Lots and lots of questions, both relevant and irrelevant, about how the Supreme Court’s decision will be implemented by PERS and when. Let me say that the ink is barely dry on the decision and so it is a bit premature to begin to speculate with too much specificity how the ruling will be implemented, and when. We do know that the 2015 COLA will be 2%, as stated yesterday by PERS head Steve Rodeman. The court used a bit of confusing terminology when it described the effects of its ruling as a “blended COLA”. Blending has turned out to be a confusing word for people. I think what the Court should have said is that the COLA will be segmented into as many as three pieces depending on the proportion of work performed prior to May 6, 2013 (May 1 for practical purposes), work performed between May 6 (May 1) and October 8, 2013, and work performed after October 8, 2013. Each of those dates is associated with a different COLA. Prior to May 6, the old COLA was in effect (that’s the 2% maximum COLA, accrual of a COLA bank, and the use of the Portland CPI as the inflation measure; the second time period reduced the COLA max to 1.5% but left other features in place, while the third segment reduced the COLA to a flat 1.25% without reference to a CPI or a COLA bank. So, if nothing changes (see below) your revised COLA will be a combination of up to three segments of your working career with the COLA weighted in each segment by the length of time spent in that segment. For most people, even those retiring today, the dominant piece of the COLA will still be determined by the pre-May 6, 2013 rules (the OLD rules). The changes the legislature made that are prospective to your working life will dilute the final COLA by some unknown amount from the maximum of 2%. How this will be implemented remains to be seen. For people who worked their entire careers prior to May 6, 2013, the old rules govern your COLA, period. That is probably 85-90% of all current retirees.
There is, of course, a possibility that the Legislature can get involved now or in the 2016 short session and clean up the mess the 2013 Legislature created. There are lots of ways to do this, but the simplest (though not necessarily the most cost-conscious), would be to say “screw it”, completely repeal all portions of SB 822 and SB 861 relating to the COLA, and just re-do the COLA provision to be effective, say, July 1, 2015 or August 1, 2016 since 2015 is a settled issue from PERS’ standpoint. Imagine they just decide to start over and revised the COLA to the October 2013 rates and eliminate any reference to the May revision. This would become effective for only future retirees. The COLA would still be segmented for those retiring after the effective date of a revised law, but computationally it would make PERS’ life immensely easier by only having to deal with two segments, but would allow them to make a clean adjustment for all current retirees. Of course, doing this would be slightly more expensive than the present situation, but the extra cost would probably be offset in administrative and clerical savings from having the re-do.
I’m not predicting the above will happen; it is mere speculation that has been tossed around amongst some of us who think about these sorts of things. I expect the Legislature to do nothing, because that would require them to use less energy than they normally use for coming up with these preposterous plans. I don’t know if there is enough brain glucose to power the legislature through deep-think right now.
In the meantime, come to our PERS discussion group (see top link on this page), join up, and be welcomed into the discussion. There are a few of us gas-bags who enjoy speculating and playing armchair (or jailhouse) lawyers.
In the meantime, I wish PERS godspeed as they deal with this hot, steaming turd left in their laps by a group of greedy legislators, even greedier school board officials, and local government officials. They were warned this wouldn’t fly, and by god the court confirmed that turkeys can’t fly (with apologies to WKRP in Cincinnati).
Peace for another day.