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Friday, April 08, 2011

Cup of Sorrow

Today was "PERS Day" at the Oregon House.  As expected, only five bills were considered.  Two were disposed of quickly (HB 2113 and HB 2114) by referring them on to the House Ways and Means Committee without discussion.  These two bills were "housekeeping" bills introduced by PERS and don't seem to make a lot of difference to most people.  Mostly they were intended to keep PERS legal with changes to the IRS code made over the past two years.  Two more bills, those dealing with eliminating the requirement for the 6% employee contribution to PERS, and a bill that would alter the requirements for the 1039 hire back were considered.  Since the 6% "pickup" is a centerpiece of the Governor's negotiations with state employees, no action was taken on this bill.  Similarly, the 1039 rule changes received tepid support and it is believed that this bill will die without further issue.

The surprise was the introduction of multiple amendments to HB 2456, the bill pertaining to the tax subsidy for out of state retirees.  In its original form, the bill would have changed benefits retroactively for retirees currently living out of state, and had the unintended consequence of placing in state retirees whose income is so low that they don't currently have to pay Oregon Income taxes.  The key amendment was introduced by OPRI, which would make the bill apply ONLY to retirees who retire on or after January 1, 2012 and who subsequently move out of state.  While this eases the burden somewhat in that no current retiree would be affected by this punitive bill, it appears that both OPRI and the PERS Coalition sold out future retirees to stave off litigation costs.  I fail to understand why this compromise was introduced when the original bill was effectively DOA.

What puzzles me is that now HB 2456-3 will get a work session, which is the necessary prelude to moving the bill out of committee and onto the House floor for a vote.  The original bill was estimated to have saved employers $72 million dollars.  However, because of the language of SB 656, passed in the 1991 Legislature, less than 2/3 of the $72 million would actually be saved.  A better figure was about $48 million.  Then, there would be administrative and enforcement costs expected to cost about half of what the savings were.  This left only about $24 million in actual savings from the bill.  The majority of the savings would have come from current retirees.  By eliminating them from the mix, the net savings from this bill are probably more like $3-$5 million.  In a budget with a $3.5 billion shortfall, saving $3-$5 million dollars is hardly enough to keep the lights on for one day across the state.

I'm also disappointed in OPRI and the PERS Coalition for their complicity in making a dead bill come back to life.  Maybe I don't understand the calculus of politics in the Legislature, but it strikes me that the long term ill will of this eats at OPRI's future seed corn.  This is an organization that needs to grow to stay relevant.  The older generation decreases with time and you want new retirees to form the backbone of your membership.  By taking this position and resurrecting a bill that was probably dead, they have sold out a whole generation of retirees who were actually qualified for this benefit by virtue of the two main settlements that put the package together.  While it is true that future retirees will continue to get the benefit IF they remain in Oregon and IF they had work prior to 1991, it still seems like a bad political decision to anger and constrain future membership growth by taking actions that explicitly harm future members.  Maybe I'm naive, but I think that OPRI may have bought itself a cup of sorrow with this decision.  OPRI may have calculated that this would affect only a small number of future retirees, but the truth is that you never know when circumstances might force you to move from Oregon when you hadn't planned on doing so.  If I were planning to retire after 12/1/2011, I would be really pissed at OPRI for removing a degree of freedom in my retirement planning.  Even if I weren't planning on moving, stuff happens and I wouldn't want to have my benefit at risk for any cut just because I moved out of state.

I'm hoping that OPRI understands the damage they may have inflicted on future membership.  You have a hard sell when it is known that you willingly and complicitly aided in the "take away" of any benefit.

Finally, it needs to be understood that there are somewhere in the vicinity of 58,000 currently active or inactive PERS members who are age and/or service eligible to retire.  I know many of the inactives live out of state.  If I were one of them, I'd be planning to retire before December 1, 2011.  Otherwise, the mere fact of living out of state could cost you a couple of percent of your retirement benefit.

 

11 comments:

MollyNCharlie said...

