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Thursday, July 12, 2018

Hangout At The Gallows

The political silly season has started in earnest early this year.  Over the past week, I’ve repeatedly seen two ads running regularly on several Portland TV channels during the nightly news hour.  The ads are anti-Kate Brown, and depict several infamous PERS retirees who draw large monthly benefits.  The ads are of the old newsreel type, and ask whether these people cured cancer, or won Nobel prizes, and then dismisses them as just ”retired state employees”, as if they did nothing of merit to ”deserve” those benefits.  These commercials, which have run multiple times during any half-hour segment of the local news are sponsored by a group called Priority Oregon, whose origins, association, and financing are a bit elusive (there is a bit of information out there suggesting that several individuals may be behind this organization, including the infamous Loren Park).  Each ad ends with a picture of Kate Brown, a derogatory statement about her, and a phone number for the Governor’s office.  I presume these ads are to make Kate Brown the cause of PERS’ high benefits with the implication that (a) the Governor alone is the solution to the problems; and (b) a change of Governor would dramatically alter the status quo.  I presume that these ads are a lead up to more targeted ads featuring Knute Buehler (Buehler?  Buehler?) as the savior Oregon needs as it's next Governor.

What makes these ads so pernicious is the fact that they play on the very issues incorrectly addressed in the article I refuted in the post immediately preceding this one (”A Hard Rains Gonna Fall”, below).  They also play to the Oregon Business Alliance’s package of proposals that will be delivered to the Legislature for its consideration in 2019.  Those focus on eliminating the pickup, capping benefits prospectively for future retirees (I’ve seen two numbers for the cap - $100,000 and $150,000), increasing employee health care contributions, and a Tier 4 as a pure 401K, eliminating any defined benefit for new members.  
 
Adding to the PERS angst is the recent US Supreme Court decision in Janus v AFSCME, which eliminates the requirement that unionized public employees who don’t wish to be union members will no longer be compelled to pay fair-share dues.  Higher Education has already implemented Janus, effective with July salaries paid on August 1st.  This challenges public employee union finances just as they head into the season where political sponsorship and endorsements are critical, and lobbying expenditures during the long legislative session loom large.  I expect a heavy recruiting campaign by the unions to raise employee awareness of the value of union membership.  Regardless of their success, this is a major jolt to their finances and is the beginning of a long-known objective of conservatives to seriously diminish the union role in influencing election results in local, state, and national elections.
 
So, if you thought my last post about the NYT’s screed on public employee retirement systems was either over the top, dour, or too pessimistic, this post is intended to reinforce the message that things look grim for PERS members not yet retired, and for those not yet members.  Our only good defense is a good offense.  I repeat my long-held, and frequently repeated maxim - ELECTIONS MATTER!  And the November elections matter more than most.  Just remember that your votes for local and statewide offices are critical for your own fiscal well-being, while your votes for national office are critical for your (and our) psychological, social, physical, and economic well-being.  VOTE CAREFULLY! VOTE EARLY! AND VOTE OFTEN (just kidfing).  Remember the title of this post and the last.  Poor voting choices could turn those titles from hyperbole into reality.

Sunday, April 22, 2018

A Hard Rain's A- Gonna Fall (very long)

This past Sunday (April 15, 2018), the New York Times ran an article on its front page (here), right below the fold, that talked about the unsustainability of public employee pensions.  Of course, Oregon PERS was the featured subject of this article, principally because we are one of the few states that publicly disclose the benefits received by all PERS retirees. The title of the article referred to the pension received by Dr. Joseph Robertson, newly retired, former President of OHSU, whose benefit is at the top of the the list.  The article, by Mary Williams Walsh - a long-time Times investigative reporter - was filled with inaccuracies, half-truths, faulty inferences, and a poor history.  The article attracted more than 800 comments, some disputing much of the incorrect information, pointing out errors and omissions, and criticizing the sensationalism of the article.  Of course, there was a near equal number of comments reporting on how bad the public employees were in their own states.  The placement and source of the article (NYT) resulted in it being reprinted, verbatim, in at least 20 different newspapers across the state, and being either reprinted or reprinted with editorials in many of Oregon’s own local newspapers.  I imagine countless other states found reason to reprint the article.  The NYT amplified a poorly written, poorly researched, and frequently inaccurate article at least a thousand fold over what occurs when this same information has been confined to our local “tribal” newspapers.  The effect, I fear, is going to be a much earlier, much more aggressive, and far more antagonistic push by anti-PERS zealots to light everyone’s hair on fire over this.  In turn, the November general election and the subsequent Legislative session will make all of us sense that “a hard rain’s gonna fall."

