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Sunday, March 26, 2017

Hey, That's No Way to Say Goodbye

Well, here we are two full months into the legislative session with not a single PERS bill having gotten a committee work session.  Most of the action is taking place in the Senate Workforce Committee, where Senator Kathleen Taylor has been running a very tight ship.  There have been four or five information sessions on various PERS bills with various experts and attorneys, but no work session scheduled on any bill through agendas posted for as late as April 3.  While it is too early to write these bills off, it certainly appears that few will survive this year’s legislature.  However, the most likely candidate is Senate Bill 560, which has already been substantially changed by gutting pages 2-16 of the original bill, and with 7 amendments replacing the gutted part.  The 6% pickup diversion is unlikely to fly, not because of constitutional issues, but because of union issues.  We learned from testimony on March 22, that SEIU has had language going back to the origin of the pickup (1979) calling for a salary increase to offset any requirement that the employee pay his/her own 6% from salary.  SEIU negotiated a contract in 2016 that has members paying their own 6% pickup, while the state gave a 6% raise to offset it, plus another 0.95% in cost-of-living increases.  We don’t know the status of other contracts, especially for local bargaining units, but likely has similar language in their contracts, or unions will use SEIU’s leverage to obtain a similar deal.  That leaves the FAS cap of $100,000, the five-year FAS computation (instead of 3), the totally confused idea to cap the annuity rate on retirement (I say confused because the clear intent of this is to limit the annuity rate for future Money Match retires, which are fewer and fewer in number, but the bill isn’t worded that way).  That drew a rebuke from Steve Rodeman, Executive Director of PERS, who cautioned the committee that they really didn’t want to go where the bill was heading, simply because annuity rates figure in all sorts of calculations.  He urged the Committee to work with him and Legislative Counsel to get the wording right; otherwise, the bill is courting difficulty.  Other pieces of the bill would cut the statutory formula rate (currently 1.67% for Tier 1 regular; 2% for P&F; ditto for Tier 2; lower for OPSRP) from its current level to 1.0% for general service, and 1.2% for P&F.  These are serious cuts, but would apply only to service performed on or after 1/1/2018.

 The theoretical “drop dead” date for bills to get a hearing is April 18, 2017.  Of course, there are a variety of parliamentary maneuvers that can extend the deadline all the way to sine die on July 8, 2017.  So, there is no reason to become complacent about the April date, although it may give some breathing room to those inclined to anxiety disorders.

People continue to ask me about “best” dates to retire.  I wish I could give a definite answer, but every situation is unique.  The only piece of SB 560 that doesn’t take effect on January 1, 2018, is the decoupling of the Money Match annuity rate from the assumed interest rate.  That piece is currently structured to take effect on passage, which could be anytime after May 1, 2017.  But that particular piece requires redrafting to remove the complex language that Rodeman warned against; that will require time.  Taylor and Knopp (committee vice-Chair) have agreed that they have to make decisions about bills to move to work sessions within the “…next three weeks”.  But complicating (or not, depending on your viewpoint) their decisions are some hard political realities.  After 2013, the Democrats don’t want to be tarred with another failed attempt to reform PERS.  In 2013, they sold their souls to the devils, Kitzhaber and the Rs in the Legislature, to achieve two different objectives - reforming PERS and providing small business tax cuts.  The Ds favored the former; the Rs the latter.  The “Grand Bargain” was struck when those two pieces secured enough opposition votes to pass both.  Unfortunately, the PERS cuts were largely overturned by the Supreme Court, while the latter quietly got lost in the shuffle and now add to the state’s growing deficit.  The Ds learned their lesson from that experience, and aren’t likely to agree to more PERS cuts without the Rs coming along with them on measures to raise revenue (some sort of Corporate tax), and also a transportation package to fix Oregon’s crumbling roads and highways.   The PERS bills are all R bills this time; they can’t pass without a couple of Ds going along.  To get out of committee, SB 560 needs all Rs and at least one D.  To pass in the House, all the Rs have to go along, and at least 4 (or 5) Ds have to go along, as well as the Governor.  But, those votes won’t come without R cooperation on the two big D objectives this session.  There will be a lot of back room deals being cut.  The reason for this extended sojourn into the political theatre, is to underscore how hard it will be to handicap the likelihood of PERS reform passing in the absence of these other pieces.  Thus, if you think you are going to retire under Money Match (remember, this isn’t YOUR choice; PERS chooses the best outcome for you), you may want to give serious consideration about going no later than May 1, 2017 (right now potential FF retirees aren’t protected under the current version of the 560-3 amendment, but we are optimistic this will change once Rodeman and LC get involved with the committee) because of the possibility that SB 560 will pass into law between May 1 and July 8 (no predictions offered there; you are on your own).  If you KNOW you aren’t going to retire under Money Match, then it is probably safe to wait until after the Legislature adjourns but not any longer than December 1, 2017.  If you are in doubt, be sure to do, at least, the PERS online estimator.  You might be surprised.  (It goes without saying that the PERS Coalition intends to litigate any changes; but this will present somewhat of a generational conflict, since many of the changes will affect younger OPSRP workers much harder than the “lame duck” Tier 1 and Tier 2 members).

To cap this epistle, I recall a line uttered by Senator Laurie Monnes Anderson (D) when she remarked that “…I guess the best thing would be for Tier 1's to die”.  She regretted it the moment it came out, but it is an unspoken truth, so those of you who are Tier 1 (retired or otherwise) now know how the Legislature really feels about you.  And I say, longevity and health are the best revenge.  Or in the words of Chris Smither, “hey, that’s no way to say goodbye”.