Having watched the hearings this morning, I'd guess that OPRI, who created the proposed amendment, is trying to look helpful instead of standing in opposition to every change proposed for PERS. They may be crossing their fingers that future retirees won't remember that OPRI initiated the revision that put life back into this dead bill.

peg

dave said...

I don't know who informed you that HB 2456 was DOA, but, as someone who has been working on this issue since last February, that's just wrong. The bill as introduced has been very much alive. The amendments that OPRI advanced and the PERS Coalition supports are an effort to limit the damage. If HB 2456 were dead, OPRI wouldn't be offering amendments. The fact is that it's very much alive, and our challenge will be to limit its scope as the amended HB 2456 moves forward, since some Republicans and Democrats are interested in applying the benefit elimination to current PERS retirees who live out of state. Your post suffers from a big factual error at its core. You should consider writing a correction

mrfearless47 said...

Dave:

My source for the DOA is someone near the top of the food chain in this discussion. Perhaps new life was breathed into this bill but as of the end of last week I had it from this source that the bill would never get a work session. So, it is my opinion that the bill was either DOA or near death late last week when the schedule was released (perhaps even as recently as Monday). Again, I don't dispute your statement as you are the lobbyist for OPRI, but I stand by my own source for the information.

Kolbs said...

I joined OPRI a few months ago. I am an active member who plans to retire in a few years. I am very disappointed in OPRI and even more so in the PERS Coalition. With friends like this...

Andrew said...

mrfearless: You had stated in the comment section of your January 13 post that "I am agnostic on the tax subsidy." But now you seem to characterize its elimination for future retirees as near tragic. Why the change of heart? (Full disclosure: I am an out-of-state retiree who benefits from the subsidy. I happen to think there there is a strong rational basis for eliminating the subsidy despite the fact that -- as a matter of self-interest -- I want to preserve it.)

TruthSeeker said...

You know Mark...I have wondered where you were at on 2456 since your "agnostic" statement some time ago. I'm breathing a slight sigh of relief that there may not be another attempt to "do-over" the conditions of my retirement retroactively...now that I am near 70 and can't go back to work and "do over" my decision to retire.

Rivrdog said...

Mr F, the French have a word for the sort of backsliding both of us see here: "Poseurs"

perspac

mrfearless47 said...

I am having the damndest time responding to a post on my OWN blog. Pisses me off. Suffice it to say that when you eliminate most of the outright mean and nasty bills introduced in the original 43, this bill stands out for its unfairness. When it is amongst 43, it doesn't jump off the page and you don't want to oppose every single reform bill that comes along. That damages my credibility. But taken on its own it had a number of really serious legal flaws that I saw under further research and I came to bitterly oppose it. I wrote to every member of the House Business and Labor Committee and had separate communications with the co-Chairs of the Committee. I maintain that in its original form, the bill was DOA; the revision took it from DOA to LTP (likely to pass). I will continue to oppose the bill as I see its current form as still breaching a promise made to all those still working who had creditable service time prior to October 1991. They were promised tax relief, but now won't be getting it.

Sundog said...

Sadly, I can partly see why the governor of Wisconsin was so motivated to repeal collective bargaining in his state. Once upon a time the tax subsidy was passed by the Oregon legislature to offset the paying of Oregon state income tax. Now it seems that even those who are “agnostic” to the issue believe that the subsidy is a BENEFIT for those who don’t pay Oregon state income tax. Personally, as a lifetime member, I am relieved that OPRI decided that this issue was not really in the “fight to the death” category.

mrfearless47 said...

Sundog: I suggest you spend some time reading the history of SB 656 and HB 3349. The language of the enrolled bills makes it clear that the Legislature was ambivalent about how these two bills were to apply to all retirees. Also bear in mind that the "source tax" (income tax on monies earned in one state are taxed at the source) was repealed after these bills went into effect. It wasn't certain that Oregon would be getting a piece of the pie at the time these two bills were passed.

Jackie said...

Hello,
You end the last paragraph writing "...could cost you a couple of percent of your retirement benefit." I thought it would be 7 or 8%.

By the way, thank you for this crucial information. I can see it takes a lot of your time and hope you realize how much it is appreciated.
Jackie