I want to try, in this post, to correct errors, recharacterize errors of interpretation, and generally try to right the wrongs perpetrated by poor reporting, in what appears to be an Arnold Foundation-funded “hit piece” on public employee pensions in the newspaper “of record” for the United States.  It is sad (to me, anyway) whenever a paper like the New York Times reports on a subject in such a biased way.  I’ve spent my entire adult life depending on the NYT to provide an unbiased record of informed reporting (except, of course, on their editorial page, which is where opinions belong).  When we have an open attack from our current President on “fake news”, it is disheartening to consider the prospect that a major source of “unfake news”  has committed the very sin we’ve been arguing against, and turning a non-story about a couple of outliers into a serious news piece.  Allow me to enumerate:

  • The article is entitled "A $76,000 Monthly Pension: Why States and Cities Are Short on Cash”.  It starts with Robertson’s pension benefit and continues its misadventure from there.   First, a significant fact.  There are more than 134,000 PERS retirees and beneficiaries (beneficiaries are not listed in the public list cited in the Oregonian).  A second fact.  Slightly more than 2,000 retirees receive pensions of more than $100,000 per year.  While the second is mentioned; the first is not.  Let’s do the math.  The percentage of retirees earning more than $100,000 comprise roughly 1.5% of ALL PERS retirees.  Put another way, 98.5% of these retirees earn less than $100K (the median is about $27,000 per year, and the average is about $32,000).  Of those who earn more than $100,000, a huge majority are Tier 1 (hired prior to 1996), under rules that have been changed more than twenty times since (although not retroactively, which has been prohibited by the Courts and the IRS).  Moreover, the top 10 recipients (as of 2018) consist of 7 former physician administrators from OHSU, one PSU faculty/administrator who worked for more than 40 years, one Community College President with 38 years of experience, and one successful football coach at the University of Oregon.  The NYT piece focuses on the just-retired President of OHSU and the Football Coach.  The OHSU President worked there for 38 years as a specialist eye surgeon, generating huge billings and income for OHSU, as well holding a series of administrative positions culminating with him being the President of a nationally recognized health sciences complex (Medical School, Dental School, Nursing School, major research center, multiple PhD programs) employing over 20,000, with a multi-billion dollar budget, and generating large sums of income for OHSU and multiplying that through the entire state.  Both he and the football coach were singled out as exemplars of what is wrong with Oregon PERS.  Both had deals (totally permissible under pension guidelines) to count “outside” income in the pension calculations.  In the case of OHSU’s President, his “outside” income came largely from his clinical practice in opthamalogy (eye surgery), which was billed through OHSU at rates including the necessary overhead to pay the PERS contribution on such income.  The football coach received a base salary, plus additional revenue from endorsement deals made with the UO Athletic Department and Nike (which received a $2 billion corporate tax break for keeping its HQ in Oregon).  Again, the endorsement payments were paid to the UO Athletic Department and were (presumably) run through UO payroll, and with the appropriate pension payments made to PERS on all income.  None of this should have come as a surprise to the institutions; nothing was done in secret.  None of this should have surprised the Legislature or PERS, both of which were aware of the details as they were formulated, and as the pension benefits were accruing.  If there was anything untoward, there was plenty of time to object during the negotiations and the signing of the employment contracts.  (And neither recipient is exceptional in salary, being compensated at below average rates for the positions and the institutional “leagues” in which they operate).
