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Tuesday, April 02, 2013

It's Alright Ma (I'm only bleeding)

The freight train you hear outside your window tonight is the one carrying SB 822 to its final resting place, on the Governor's desk, where he will assuredly sign the bill in 6 seconds flat. So much for the democratic process. The first public hearing on the bill was last Thursday, where the rules committee of Ways and Means took testimony for 3 plus hours. There was exactly zero support from the public on the bill either because it was viewed as illegal theft of earned and promised benefits from PERS retirees, or because it didn't solve any problem, but merely created more, or because it didn't go far enough in stealing from retirees or actives. Discussion continued briefly on Friday morning where more opposition was raised. In a typical case of completely ignoring all testimony - a fact yours truly predicted to the committee's faces on Thursday - the bill was rushed out to the Ways and Means Committee for more testimony and a work session tomorrow at 4:30. The final bill, which committee member and House Speaker Tina Kotek has already announced is in its final, unamendable form will come up for a joint Ways and Means full Committee vote on Friday April 5 at 9:00 am. At that point, all that remains is a vote from all the House and Senate members ( where the dumbocrats have a sizeable majority). All this looks like a slam dunk passage of the COLA cut, the elimination of the income tax subsidy for non-resident retirees, and allowing employers to defer about $350 million worth of employer required payments down the road an additional two years.

There are so many problems with this bill that despite Bill Gary's $500 per hour opinions on their legality, the legality is nearly immaterial to the damage they will do to the system, legal or not. First, the problem that motivates this "solution" is an Unfunded actuarial liabily that is $14 billion without employer side accounts, and $8.7 billion with the side accounts. While the savings from reducing the COLA payment obligation the present and future retirees works out to be approximately $400 million per biennium ASSUMING the savings accrue for the next 10 biennia. But the savings don't accrue at all under this bill. Instead, the $4+ billion savings in the next 20 years will be spent every year to keep employer rates artificially low, and at the end of 20 years, the system will be no better funded than it is now, unless the earnings approach Bernie Madoff levels. Second, the funds are supposed to prop up the K-12 budget with the governor insisting (pandering) that the money will be used to put more teachers in the classroom. That would be a noble gesture were it not for the inconvenient truth that nothing in this bill requires the employers to provide an audit trail that proves the money will end up in the classroom hiring new teachers, updating the curriculum with new books and possibly hiring a few teachers aides. I know way too much about how the educational system uses some creative accounting to hide the real purpose or placement of new funds, that without some serious checks and balances, perhaps accompanied by prison time for misuse of these funds, I'd be astonished if the net increase in teachers from this infusion of stolen cash leads to more than 50 genuinely new, full-time teachers.

Finally, we have the legislature buying into a scam previously reserved only for the PERS Board. If the legislature imposes an addition rate collar of $350 million so that money due to pay bills due now is allowed to drift unpaid for another two years, the increased costs just from that deferral alone will add another $60 million in interest costs to the deferred money, which will be added to the employer costs in 2015-17. Pushing the can down the road doesn't relieve employers of these current obligations. It just makes the next bill more expensive because the current costs that are deferred get added to the UAL and make the debt service on the UAL that much more expensive.

So, the logrolling of SB 822 has begun in all seriousness with public employee retirees being subjected to (probably) illegal cuts to their COLA benefit, with none of the savings retiring any portion of the UAL,none of the savings guaranteed via any mechanism to achieve its intended target - the children and their teachers, and accompanied by a deferral of mandatory payments by at least two more years and the UAL not declining, but rising by another nearly half a billion dollars.

If this is intelligent public policy, then I am the densest person on this planet. Don't look now ma, I'm only bleeding, just a little bit more. And the really encouraging piece of news is that after this bill goes into effect, we will all be back here again in two more years for the next round of cuts.

14 comments:

M&S said...

Thank you for the insight and indepth opinion on what is and what will be. Igjeup. PS Irony 1: No one, and I mean no one, in the Legislature has got the word out that he or she is steadfastly opposed to any changes to the earned PERS benefits, and that the needed increase in education revenue has to be chipped in by every Oregonian. PPS Irony 2: SB822 has already passed in my mind, while measure to reduce tax breaks for the well-off has not passed, because 822 is not labelled "revenue increase" ["a rose by any other name"], and 822 can pass with just a simple majority, which Dums have without help from the Repub-Bullies. On the other hand, closing tax loopholes is labelled as a tax or revenue increase, so Oregon law requires a super-majority to pass, which Dums don't have on their own. Wow, getting me coming AND going. What a world!

RKS said...

I'm getting the feeling that our dedicated legislators are doing nothing more than fulfilling a promise to "do something about PERS" even though this bill does little except cost me some money and make the system less well funded.
I keep hoping that sanity will prevail but so far I haven't seen it happening.
I belive it was Einstein who described insanity as doing the same thing over and over and expecting a different result.
Color me insane, I guess!?!??

mpguy said...

M&amp . . . You make an interesting point about this not being a "revenue" bill. It begs a quesiton I've been asking for some time that should show up in the PERS Coalition's lawsuit over this: What's the real, substantive difference between the COLA cut and a percentage graduated excise tax on PERS retiree benefits--which would be patently illegal?

Unknown said...

