed interest rate. Reduce the rates and the mortality factors will change. This will, in turn, lead to lower monthly benefits. Similarly, the Tier 1 regular account balance is driven entirely today by the assumed rate (the 8% guarantee) since no new funds have flowed to Tier 1 accounts since January 1, 2004. At a lower assumed interest rate, account balances would grow more slowly. Again, a lower account balance at retirement will lead to a lower monthly benefit and coupled with lower mortality factors, drives the monthly benefit down significantly. Finally, the employer contribution rates are driven by several factors, not the least of which is the assumed rate at which employer contributions are expected to grow. If the assumed rate is lower, employer contributions will rise because less of the anticipated growth will come from the assumption about earnings. This is the trickiest idea for most people to understand, but any careful research would demonstrate its truthfulness.

Even from the briefest introductions above it is easy to see that both PERS members and their employers have interests that are completely aligned. The coupling of the assumed interest rate makes both parties agree on the direction of the assumed interest rate.

Recently, I had an email exchange with Greg Hartman about this, while a PCC colleague had an almost identical conversation with Paul Cleary, PERS Executive Director. Both mentioned the same set of facts. First, employer rates have been set for 2009-2011 on the assumption of an 8% rate. This means that no change will be made until the next time the PERS actuary undertakes its next system valuation in 2010. That will be used for the 2011-2013 rate setting. Second, the 2009-2011 mortality tables have already been set to take effect on the first of next month. They, too, assume an 8% earnings rate. The take home message here is that none of the crucial decision-making about the assumed interest rate would make any sense until 2010 for implementation in 2011. Both Hartman and Cleary make the same point about the next system valuation. The 2009-2011 rate-setting and mortality table implementation do not take into account the dismal situation in 2008. Those losses will get recognized in the next system valuation in 2010. Since those losses bear on employer rates, there is a strong likelihood that employer rates will rise significantly resulting from the 2008 system losses. If PERS were to add to that a change in the actuarially assumed interest rate, employer rates would rise even further. It was a steep rise in employer rates that triggered the series of events that led first to the City of Eugene case, the 2003 Legislative reforms, and the string of litigation that followed. It is doubtful that anyone has the stomach for that again.

The logical conclusion from this is that, despite the pressure from outside forces to do so, it is highly unlikely that we will see a decrease in the actuarially assumed interest rate anytime in the near future. Of course, a rogue legislature might try to force the issue, but with all the forces who share a common purpose in keeping those rates where they are, it seems unlikely that the Legislature will try to overcome that resistance.

Monday, December 01, 2008

Politik Kills

This post has been a long time in coming, but the time for writing it has now come. It pains me to report that the Oregon PERS Discussion Group (OPDG) is on its last legs. It is suffering from a terminal illness described in this post's title. The group began in late 2003 by Dana Jackson. It took off slowly, but eventually became *the* group for news and discussion about Oregon PERS and all the issues surrounding it. It was a perfect addition to my blog, which began as a web site in early 2002. For the first four years of its existence, OPDG retained its focus and participation was high. It seemed that everyone wanted to know about PERS and since several of us with access to good sources of information posted there regularly, its membership grew. When Martha Sartain died in mid 2007, the group began to atomize. It seems that Martha's wisdom, her ability to "tell it like it is" and her stature as the face of the PERS litigation (Sartain v PERS remains one of the few landmark decisions in the consolidated Strunk cases at the Oregon Supreme Court), seemed to make people feel that she had an insider's knowledge of what was really going on at the legal level.

It is not really possible to pinpoint the precise point at which OPDG began its long downhill slide into irrelevancy, bickering, and petty sniping. It has been at least a year, possibly more, since there has been any spirited discussion of a significant PERS topic. Yes, there have been discussions of PERS-related matters, but the old fire simply isn't there. Earlier this year, I made the decision that I could not tolerate the level of politicization of the Board and its hostile takeover by the extreme political right. I resigned as a moderator, and after many entreaties, started my own Yahoo newsgroup that *is* devoted exclusively to PERS and retirement-related issues. Once the political candidates were known, OPDG began on the relentless path to irrelevancy. There was a constant drumbeat of anti-Obama rhetoric, and attempts to crush and intimidate any opposing viewpoint (especially those who actually supported Obama). This has not abated with Obama's election, the financial crisis, and the end of George Bush's presidency. If anything, the hostility has grown in much the same way that talk radio seems to inflate by the appearance of political opposition.

The irony of this is that OPDG's charter actually warns new members about the very things that are tearing at the fiber of OPDG. Uncivil discussions, name-calling, ad hominem arguments, censoring posts for no obvious reason, etc. The reality is that there are only now four or five regular posters and a few drive-by shooters - mostly from the political far right, and a couple who have tried to defend the more moderate or left wing of politics. The left has no chance on OPDG, because the moderation team is composed primarily of those with opposing viewpoints. In short, for those of us who are celebrating the beginning of a new era in politics, OPDG is like the polar-bear club, with waterboarding.

Because I have no desire to subject *my* readers to the abysmal and unpleasant discussions over at OPDG, I am today removing the link for OPDG from my blog, and from my newsgroup. I will no longer reference any discussion on OPDG and will, in all likelihood, completely discontinue any participation in that group. Its members will still have access to the same news as both this blog and my newsgroup (see left to PERS Oregon Discussion) are completely open, unlike OPDG.

Contrary to the belief of many, there is still plenty of PERS news to report. It won't be daily; it may not be weekly. There is a legislative session coming in about 7 weeks, and with the financial crisis still ongoing, there will be many discussions about PERS and its financial health. It would not surprise me to find that PERS benefits show up again in discussions. Whether this will result in any changes or not, remains to be seen. But you can be assured that I and many others will be watching, listening, and reporting on relevant PERS news. You can be certain to find out here and on our sister-newsgroup (PERS_Oregon_Discussion).

And to the owner of OPDG, I wish you well competing in the political world. There are many other discussion groups on the web you can compete with. But if you wish to become the FOX news archive on the web, I'm afraid that FOX news has its own archive and anyone interested in seeing the views presented on that network can go there. You would be wise to heed the advice of Manu Chao who said it best when he wrote: "Politik Kills". Your group has a substantial membership, but the question you need to ask is how many readers do you actually have. How many have tuned out because the group has lost focus and lost direction. OPDG is becoming like the legendary foo bird. If you don't know that legend, Google is your friend.