  • “Oregon’s costs are inflated by the way in which it calculates pension benefits for public employees.  Some of the pensions include income that employees earned on the side [see above].  Other retirees benefit from long-ago stock market rallies that inflated the current value of their payouts.”   The second “problem” closed twice, first in 1996 with the creation of a Tier 2 that does not receive the rate guarantee that Tier 1 members receive.  The second time it closed was at the end of 2003, when ALL employee contributions to Tier 1, Tier 2, and the newly created OPSRP plan were directed to a separate account, not subject to employer match, not subject to any rate guarantee, and subject only to the performance of the market in good times and bad.  The balances in Tier 1 and Tier 2 accounts were frozen as of 12/31/2003 and only earnings have been credited for the past 15 years.  Tier 1 actives and inactives still get rate guarantees on their accounts, but for Active Tier 1 members, salary growth has generally outpaced the earnings on a frozen balance; the vast majority of retirements that have taken place in the past 6 or 7 years have been under Full Formula, not under the “lucrative Money Match” alluded to in the article.  Most of the cases where new retirees earn far more than their Final Average Salaries are instances where the employee has long been inactive, but not retired.  In these cases, the Final Average Salary is frozen at the last known salary when the member worked, while balances continued to grow at the assumed rate until retirement.  Not surprisingly, a large majority of these people end with benefits exceeding their Final Average Salary.  (Note:  the Legislature tried to solve this problem in 2003 by creating a very limited, very short-duration, option to induce inactives to withdraw their money from the system.  The deal was open for slightly more than a year, and offered these members the option to withdraw and rollover their own accounts plus a 50% employer match, forsaking the remaining 50% employer match.  Not many people took advantage of this option because it was poorly advertised, available for a short period of time, and was a bad deal that would have cost members a 25% reduction in benefits accrued toward their retirement).  Nine of the ten top recipients are Full Formula retirees, while one is a Money Match recipient.  So, the article focuses on two Full Formula recipients with unusual (but relatively uncommon) salary arrangements, and blows smoke about Money Match (when only 1 of 10 top recipients receive that benefit).  (The article does acknowledge that Full Formula is what most states use).
  • “The bill is borne by taxpayers”.  Of all the claims, this one pisses me off the most.  Of course taxpayers are on the hook for public agency budgets; that’s why they are called “Public Agencies”.  But this overlooks several important points:  1) employers are supposed to submit the amount deducted from employee payroll to pay for employee contributions in real time, and 2) they are supposed to pay their employer contributions at the same time.  If employers had fulfilled their obligations in real time, the current problem would be negligible.  But that didn’t happen.  Following the income tax remedy negotiations, the employers were expected to cover the cost of this in their current contributions.  Moreover, it took the PERS actuary longer than it should have to recognize that Money Match, not Full Formula, had overtaken the formulae calculations starting in the early 1990s.  By 1997, the tax remedy [see below] and the Money Match problems hit the employers simultaneously, with concomitant and hardly unexpected rate hikes to cover the additional expenses.  Instead of just paying them, while the overall economy was growing, the employers caviled, whined, wheedled and cajoled the PERS Board and the Legislature to come up with ways to “amortize” their payments over a longer schedule, “smooth” the ups and downs of the market, and eventually to put rate collars on how much the contributions could grow from biennium to biennium.  In addition, they sued to claw back some earnings crediting to members in 2000 for 1999, setting up the 2003 reforms (see above and below), which, in fact, clawed back 8.67% of the 20% credited earnings from all Tier 1 members who were in the system in April 2000.  In short, the employers, the Board, and the Legislature used creative techniques that allowed PERS employers to deliberately underfund their contributions to the system.  This further overlooks another important factor.  The budgets of many public agencies are built from small taxpayer contributions, coupled with significant user fees levied on the primary beneficiaries of the service.  Higher education, an example I’m most familiar with, started in the 1970s with 90% of revenue coming from the State General Fund (Income Taxes).  By 2017, the state contribution from General Fund dollars (Income taxes) was less than 10% of the operating budgets.  