The Ways & Means subcommittee heard no public testimony and only took 15 minutes to move SB 822 on to the full Ways & Means committee with a Do Pass recommendation this afternoon. The freight train has a full head of steam!
peg

yehudah said...

Hi Marc -
I am just now tuning in, but it's because I just got a bill for close to $5000 from PERS! I've signed on to the Yahoo discussion group in order to hear what others are doing, i.e. what recourse is being pursued, and how PERS is able to get away with this. It's a laborious process to go through all the discussions and your blog posts to find this information, so I'd be very appreciative if you or someone in the discussion could show me a short cut. Thanks in advance. alanyehudah@gmail.com

mrfearless47 said...

Yehudah. I wish I could help you right now but I am on vacation until April 12. You could ask your question on the Yahoo Group and one of the people there will probably help you. Two pieces of information would help. First, when you retired, and whether you took a lump sum on an annuity. Also are you currently residing in Oregon or elsewhere.

tredway said...

For out of state PERS retirees, it's time to start thinking about a lawsuit if the legislature follows through on more legal theft to pay Oregon income taxes.

If such legislation passes, it should be argued in court that "no taxation without representation" applies to those living out of state. PERS retirees should be entitled to the same benefits(voting for those who would steal our benefits in the future, purchasing cars without paying state sales taxes, etc) as those living in the state of Oregon.
Also,at the time most of us retired, the PERS Board, legally constituted at the time, sent its representatives to retirement meetings promising as a benefit, no taxation for living out of the state after retirement. Either the Board was incompetent in sending those people to meetings with false information or it was grossly negligent in issuing misinformation, the fact remains that a contract took place upon final approval of the benefits and issuing the first checks.
What is to stop the future Oregon legislatures from decreasing pension benefits 50-75 or even 95% simply by saying "The PERS Board acted improperly?"
Now that we see democrats in the legislature outdoing republicans to enact PERS 'reforms' after ten years of brainwashing the public by the state's three major newspapers, a vigorous coalition of out of state PERS retirees needs to be formed.

Unknown said...

After sitting through 3 of the 4 hearings/worksessions on SB 822, I have heard enough of the Democratic rational to understand how they are justifying their actions to themselves. The key phrase that sticks my mind is the principal they are repeating to themselves: Actions of prior Legislatures in no way bind the actions of the current Legislature.

Now I understand how the US Congress could justify violating treaties with the Native Americans! Their actions in the present were not to be bound by the treaties and commitments of earlier Congresses! Wow! What freedom of action this allows.

I am *not* saying that the betrayal PERS members are again experiencing is in any stretch as severe as what was done to Native Americans. At this point I have only had a few thousand dollars taken from my planned retirement; between the Oregon Courts, some Democratic governors and the Oregon Legislature. So far I have not been forced out of my home at gun point, or force marched hundreds of miles to some barren wasteland. SB 822 will *only* steal another $8,000 from me by my expected death in about 20 years.

But I *am* saying that this is probably not the end of it. As long as our leaders feel perfectly comfortable breaking past promises because they didn’t make them -- there is no end in sight to what might be taken away. Ready to be put to sea on an ice flow anyone?

peg

Cletus Clovis said...

I agree. More broken promises ahead over the next many years. Don't engage in any big financial plans such as buying a car, a house, or a modest vacation, because the money will not be there as the legislature and governor "gobbles" up our benefits. Those &$!@$ greedy fat rascals!

Unknown said...

Interesting to hear that SB 822, after the 1st year, eliminates the tie between CPI and PERS COLAs. While not a huge favor, it does eliminate the annual announcement to let retirees know if they qualify for the full 2% COLA and it eliminated the COLA Bank.

peg

Bob Frazier said...

This has to be illegal.

something so clearly in vioation of a contract? Will the Oregon Supreme Court do the right thing and simply negate this? Thoughts? What can we do to prepare for that battle?

mrfearless47 said...

@Bob. Which part is illegal? The COLA cuts or the out of state tax provision. The former is where most of the energy will be spent because that's where the money is and where the legal haziness begins. I'm guessing that within hours of the governor's signature, this bill will be challenged by the PERS Coalition and OPRI on the grounds that the original COLA is contractual and that the Court's previous rulings make it clear that they can't change it. It will take about 2 years for this to be resolved - shorter if the OSC does not require a special master, and should be resolved one way or another by the time the 2015 Legislature convenes. That way, whatever happens, the Legislature can either try something else, or come back for second and third helpings. There is no doubt in my mind that no matter what happens, this is not the end of the screwing around with PERS retirees.

mpguy said...

Marc . . . There was some good evidence in the Register-Guard this week that the final sentence in your post is true.

In discussing the Oregon Senate's 16-14 party line vote to send this bill to the House, there was a comment by several unnamed Senate Democrats that there will be further efforts to reduce the COLA, and likely the benefit itself.

I've asked the staff members of more than half a dozen Democratic Party legislators and a couple of lobbyists if the ultimate goal is to reduce, or even eliminate, the core benefit. The responses I received ran from "I can't deny that" to "you're probably right."

If the Oregon Supreme Court upholds SB 822 and its COLA reduction provisions, I wouldn't hold out much hope that current retirees will still be receiving anything more than a token benefit within a couple of years.

mrfearless47 said...

If the OSC upholds SB 822, then retirees should be on notice that benefits earned and promised are only illusions, not reality. Objects in the mirror are further away than they appear.