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Monday, September 18, 2017

Long Time Gone

It has been nearly two months since I posted the last entry.  Truthfully, nothing much of substance has happened, although the various newspapers around the state, the various anti-public employee organizations (e.g. OSBA, OBA, PBA) are still running around with their hair on fire about the “PERS Problem”.  Even national columnists and investment advisors are writing about the impending doom from a public pension debacle.  While I agree that the public pension systems around the country are in varying degrees of trouble (how can a state as small as Kentucky for example, have a UAL of $41 billion?), the solutions vary from state to state and from public entity to public entity.  One certain thing is that States, by the constitution, cannot go bankrupt.  As an extension, a public retirement system run by the State cannot go bankrupt.  This point seems to be lost on many (most) of the commentators who pursue the Oregon PERS “problem” as if it were cholera that needs to be eradicated by “whatever means necessary” (including those presently illegal federally or at the state level).  Op-Ed writers from around the state seem to think that the City Club’s 2011-12 report contains the solutions to most of Oregon PERS’ problems.  So far, I’m completely unpersuaded by this argument.  Moreover, the COLA freeze, adopted by the Legislature in 2013, was definitively ruled an illegal breach of contract by the Oregon Supreme Court in 2015.  And this was in the City Club’s 2011-12 report.  The Moro court made clear that prospective changes would be permissible, but implementation of prospective changes carry with them the problem of how to preserve the accrued benefits protected by the requirement that retroactive changes can’t be made.  So, for instance, going to a 5 year averaging for FAS has the problem that the accrued benefit includes the 3 year average for FAS, and so how do you implement this for anyone reasonably close to retirement?  Similarly, the $100,000 cap (not indexed for inflation) has multiple problems because of the accrued benefit matter.  As long as individuals have access to the 3 year average, it will trump any 5-year average or salary cap for individuals close to retirement.  Ditto for sick leave.  You can stop further accrual, but you can’t take away what is already accrued.  Inactives are protected from any of these rule changes so long as they accrue no service credit after the effective date of the changes.  Tier 4?  Sure, go ahead and see how that works recruiting for difficult-to-fill positions now.

In short, there is nothing I can see on the near-term horizon that would create the savings that PERS would need to make to pay down the UAL.  So, let’s propose something really radical.  How about if the damned employers just pay their bills as they have supposed to have been doing since the beginning of the “troubles”.  There would be no liability but for employers failing to pay bills when they were due.  How about the Board actually growing a spine and simply telling the employers that “…the game is over”.  “You’ve played it well, gamed it out beautifully, but your win streak has come to an end.”  Of course this will be disruptive to employers, to public employees, and the like.  But blaming the public employees for problems over which they’ve had little to no control is giving a complete pass to the real villains in this fiasco (which is far tamer than fiascoes in other states).