Tuition, grants, contracts, patents, administrative overhead, rentals, fees cover the remaining 90% of the budget - the user fees.  My local city charges me significant water and sewer usage fees, which covers a significant portion of their operating budget.  So, it is a mistake to claim that “…the bill is borne by taxpayers”.  It is partially borne by taxpayers; the remainder is paid by those who use the systems  (think tuition; campground fees; hotel occupancy taxes, water and sewer bills).  My faculty and administrative salaries and benefits were NOT paid from taxpayer money; they were paid from the 90% of the revenue generated from the sources other than tax dollars cited above.  Remember that higher education has been funded with only 10% - 20%  of income tax dollars since the passage of Ballot Measure 5 in 1990.
  • The article cites Josephine County as one of the PERS “basket cases”, but fails to mention that Josephine County prides itself on having the lowest property tax rates in the state.  Josephine County refuses to raise its property taxes to support public services, and it is little wonder that they can’t fix roads, jails are at half capacity because of lack of guards, and 911 calls are not promptly acted upon.  One school superintendent complains that PERS is the root of all their problems.  He notes:  “The system (PERS) is run at the state level, but it is bankrolled in large part by obligatory contributions from local governments.”  Again, this superintendent must be completely ignorant of Ballot Measure 5, which passed his county overwhelmingly (and statewide by a smaller margin) in 1990.  Measure 5 did several things (among many others). It limited total property taxes to no more than 1.5% of assessed value (with exceptions for self-inflicted voter-approved levies); Second, it directed that about 90% of school funding come from state general fund revenue (State Income Taxes), while allowing local school districts to assess up to $5 per thousand of assessed value on real property (this is 180 degrees different from pre-Measure 5 rules, where 90% of local school funding came from property taxes and 10% came from the State). Measure 5 also provided no funding mechanism for this massive change in school financing, leaving it to the Legislature to reallocate existing funds to cover the school budgets.  Higher Education and Human Resources were massively underfunded to come up with the revenue to cover K-12 funding.  Worse, the local school boards set the proposed school budgets and negotiated with their public school teachers and support personnel; the district in turn negotiates with the Legislature for their 90% based on the locally established budget.  The state imposes no restrictions on salary and benefit packages for the school districts; they negotiate within the district with the Superintendent and the locally elected School Boards.  As of 2018, all school districts within Josephine County have school tax rates at least 20% below the statutory $5 per $1000 maximum, while the large school districts in the larger areas have maxed out their $5 rate, and have also received approval from the State to form local improvement districts (“local option”) to tax outside the maximum.  Josephine County also has a total effective property tax rate of 0.62% of assessed value (less than half the maximum allowable), while larger counties tax at or above the statutory maximum 1.5% (depending on levies and local options).  The article never once mentions Ballot Measure 5’s hamstringing effect on local funding of schools, much less the paradox of having 90% of the funds coming from the state, yet the state having no control over the local school boards or salary and benefit negotiations of teachers and support personnel in those schools.  Moreover, it never mentions Josephine County’s preoccupation with being anti-tax of any kind.  
  • “For decades, PERS calculated pensions two different ways, and retirees could choose whichever produced the bigger numbers.”  FALSE, FALSE, PANTS ON FIRE FALSE.  No member chooses anything about his/her pension except the optional payout method (with a beneficiary, without a beneficiary, lump sum, partial lump sum, annuity certain).  The Oregon statutes clearly require PERS to calculate benefits all applicable ways, and PERS CHOOSES the method yielding the highest Option 1 benefit.   PERS calculates Final Average Salary based on parameters set by the Legislature, and the elements of those parameters that each agency chooses to participate in.  For example, some agencies allow employees to accrue sick leave over their careers as an incentive to reduce absenteeism, and rewards employees by counting “HALF” the value of the sick leave in Final Average Salary calculations; other agencies do not allow its employees to accrue sick leave).  The sick leave calculation is irrelevant to Money Match retirees.  (I left over 3000 hours of accrued sick leave at the table when I retired).
