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Wednesday, March 06, 2013

Making Promises

The current Oregon Legislature has spent an inordinate amount of time figuring out how to screw over PERS retirees already drawing benefits.  From the beginning, starting with Governor Kitzhaber's budget that proposed to cap the retiree COLA at 2% of the first $24,000 of benefit, the legislature has been doing pretzel twists in an effort to second guess what the Oregon Supreme Court might allow as a change to a benefit that has been enshired in statute for more than 40 years with no change.  Both the Legislative Counsel and the AG's office have independently concluded that a dollar cap on the COLA isn't likely to persuade the Supreme Court of its legality.  For the past month, a group of fiscal analysts, the Legislative Counsel(s), and various highly placed politicos have been meeting secretly to find a legal way to reduce the future benefits paid to current retirees.  It is a no brainer legally if they want to go after those who haven't yet retired, but the issue of stealing future benefits from those already retired has been problematic.  The issue the Legislature and the Courts confront is that of ALL the benefits paid to PERS retirees, the COLA is the most clearly articulated, longest standing, and most direct promise made to retirees.  And that promise has existed since the day every retiree retired, if not from the first day they were hired.  So, the Legislature faces the daunting prospect of trying to alter a benefit that has been etched into the annals of the state statutes since 1971, and in its current form since 1973.

After weeks of meetings, the Legislature seems to have hit on their "solution" to the problem.  They will settle for a lesser reduction and lesser savings in exchange for something that will keep PERS' programmers up nights and days trying to figure out how to comply with the typical byzantine rules of the Legislature.  While no one knows exactly what those mental giants in Salem have come up with, it is pretty clear that they've decided that they *might* get away with a graduated COLA.  The idea is that lower benefits would reap the highest (2%) COLA, while the COLA percentage would decline with income.  One can imagine a COLA with 4 cut points - 2%, 1.5%, 1%, and 0.5% depending on the benefit level of the individual.  At the moment no one has a clue about where the cut points might be, but we do know that the savings estimated are around $400 million per biennium, which is half what the Governor's proposal would have raised if it survived (unlikely) a court challenge.  The notion of a inversely regressive COLA will give the Oregon Supreme Court fits, because the court loathes discriminatory statutes.  This one, however it works out, is discriminatory on its face since the statute would, in effect, provide a higher benefit increase (possibly dollars, definitely percent) for people who have worked shorter periods of time.  The career employee (30+ years) probably earns the greatest benefit primarily because he/she chose to make his/her life's work in the public sector.  The short timer (a generalization to be sure, but probably more true than false) will end up with a higher percentage increase in benefits for working  a shorter period of time and, possibly, having multiple retirement accounts to draw upon.  I have no problem with the career employee who draws lower benefits receiving a higher benefit increase, but I object to the discrimination that arises from spending an entire career working for a single public employer that makes me out to be the "bad guy" in the state's current budget woes.

Lest anyone forget, any reasonable examination of the history of PERS for the past 20+ years will find case after case where the employers have complained about rate increases and have gotten the PERS Board to capitulate in ways that, combined with legislative action, resulted in lower benefits than were promised.  No one wants to address the imperative question of where the savings from every previous set of changes to employer rates have gone.  The employers treat this as a zero-sum game.  Rate reductions must require benefit reductions and so every problem that this state faces automatically requires employees, and PERS beneficiaries to give back something that the employers promised in exchange for both salary and lower employer rates.  When is someone going to call "buillshit" on the employers and ask where all the savings from previous rate cuts have gone.  Because saving them seems to be an alien concept.  If one wants to compare greed, lets pit employers and employees and see who has better husbanded money.  I bet employees win every time.  I wouldn't give employers another dime unless someone can PROVE they are spending their resources wisely and saving properly for a rainy day.
For retirees, I suggest that you assume the position and get ready for another screw job brought to you by the "fiscal analysts", the Legislative Counsel, and the "wide boys of Salem".  Bend over and prepare to enjoy it!

18 comments:

Unknown said...

Like you Marc, I am especially angry at the concept of further capping the COLAs of PERS retirees based on their monthly benefit. All it really does is tell me what a complete sucker I was to devote my full work life to the people of Oregon and how stupid I was to believe I had a binding agreement as to the benefits I earned in those 30 years. Thank you for articulating the anger many of us feel.
peg

mpguy said...

I disagree with you that it's OK to give a greater COLA benefit to those who receive less--whatever the reason for that.

The simple (and equal) percentage increase is the only fair approach.

One question I would have for the Governor and the legislators is, "Why was it OK for the employers to allow investment returns to be used to reduce or eliminate their contributions during times when the investment markets were doing well?" Had the employing jurisdictions simply put aside 6-8% each year, regardless of the performance of the "employer" parts of the funds, the overall fund balance would be greater. Employers wouldn't be scratching around, trying to figure out ways to reduce their current obligations.

mrfearless47 said...

I take your point on a COLA differential. I put it in there primarily to indicate that I don't want to pile on career employees who do not draw large pensions, but rather to express my concern that this depreciating COLA actually punishes career employees and acts as a deterrent to attracting and keeping some of the best. I didn't put that in the post because I didn't want to make the post longer than it already is. I guess this serves as a sort of footnote.

Robert Gorham said...

Something you haven't mentioned is the language in SB 754 (the republican...school board proposal) which says in Section 28 "Assumed rate for calculation of money match"...."For the purposes of calculating an annuity under this sub paragraph the assumed rate shall be 4%" No mention of whether they think this should be retroactive. Of course this change if implemented will cut money match rates in half. And why not make it retroactive...then they can bill back to those who have been on money match at 8%...result, no more pension. I listened to a program on OPB with a republican and Democratic representative. Their attitude was that PERS was like a legislative piggy bank. They were in agreement that PERS was where they should and could find new income. The only issue, was how much.

mrfearless47 said...