Tuesday, March 07, 2017

You Want It Darker

Just a quick post to note that SB 560 (a cornucopia of crap) and SB 913 (another capsule of crap, slightly different from SB 560) will have their first public hearing on Wednesday March 15 at 3 p.m. before the Senate Workforce Committee.  These two bills together contain an obnoxious amount of damage for potential PERS retirees and each strike in a slightly different way.  If SB 560 isn’t to your liking, try SB 913.  Both cover similar turf, although SB 913 contains a really ugly piece that isn’t a part of SB 560.  That ugliness takes the form of a decoupling of the actuarially assumed interest rate (used for valuing the fund, setting employer rates, determining Tier 1 earnings), and the annuity rate, used for setting benefit levels for retirees over a large class of individuals.  It would be good if affected, or potentially affected, individuals showed up for the hearing.  You won’t be able to testify on the 15th because it is invited testimony only from the experts at PERS, State Lawyers, and probably PERS Coalition Lawyers who will try to sort out the probably illegal from the possibly legal aspects of each of these bills.  We already know that the 6% redirection isn’t likely to fly, but I’ve already heard rumors that the bills principal Sponsor, Senator Tim Knopp, has at least half a dozen amendments ready for SB 560, the more “benign” version of the two bills.  It is only benign because it gives members until December 1, 2017 to get out before being affected; SB 913 takes effect on passage, which means that you’d probably need to be out of the system (i.e. retired) by absolutely no later than May 1, 2017 (preferably April 1 to be certain).

In any case, while there is no reason to hit the panic button yet, if you are already thinking about retiring during 2017, you might want to give some thought to how you might manage an April 1 or May 1 retirement.  While I continue to hear rumors that the Ds aren’t willing to support any of the bills dropped by the Rs, the problem remains that there is a $1.6 billion (or $1.7 or $1.8 depending on day of week and who is quoting the figure) shortfall between budget needs and revenue, there is a desperate need for a transportation package, and the Ds don’t have a strong enough majority to pass any revenue increases without buy-in from at least 3 or 4 Rs.  So, there is the dark version of this year’s legislature in a nutshell.

You’ve been warned.  At the very least, be sure to watch the recording of the meeting on March 15.  The Legislature posts the feed shortly after the committee adjourns.  Then you will have more information than I can provide you here. 

This site will go dark next week for a short while as I will be out of town and unable to post.



Thursday, March 02, 2017

Rough God Goes Riding

This is just a quick note to alert affected PERS members that SB 913 has dropped.  This bill, introduced by one of the dynamic trio (Moe, Curly, and Larry)  of Central and Eastern Oregon legislators, attempts to throw just about everything against the wall to see what sticks.  In addition to duplicating HB 3013 on the assumed interest rate, this bill goes after issues related to vesting and inactive membership, and just to put the icing on the cake, makes some changes to OUS Optional Retirement Plan that makes sure that the pain is shared amongst all eligible public employees.  I haven’t had time to analyze this bill closely.  I’ve read it briefly, and the Warren Zevon line:  “…send lawyers, guns and money, the shit has hit the fan” is apt once again.  Warren anticipated just about every circumstance (except for Send in the Freaks, which is a Was/Was Not epistle).  All I can say to people is that most of the cards are out on the table.  If you stay voluntarily past April 1, 2017, you are taking a chance.  Don’t say you haven’t been warned.  The Rs in the Legislature are doing a full-court press on the Ds, and the Ds don’t have the votes to override a Governor’s veto.  So, be afraid, very afraid. (There is some confusion over this statement.  Consider this primarily in the context that the Ds also don’t have enough votes to pass any revenue measure without Republican support, and the quid pro quo for that support might be support for a or some PERS measures.  Hence, the problem with a Governor veto).  For those of you stuck past April 1, 2017, you have my sympathy, and hope that you will work really hard to help the Legislature understand that Ballot Measure 5 (1990) is the REAL ENEMY here, having given citizens one of the highest personal income taxes in the nation, a mediocre property tax, and businesses a nearly 30-year holiday against paying their own way in this state.  I’m hoping that our rough god does his work on Don McIntire (already deceased) and Bill Sizemore (one can hope), for gifting this state with the biggest, smelliest turd ever.  I pray nightly that their souls will burn in hell for eternity.  They’ve given Oregon the gift that keeps on taking and taking and taking.

Wednesday, March 01, 2017

Gentle On My Mind

There seems to be some confusion about the recent spate of posts about proposed changes to PERS.  To gentle the minds of those already retired, none of these bills propose to do anything to anyone already retired, or to anyone retiring before any of these bills are enacted (if at all).  So those of you already retired can spare your anguish, and return to your (hopefully) relaxing retirement.  All these bills target those still working and those not working for a PERS agency, but not yet retired.  While I think that targeting the next generation to pay for our retirements, it really is no different than Social Security.  It isn’t fair, but it is life.  I oppose it on principle, and will fight like hell to keep any of these obnoxious bills from taking effect, but the reality is that there is no other way to pay for PERS without a general tax increase aimed at businesses that have gotten away with tax murder since the passage of Ballot Measure 5 in 1990.  As far as I can tell, payback for those businesses is a bitch, but it is necessary.