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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.


dbg gardner said...

I am confused. Why would the D's need to override a veto?

treehugger1 said...

Thanks for taking the time to post updates. This is like waiting for the ketchup to come out of the bottle.

I have been wondering for a few years when whining about the university ORP would begin.
I was involved with AOF (Association of Oregon Faculty) for 12 years, and there was some amazement that the ORP kept going unnoticed. AOF is still very much involved with lobbying efforts that continue to support all public employees.

Ed Haney said...

How soon would you guess these bills can make it through the legislature and become effective. I'm one of those that is right on the cusp and might have to make a move sooner than later.

mrfearless47 said...

Ed. You stay past April 1 at your own peril. I can't predict when/if these bills will make it through the Legislature and on to the Governor. Some suggest sometime in May at the earliest; I've seen instances where they've passed in late April, and some not until early June. I just know they can't get anything done by April 1; beyond that, it is a crap shoot.

mrfearless47 said...

dbg Gardner. See the note I added to the post. It should help.

Matt said...

I am not clear on how this is legal. How can they take money intended for my individual account and do something else with it. If they can take the money, why don't they just take all the money from our accounts. Why limit themselves to 6%.

mrfearless47 said...

I think the diversion of the 6% is pretty much a dead issue now. The geniuses who wrote these bills did not bother to check the existing labor contracts, or the fact that a large percentage of them have language in the that requires the employer to offset any loss of the 6% pickup with a compensatory salary increase, thus saving no money. Others already pay their own 6% from their own salaries and were given compensatory raise in exchange for giving up the pickup. So for anyone already paying their own 6%, it would be wage theft, which is illegal on its face, and for those with offset clauses in contracts, it would become wage theft the moment the members started having to pay their own benefits. Moreover, if they kept the pickup and only targeted those members, it would become a discriminatory action, which is also illegal. Consequently, I don't see much chance of this part going anywhere, a fact the bills' sponsors now recognize and admit.

capeman said...

What's left seems to be (1) the $100K cap on salary used to determine PERS; (2) an end to "spiking"; and (3) decoupling the annuity rate (investment return rate used to determine pension) from the actuarial rate (assumed rate of return on the PERS trust fund).

Apart from their legality, I don't see (1) or (2) saving much money.

That leaves (3). Perhaps barely legal. Just because they have been coupled since forever doesn't mean that is part of the "contract." On the other hand, hard to see how the inconsistency is not a robbing of future pension beneficiaries. But it would definitely save money on future pensioners with accounts in the PERS trust fund (i.e. not the new "independent" accounts). I figure it would cut future Money Match pensions by roughly 1/3.

A nasty piece of work, and also easy to sell to much of the public, who can't find an annuity deal in the private market anything like the current PERS setup.

As mrfearless notes elsewhere, this is one to be watched. A real stampede of inactives and many actives to lock in the current deal can be foreseen, if this nears passage.

mrfearless47 said...

capeman. Don't forget the 5-year period for computing the FAS. Incidentally, estimates I've seen from the actuary, put the savings for (3) at approximately $135 million per biennium. Also don't forget that the decoupling proposal also has impacts on Full Formula retirees who choose (need) a beneficiary option. The only way they could possibly sell a decoupling would be to make it across the Board. That's what makes it particularly nasty. I figure that it will dump most current members who see Money Match as the most likely retirement prospect into the Full Formula, where it will hit them again, but not in the Option 1 comparison where the "best of" is based. The only people still likely to find MM their retirement basis will be the long inactive.

The actuary sees more savings in (1) than (3), although I'm puzzled what assumptions they used. Also, do not forget that if (1) were ruled constitutional (unlikely for Tier 1 or Tier 2, but who knows), that would paralzye recruiting efforts for the more highly compensated positions - agency heads, OUS faculty, OHSU physicians and dentists, although both of the latter groups still have the ORP as an option, despite the changes proposed in SB 913.