SB 754 isn't retroactive so why bother to bring it up? I will post more information when/if it gets scheduled for a hearing. Until then, SB 754 covers just about everything but the kitchen sink, and isn't very likely to gain much traction.

Robert Gorham said...

Well I think there are money match employees still working, who might be interested. No one should be left with any doubt about the republican intentions, now and in the future. The republican legislator on OPB said that their proposal was the school board proposal.

mpguy said...

You're right that SB 754 isn't retroactive. However, Robert's point is that this bill could be amended--or another bill introduced--to make such a change apply to those already collecting pensions.

Based on past court rulings, that shouldn't be a worry. However, there also isn't much reason to have faith in the Oregon Supreme Court.

Cutting benefits already in force is likely next step. Especially once the Governor and legislators see that taking away the COLA proves to do something less than solve all of Oregon's budget problems.

You know the Dennis Richardsons of the world are just sitting out there looking for an opportunity.

rkgernhart said...

Get ready for a huge group of new retirees this spring. I hate it when the Oregonian and others act as though changes to PERS this year will finally fix the "problem". That is the same thing they said back in 2003. I retired in 2012 - compared to people that I worked with - with the same years of service and same job but they retired in 2003 (prior to changes) they made at least $2,000 more per month at retirement than I did in 2012. The way I see it I already have sacrificed unforunately those that are making the decisons don't remember 2003 or aren't honest enough to remember. This whole things just well I can't really print what I really feel. Obviously the only constant is that our pensions will never be secure.

rkgernhart said...

Get ready for a huge group of new retirees this spring. I hate it when the Oregonian and others act as though changes to PERS this year will finally fix the "problem". That is the same thing they said back in 2003. I retired in 2012 - compared to people that I worked with - with the same years of service and same job but they retired in 2003 (prior to changes) they made at least $2,000 more per month at retirement than I did in 2012. The way I see it I already have sacrificed unforunately those that are making the decisons don't remember 2003 or aren't honest enough to remember. This whole things just well I can't really print what I really feel. Obviously the only constant is that our pensions will never be secure.

RKS said...

Sent a letter to my senator (Starr) and Rep. (Unger). No response from Starr (go figure), got one from Unger.

"I do realize that benefits to employees were a promise and a contract. I also appreciate that employees have been making sacrifices to make budgets balance, and that we've often balanced our sheets on the backs of our employees and people are working harder, for less money, than they were 5 years ago.

I'll fight to make sure that any changes that are made to the PERS system fit into this framework: they're fair, they're legal and they actually save the state money. That's the promise I made during my campaign, and I'll continue with that platform."

I'm not very worried about the "legal" part but "fair" scares me. "Fair" is really in the eye of the beholder and if legislators are looking through jealous or greedy eyes it won't look good for us. "Actually saves the state money" can also be very subjective. As we have seen the calcuations can be a bit of a guess and may appear much better than reality.
Had a letter from the Firefighter union, too. They are realizing the possible implications for their members and are gearing up.

Keep up the pressure!

Unknown said...

I am a simple man. I just don't understand how legal-ease can be used to break a contract!

All of us based our retirement decisions on the contracted amount of income from PERS. Now legal people are inventing ways of stealing from our contracted promise of income.

To me this is legalized theft!

Unless I misunderstand what a contract is!?

Cletus Clovis said...

Let's not forget the PERS retirees living out of state. Remember when the legislature and the governor pass the law ordering the offset be denied to those planning to retire on or after 01012012 and now they want to change it. I pay income tax to CA and they want change the law again and take away the offset? That was never a consideration when I retired in 2003. How is a retiree to financially plan when every two years the governor and the leg want to take more away from us?

Cletus Clovis said...

Let's not forget the out of state PERS retiree. The legislature signed a bill ordering the offset not be given to those persons retiring on or after 01/01/2012. Why the change? The governor signed it also. It is hard to do any financial planning when each year the legislature and the governor wants to reduce promised benefits. If that passes, it means I not only will. Paying taxes to CA, but being penalized by the state I devoted my working life to.

1mootpoint said...

The bills that I have seen prohibit the supreme court from awarding attorneys fees to the prevailing challenger, thus requiring whoever steps up with a challenge to cover those costs personally (assuming the challenge is successful).

mpguy said...

1mootpoint . . . The fact that a bill may have that language in it to begin with doesn't mean that it will remain there. Bills are often amended.

Since the state will defend this kind of legislation with our tax money, it doesn't need reimbursement. Retirees, however, should be reimbursed if they (we) prevail. After all, there are legal analyses out there which show that this in unconstitutional. Continuing to push this is a demonstration of bad faith on the part of the Governor and our legislators.

Unknown said...

As a Window Retiree, the whole issue of who pays the legal fees is moot. When we lost our cases the retirees involved ended up paying for the attorneys on *both* sides. PERS took a bite out of our benefits and we paid through various members of the PERS Coalition (in my case through a union and through voluntary contributions to the OPRI legal fund). This went above and beyond the reduction in benefits from the cases we lost. Talk about adding insult to injury.
peg

Cletus Clovis said...

I thought PERS is supposed to be our advocate NOT our enemy. What a bunch of stupid rascals! Same goes for the stupid governor and legislators.

Bob Frazier said...

PERS must not be broken if the legislature wishes to steal from it. Well which is it guys?

And please NOT July 1, 2013... that's my "special" day.