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Sunday, December 04, 2011

Don't Think Twice, It's All Right

The usually reliable radio show, "Think Out Loud" carried on Oregon Public Broadcasting will air a show tomorrow (December 5) to discuss the outing of PERS retirees and their benefits.  The ONLY guest on the show to the best of my knowledge will be Dennis Thompson, the flack for the Salem Statesman-Journal, who has written about PERS issues for the paper for the past several years.  Thompson is a comparatively fair guy who tries to print the truth occasionally, but mostly he gets caught up in the rhetoric about PERS where facts take a back seat to opinions.

I am a Cornerstone member of OPB.  That means I donate more than $1000 per year to public radio.  Part of my expectation for such a donation is that OPB present fair, unbiased, and objective journalism in their programming.  The "Think Out Loud" show tomorrow fails on ALL those accounts.  Thompson has already demonstrated his bias and lack of objectivity, and only barely meets the standards of fairness whenever he's been backed to the wall and has had to correct something he's published.  There are many people in Oregon, myself included, who could easily provide OPB with an effective counterpoint to much of what Thompson has tried to argue about the shortcomings of PERS.

As a public service, I'm going to offer some FACTS about PERS that Mr. Thompson surely won't present because they would contradict his opinion about the system.

  • The MEDIAN PERS benefit is $1902.66 (less than $24,000 per year).  The median is used here because it is a robust statistic and a clearer indicator of the true state of PERS than the average or mean, which is something above $2300 per month.  The average is strongly affected by the outlier benefits of people like Mike Bellotti.  If you averaged my salary, my middle daughter's salary, and Bill Gates' salary, you'd come up with a figure of over a billion dollars per year.  Is that an accurate description of the average salary?  Of course not.  You'd argue that Bill Gates' salary exerts such a strong influence that it produces a misleading average.  Well, the same is true with the PERS statistics.  Out of 105,363 currently listed retirees, slightly more than 800 receive benefits in excess of $100,000 per year (less than 1% of the whole population), while there are about 13 members whose benefits exceed $200,000 per year.  Even averaging among the 13 members with $200,000+ per year pensions would be heavily weighted by Bellotti's outsized benefit.  So, there is no reliable way to estimate a measure of the "average" PERS benefit without encountering the effect of less than 1% of the population that leverage the average up by nearly $5000 per year.


  • Concerning the 6% pickup.  Yes, this benefit was negotiated in 1979 in lieu of a pay raise that would have been in excess of 10% due to 16% inflation.  While pay raises resumed some years later, two things seem to have been forgotten.  The pickup in lieu of a pay raise was just that.  Nobody got a pay raise when that happened.  Salaries lagged behind and when pay raises resumed they were always less than the current rate of inflation and never restored the 16% lost to inflation in the year of pickup.  To suggest that the pay raises that resumed somehow negated the need for the pickup is to fail at basic economics.  The only way that the pickup could have been eliminated would have been to give the pay raise that the pickup obviated.  Since that never happened, the lost purchasing power of public employees still getting the pickup has never recovered.
  • Employer rates are going to bankrupt Oregon.  This has been one of pet peeves since at least 1994.  During the go-go 1980's and 1990's the employers were banking as much as the employees were on their PERS accounts.  Because high earnings tend to lower employer rates, the employers failed to plan for the day when the gravy train would stop.  They took the low rates, failed to bank the savings, and then had to beg PERS for an installment plan to amortize rate increases over a longer period of time.  When even the installment plan didn't work, many employers went for Pension Obligation Bonds essentially betting on the same forces that got them into hot water in the first place.  The rates the employers are paying now are the result of employer greediness and spending patterns, the PERS Board's feeling sorry for the employers, and sheer stupidity borrowing to pay off what amounted to another loan.  The employer rates can be blamed almost exclusively on the employers.  Nothing PERS members did or could do caused the predicament the employers are in today.
  • Taxpayers are entitled to know PERS benefits because they pay the salaries.  Yes, this is partly true, but not entirely true.  Let's take Higher Education as an example.  Higher Education's general fund budget comes to less than 10% of the operating costs of each institution.  Therefore, taxpayers are responsible for 10% of the salary budget.  At best, they are entitled to know approximately 10% of my salary.  When the issue comes to PERS benefits, the people receiving them are no longer receiving taxpayer money.  Roughly 25% of the money coming in to PERS comes from general fund sources.  The remaining money is from investment earnings.  So, my retirement benefit derives from 10% of my salary and a fourth of that to PERS, and the remainder from non-taxpayer sources.  I'd gladly reveal the 2.5% of my PERS benefits that can be traced back to taxpayer sources.  My academic salary came from grants, contracts, tuition, fees, indirect costs on grants and contracts, and only a small fraction from the taxpayers.  Thus, my retirement benefits began from those same sources, and then investment income funded the rest.  This argument holds true for many agencies that have a source of income other than the state.
  • Whose money is the 6% pickup.  It is mine.  PERS and my employer always treated it as part of my salary and when my PERS benefits were calculated, my final salary always included an additional 6% as the pickup.  If there was ever any doubt about whose money that was/is, this is the needed confirmation.  If Thompson, or anyone else, wants to propose eliminating the 6% pickup, just remember that it would be a 6% pay DECREASE, plain and simple.  It isn't a matter of saying "well, we eventually gave you raises didn't we"?  Nope, not at all.  We never recovered any of the purchasing power lost to that tradeoff.  Taking it away now, or making employees pay it instead (the same thing, in effect) is a salary decrease plain and simple.


So, I challenge my friends at OPB who've happily taken my Cornerstone gift every year for the past four or five years to honor my expectation of "fair, impartial, unbiased".  Failure to deliver on this basic promise will cost you my cornerstone membership, and possibly more.  I wouldn't spend too much time thinking about it.  The show airs tomorrow.  If you have to think about it a second time, you're done from this household.  I'll continue to listen, but you won't get those membership dollars from me.





Unknown said...

Well said, and I agree even to considering ending my annual contributions to OPB. I may not be in your league, but I contributed just under $700 in 2010. OPB loudly sings it's own praises about what great journalism they promote. If they fail in this, where there are many local sources and lots of good information, I see no reason to waist any more of my hard earned money.

Unknown said...

I am cutting my contribution to OPB...SAIF employees get PERS...and NONe of it comes from taxpayers...O.OO

TruthSeeker said...

Good on you all!~

TruthSeeker said...

Good on you all!

mpguy said...

Marc, if OPB were really interested in fair and accurate fair and balanced) journalism, they would have asked you to appear on the show.

Andrew said...

Though I agree that there was no good justification for identifying PERS retirees by name, it does satisfy a certain morbid curiosity of mine to be able to look up specific retired colleagues to see how they are faring. A lot of dismaying moments for me: in particular, an administrator who worked at my university during my time who lacked a doctorate degree and was widely regarded as incompetent is among the top PERS beneficiaries (literally getting 5 times more than I am for roughly the same period of work - and I am a Ph.D. who worked 60 hrs. a week in a lab and published over 200 articles). Helpful to know that some of us actually deserve to be despised.

mrfearless47 said...

I don't care one way or another whether they have me on the show or not. I DO care whether they present a fair, balanced, and unbiased picture of Oregon PERS. The show turned out to be much ado about nothing, but I didn't think it necessary to quote Dennis Richardson's description of Tier 1 retirees. That pissed me off.

Anonymous said...

This is not the first of your posts I've read, and you never cease to amaze me. Thank you, and I look forward to reading more.

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