As far as "spiking" is concerned, about the only thing they can legally do is to prevent future accruals of sick leave and *maybe* limit the proportion of overtime. They can't eliminate sickleave already accrued. That was stopped in OSPOA back in 1996 (the Ballot Measure 8 case).

One more possible area they've floated, although I don't think I've seen a bill yet covering it. That is to reduce, going forward, the service time multipliers used in Tier 1, Tier 2, and OPSRP. I've seen figures for Tier 1 and 2 down to 1.0%, and OPSRP at 1.2%. Again, talk about recruiting killers.

All of these approaches should trigger a massive rush to the door, something PERS has begged them not to do. But, the Rs in the Legislature don't seem to care.

capeman said...

I am counting the proposed 5 year rule as part of the attack on "spiking." Whatever.

If the savings from (3) are that small -- perhaps they think the savings will increase over time? -- then I don't see the point of even trying it.

You are right about recruiting highly qualified professionals. As for the ORP, I imagine most new faculty are taking it. Who would want to go for Oregon PERS, except perhaps for a few people starting public employment late in their careers? That is my view, anyhow -- I simply wouldn't trust the state of Oregon now when it comes to my retirement.

In the end, I think the most likely thing for them to pull is something to do with "spiking." You know, the Bellotti thing. It is extremely unpopular and easy to understand. They might try it, if only for cosmetic reasons.

mrfearless47 said...

The Bellotti thing wasn't even a case of spiking, or was the case of Johnny Delashaw, the current poster boy for high PERS payments. Spiking is primarily limited to people in which overtime can be used to prop up salary and is most common among Police and Fire agencies where overtime is a fact of life. Anti-spiking legislation will hurt a lot of middle-level PERS recipients and, except for the "cap" on 100,000 FAS (which I don't think will fly legally), nothing else would actually hurt the highly compensated remaining Tier 1 retirees. Note that Tier 2 and Tier 3 are already limited by Federal law and PERS' mandate to cohere with it, to the maximum FAS of $270,000 set by the IRS. There are ways around this limitation, but not with PERS or the ORP. Once the employee reaches a salary level greater than the IRS allows, retirement contributions by employer are no longer allowed and no longer have tax benefits for the employer. I know this from my wife's personal experience with a much lower level back in the late aughts. This change occurred in 1995 to be effective beginning with the tax year 1996.

ViceGrips said...

Worthy of note, the Oregon Secretary of State performed an audit a couple years ago, report number 2015-02 which found only isolated incidence of pension inflation. Quote from the report: "We also found that provisions of individual employment contracts may have an effect on pension payouts. However, the inflation of pensions,either intentional or unintentional, appears infrequent. The impact on
PERS appears to be negligible." If prospective legislation is evidence based, it seems anti-spiking legislation is a solution in search of a problem.

mrfearless47 said...

ViceGrips: I had totally forgotten about this report. I think I will search it out and link it here so people can read it. It confirms what I've known for a long time, that "spiking" is a concept invented by the right to call out a vague premise that rarely, in comparison to the totality of PERS retirements, occurs. It is impossible to "spike" a Money Match retirement; while "spiking" is limited even in Full Formula retirements. That's probably why the "anti-spiking" legislation saves so little money and what it does save comes on the backs of mid-level PERS retirees, but hurts all.

mrfearless47 said...

The full report: http://sos.oregon.gov/audits/Documents/2015-02.pdf .

Rosie Zupan said...

Question: I'm planning on taking my tier one money match as one lump sum, reinvest it . How would these bill effect my money match total? Let's say in two years I had 200,000. In my tier one account. Thank you for your thoughts .

mrfearless47 said...

Rosie. At this point, there is no bill that would have any impact on lump sum settlements under Money Match. I am assuming that you are an inactive member; otherwise, it is unlikely you'd retire under Money Match as a still active member. Also, it is unlikely that your Money Match account would double in two years, especially when the assumed rate has and will be declining. If you have 100,000 now, at most in 2 years you'd have about $115,000 (unless some of that is in variable, but even there it would take about an average of 30% per year to double in two years.

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