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Thursday, January 06, 2011

Weaver of Lies

Yesterday I attended the Supreme Court oral arguments in the Arken and Robinson cases.  These two cases, along with the White case, which still remains docketed in the Oregon Court of Appeals, represent the last of the litigation over the 2003 Legislative reform, the City of Eugene case, and the subsequent settlement agreement.

The Arken case hinges on the impact of the Strunk's decision to strike down the COLA withholding provision of HB 2003 from the 2003 legislature.  Central to this argument is the fact that with the COLA provision gone, the plaintiffs argue that this left the statute and the "window retirees" in the position they were in on July 1, 2003 - still with 20% credited to their accounts, but not receiving the COLA.  The court ordered the COLA restored in Strunk (2005) while the members were receiving their "fixed" benefit.  PERS argues that because the trial court judge in the City of Eugene case (Lipscomb) had already entered his judgement and order, that the 20% had been vacated and that the only rate in effect, although not formally adopted by the Board at this time, was 11.33%  Thus "window retirees" had no expectation of retaining the 20% when the Legislature adopted HB 2003 in May of 2003.  So far, Arken has failed at the trial court (Kantor), and the issue for the Supreme Court to decide is whether the Legislature intended that window retirees be held harmless if the COLA provision had been struck down.   Much of the questioning focused on the exact status of the Lipcomb order at the time the Legislature enacted HB 2003.  Justice Durham reminded both Bill Gary and Joe Malkin that there is a significant difference between final order, and final justice.  Clearly the final order had been entered, but the case was under appeal at the time the Legislature acted.  PERS had not been granted a stay pending appeal.

The Robinson case pertains to a slightly different portion of HB 2003 and affects a slightly larger cohort of individuals.  At the end of HB 2003, the Legislature late in the process added section 14b (around revision 10 of the bill) to provide an exclusive remedy for the City of Eugene case.  In it, it described two methods PERS could use to recover for the errors identified in the City of Eugene case.  One method was the "COLA freeze", while the other was the use of "administrative expenses".   Since the errors identified in City of Eugene had to do with improper crediting of 20% to regular accounts in 1999, failure to fund reserves, use of outdated mortality tables, and improper calculation of the Money Match benefit, PERS was ordered to correct these.  Because HB 2003 saw so many drafts before it finally fell into its final form, language was entered and removed and it has been difficult to discern either the reason for dropping things from the enrolled bill, or the reason for adding them.  One such word was "Exclusive remedy".  These words were dropped from the final preamble to Section 14b.  Jim Coon, attorney for the defendants in this case (us), argued that the Legislature intended to be done with the City of Eugene case by providing the only remedies that PERS could use to collect.  He argued that the collection statute 238.715 was superseded - in this instance - by section 14b and that PERS improperly billed retirees for monies owed by the City of Eugene errors.  PERS argued that the removal of key words from the final drafts of HB 2003 meant that the Legislature had no such intention to hamstring PERS, but instead offered 14b as *additional* tools that could be used to collect overpayments.  Moreover, Malkin argued that the City of Eugene case involved only 8 employers, not all employers and therefore could not be viewed as the overarching collection mechanism for all PERS employees.  Justice Kistler spent a fair bit of time trying to tease from Malkin why it mattered to the employers what mechanism PERS used since the employers were excluded from bearing the costs, and why also did the money issue, which related to individual retirees, matter to the employers.

The arguments were tedious in the extreme.  I wanted to shout out several times to ask why the justices weren't pursuing a particular line of questioning, but of course it doesn't matter.  No case that I've ever sat through was influenced by oral arguments.  The oral arguments are a dog and pony show where each side gets to take its best shot at the other side while also trying to show the justices why they are so smart.  Similarly, the justices try to get inside the heads of the lawyers by asking some twisted and bizarre questions.  In the meantime, the case is adjudicated entirely through the legal briefs filed on both sides, along with all the pieces of evidence cited in support of the argument.

It is hard to predict when the Court will rule.  I do believe that the court will NOT rule in time for the 2011 Legislature to do anything to fix any errors the Court identifies.  On the other hand, I do think there will be a decision available for the 2012 Legislature to work with, and so I continue to hold that 2012 will be the year of the remedy, for better or for worse.

Only five of the justices were present for the hearings.  Justice Martha Walters was absent but will participate in the ruling.  Justice Jack Landau who joined the Court only earlier in the week recused himself from the case because his son is an Attorney for the firm representing the defendants in the Arken case and consults on the Robinson case.



Kolbs said...

Are the "window retirees" still getting benefits based on the 20% allocation or are they now getting benefits based on the 11.33% allocation? In other words, is this about having to pay back ongoing "over payments" or the amount they were "overpaid" from 2000-2004?

mrfearless47 said...

