Just when you thought things couldn't get much worse, the Oregon Legislature has decided to fast track a PERS bill that will make retirees the beasts of burden to carry the load for funding public schools. From the beginning, this has been set out as a contest between two conflicting contracts - the PERS contract, and the so-called contract with schools to provide a quality education for our students. So now, the issue comes down to robbing retirees to pay for "the children". Not only is this just wrong, wrong, wrong, what lesson does it teach the children. Leaving aside the question of whether ANY children will benefit from the legislative action, there is the larger question of the lesson that "keeping your word", "honoring a contract", "promises must be kept" teaches our current-day students in this environment of "they SHALL pay". I wonder if the Legislature even notices the irony of "its for the children" when weighed against "a small break in the retiree COLA contract". I guess trust is not a commodity they teach in school today and the students of today need not worry about their future concepts of right and wrong. The Legislature has just told them that "breaking a contract" is OK if it is "for the children".
My last post outlined part of the terror to be visited on retirees as soon as July 1, 2013, in the form of a reduced COLA (1.5%) in 2013, followed by a graduated COLA based on income level that will be implemented in July of 2014. I'll spare you the details again since they were in my last post. But this fiscal sleight of hand takes roughly $45 million in lost COLAs to current retirees and through the magic of compounding, actuarially apply a Betty Crocker recipe, and turning up with a $400 million reduction in PERS employer contribution rates. This money, or at least the money retained by the schools, will be redeployed to do things "for the children". Several groups are strongly favoring reductions in retiree COLA (even if not the current proposal), but nothing in the current bill will actually help the situation on the ground. The public schools have always been a vast wasteland of unnecessary spending, although none of the unnecessary spending has ever been at the classroom level. So, when I testified before the joint House and Senate Rules committee on Wednesday, I asked exactly how the Legislature planned to insure that every penny of the money stolen from retirees will end up in the classroom where the children live. How does the Legislature plan to monitor expenditures of this $400 million to insure that my granddaughter's classroom sees every single dime of money that you've taken from her grandpa's retirement fund. I am a cynical person. I spent my entire career in education, although higher education instead of K-12. I remain close to the scene at my former employer. I get weekly emails telling me the latest goings on. So while teaching positions are frozen, tuition continues to rise, faculty continue to be paid well-below comparator institutions, the University can find enough money to hire a new "Vice President for Customer Service". I confess to being flabbergasted by this appointment. Who are PSU's customers? What will the VP for Customer Service do? Assuming that the students are the customers, will the school then adopt the retail adage that the "customer is always right"? This kind of fungibility of funds in education is what worries me greatly about this latest attempt to steal money from people who have already worked their entire career, have spent 10-12-14 hour days trying to help the good citizens of Oregon and who now not only get to be regularly trashed in all the local media, their own employers conspire against both actives and retirees to take more money so that we can all enjoy the benefits of a "Vice President for Customer Service".
If that isn't enough, the bill currently floating through the legislature at warp speed also includes a provision to end a practice that has been in effect since 1995. This is a very complicated issue, and on the surface it appears that it should be a slam dunk reduction. But like all things involved with PERS, there is a long history, a very complicated history that involves multiple cases before the Oregon Supreme Court, changes in the IRS provision nearly immediately after Oregon addressed the problem, and a lot of people who have no idea that their current benefit contains a fractional adjustment to the gross benefit that is the result of Oregon being forced to tax PERS benefits after a US Supreme Court case in 1988. The problem isn't the solution to the matter - PERS members who live outside Oregon no longer have to pay Oregon income tax on their PERS benefits, although they did until 1996, the real problem is that PERS has never been entirely clear about what the benefit "bump" was for. Consequently, if you ask the typical retiree living in another state, someone who moved there to be closer to family, to be nearer better medical care, or to help out other family members, few, if any of them, even know that their benefit is in jeopardy. So SB 822, the latest piece of legislative flypaper catches all retirees with the COLA change, and it affects 19,000 retirees living away from Oregon who receive approximately $55 million in extra benefits every two years as a result of a legal case that occurred early in their working careers.
Your can write the legislators involved - Senator Richard Devlin and Representative Peter Buckley - or you can write to the Governor to argue that these cuts are ill-advised, possibly illegal, and will wreak havoc on retirees if they pass and won't benefit the schools (or at least a few overpaid administrators) either. You can also indicate that you think that there is not a small amount of irony in teaching our children that breaking promises is OK if you are the beneficiaries of the broken promises. Unfortunately, I doubt that our students will see any of the money from this latest raid on the PERS fund. I'm willing to take bets that less than 20% of $400 million reaches the classroom, while the remainder goes to support the bloated and corrupt bureaucracy of the public schools.
The other piece of delicious irony in SB 822 is that our opposition in the Oregon School Boards Association (OSBA) represented by loudmouth Jim Green from Salem and sleazy and unctuous Bill Gary from Eugene are deeply concerned about the unfunded actuarial liability (UAL). Their concern would touch me if any of the savings from retirees actually did anything to reduce the UAL. But, as good representatives of the OSBA they would be remiss if they actually helped reduce that nagging concern, especially if they have to choose between "the children" and the "UAL". So, the schools get $400 million worth of play money to enjoy as they wish - because there is not any oversight on how they spend it - while the UAL lingers at $14 billion dollars and MIGHT be $11 billion after the schools have ravaged through 10 biennia of $400 million + in savings taken directly from retirees and future retirees.
Oh, and did I mention that this bill also asks the PERS Board to push about half of the employers' required payments down the road until 2015-17. So, the net effect of all this fiscal chicanery is to generate $400 million in phantom dollars for the schools to spend on executive boondoggles, new offices, maybe one or two new computers, and a new administrative lounge or two, while the employers of all PERS employees get to defer about $400 more million dollars in payments that should be due now, today.
The sad fact in all of this is that while we are Beast of Burden for the 13-15 biennium, I have no expectation that anything will change between now and the next big legislative session in Feburary 2015. I expect that the money will be squandered, that PERS will be in no better shape, and the rapists will be coming for more contributions from retirees, but will have gathered all the low-hanging fruit out there. Good luck. I hope they are in training now, because the next time they try to take money from us, we will be better organized and prepared to walk these clowns out to the end of tiny branches and watch them fall like rocks.
Have a nice Easter.