Window retirees ongoing benefit, since about 2006 or 2007, is based on the revised benefit reflecting an 11.33% earnings rate. The Arken case wants to put them back to where they were on July 1, 2003, which was with the 20% credited to their accounts.

The Robinson case involves the payments on the amounts reputedly overpaid from 2000- date of adjustment in 2006/2007. This collection was stayed by Judge Kantor in his ruling in favor of retirees in the Robinson case.

topgun97365 said...

Thanks for your hard work and great synopsis. Sounds like the reporter for the Statesman Journal was at a different hearing.

MollyNCharlie said...

Topgun is right. It is what I've said any number of times, the SJ's reporting on PERS is not to be relied on.


TruthSeeker said...

I read something on the AFSCME site describing proposed PERS legislation which included a proposal to tax pers benefits for those of us living outside of Oregon. I think it was Greg Scott who alluded to something similar on the PERS discussion site.
Such a proposal would mean I would be paying taxes to Oregon and the State of Utah on my PERS benefits! This cannot be under consideration.
I have sort of gotten my head around losing the tax adjustment, but paying taxes to two states cannot be legal in any sense of the word. Yes/No Please let me know. I will lose sleep over this.,

mrfearless47 said...

Lance: the proposal regarding taxation of PERS benefits is actually a proposal to take away the income tax remedy of HB 3349 (1995) for out of state residents. It is not a proposal to tax benefits. The US Supreme Court has already ruled that states cannot tax benefits delivered to recipients residing out of state, but the resolution of Hughes v Oregon (1991) required that Oregon provide some offset to individuals who would now be subject to Oregon Income tax on PERS benefits. Our original contract called for Oregon tax free benefits. The only solution was HB 3349, which added some fraction of 9.9% to adjust our benefits for the sudden taxation after October 1991. Out of staters stand to lose that benefit if the bill passes.

TruthSeeker said...

Thank you Marc. Someone should tell AFSCME to fact check what they post. That one scared me alot.
Again...thanks for keeping us apprised of what's going on up there. Especially important for us out-of-state retirees...who, it appears, are about to be thrown under the bus for the sake of political points and to appease the blood lust of the anti-public employee factions in Oregon.

mrfearless47 said...

re: Statesman Journal reporter. I saw him at the hearing diligently taking notes. Because he is new to the process, I doubt that he was even clearly aware that there were two different cases being litigated and two separate outcomes will be forthcoming from the Oregon Supreme Court. Nowhere does he mention that Window Retirees have ALREADY had their benefits recalculated to the lower benefit. This was done in 2006/2007. That issue is part of the Arken case and Judge Kantor did not permit the plaintiffs in Arken a stay until the case was finally resolved. Thus, of the $800,000,000 supposedly at stake, PERS already has nearly half of that recovered through benefit reductions. The second case - Robinson - pertained ONLY to the method that PERS chose to try and collect overpayments PRIOR to the recalculation of benefits that the settlement agreement required. Section 14b's interpretation is crucial here because an affirmative judgement for the PERS Coalition (Robinson et al) means that PERS cannot use the "error statute" ORS 238.715 to recover those overpayments. There was no error made. The Board didn't make any mistake when the earnings of 20% were allocated. They did, according to Judge Lipscomb, exceed their authority, however, to NOT fund two statutory reserves. So, Section 14b was enacted (I was there when all the testimony was ongoing) as the "exclusive remedy" for PERS to use in collecting those overpayments left after benefit adjustment. Judge Kantor ruled IN FAVOR of retirees and argued that PERS had totally misinterpreted the error statute and section 14b. He ruled that PERS could NOT collect that additional money because they failed to follow the rules. Consequently, the statute of limitations had run out on PERS' ability to collect under any mechanism and this should be charged to administrative expenses.

Dennis Thompson did a fine job of summarizing about 25% of what was discussed at the Supreme Court and seems have done almost no research into the cases under litigation. Had he, the article would have been more informative. As usual, it makes it appear that the PERS retirees are nothing but a bunch of greedy SOBS. Someday someone in the media will actually relate a story in an intelligent matter. Unfortunately, that day hasn't come yet.

Marilynne said...

I retired 1/1/2003 and took my relatively small pension in a lump sum. On 6/5/2007, I was notified that I owed PERS $12,436 for overpayments due to Strunk and Eugene recalculations. Before I sent the money, on 6/22/2007, I received a second letter from PERS telling me not to send repay the amount because of Judge Kantor's 6/20/2007 ruling. I have never heard anything else from PERS regarding repayment. Do you know the status today for those of us who took our benefits as a lump sum? Marilynne

mrfearless47 said...

@marylynne. You money is still safe. The Robinson case, discussed in earlier posts, is in review by the Oregon Supreme Court and will be decided later this year or early next year. We've already "won" this case once and we may again win in the Supreme Court, in which case you won't owe PERS anything. I'm not holding my breath however.