  • “…when lawmakers required government retirees to pay Oregon’s 9 percent income tax, as everybody else did, they also increased pensions by 9.89%, giving retirees extra money to pay the tax with.”   Another quarter truth, with a much more complex background, and far less significant effect than dramatized in this article.  First, all Tier 1 members (those hired before 1996), were initially promised (at the time of their hire) that their PERS pensions would NOT be subject to Oregon state income tax.   In 1988, the US Supreme Court decided a case - Davis v Michigan - that concluded that, for income tax purposes, States could NOT treat resident federal retirees differently than public employee retirees.  At the time, Oregon was doing exactly what the Davis v Michigan ruling prohibited.  Thus Oregon was required to either give Federal retirees tax free treatment, or start taxing PERS retirees.  In 1991, the Oregon Legislature started taxing PERS recipients.  They were sued for breach of a statutory contract, impairment of a contract, and wage theft.  The court ruled that the taxation scheme impaired the statutory contract, but that given the State’s decision to tax PERS pensions, then a monetary solution could repair the problem.  After multiple negotiations, lawsuits, settlement agreements, PERS retirees, PERS, the Legislature, Federal retirees, and the Courts reached agreement in 1996 to start reparations beginning in 1997.  At that point, federal retirees were permitted to deduct from their Oregon Income taxes, the amount of pension income attributable to work prior to October 1991 (when the Oregon Supreme Court ruling was finalized), while being taxed on that portion of pension income attributable to work performed after October 1991.  Both Federal retirees and Oregon PERS retirees who retired prior to October 1991, received refunds of taxes paid after the Legislature started taxing PERS pensions.  The PERS retirees whose work was completed prior to October 1991 received an income tax remedy (a pension increase) of 9.89% to cover the state’s then 9% income tax (the 9.89% increase resulted because increasing the benefit by only 9% would have exposed the additional compensation to the very taxation it was supposed to remediate; thus the amount was 9.89% to cover the tax on the 9% remedy).  For those who continued to work after October 1991, their income tax remedy was a fraction of 9.89% representing work performed before October 1991, relative to the length of their entire PERS career.  For me, for example, my work career began in September 1970 and I retired in October 2002.  I received a tax remedy adjustment of 6.6%.  Anyone hired after October 1991 was not eligible for any income tax remedy; their pensions are 100% taxable with no offsetting remedy.  Only Tier 1 members hired before October 1991 are even eligible for any sort of tax remedy.  The article makes this appear as if it were a gift from the Legislature, when, in fact, it was a decision forced on the state by the US Supreme Court, and applicable to only a small subset of current members.
  • The article misrepresents Tier 1 and Tier 2 employee accounts.  These are not “tracking” accounts.  They are real accounts whose member contributions were frozen at the end of 2003.  “For workers with the tracking accounts, PERS dialed back the annual returns to 8%, then to 7.5% in 2016”.  WRONG  DEAD WRONG.  First, only Tier 1 was guaranteed any specific earnings - the assumed rate of, then, 8%.  Tier 2 had no such guarantee and has always been credited only with market earnings regardless of the amount.  The maximum annual return ever guaranteed for Tier 1 members was 8%.  Therefore, it wasn’t dialed back TO 8%; it never rose above.  Moreover, the assumed rate (the 8% referenced) had/has a direct bearing on employer contributions.  The higher the assumed rate, the less the employers have to contribute.  So, both the employers and members had a shared common interest in keeping the assumed rate high.  But, beginning in 2014, the rate was lowered to 7.75%, in 2016 to 7.5%, and effective 2018 the rate is now 7.2%.  Each time the rate is lowered, employer contributions have to rise because the system assumes less income from earnings to pay the required pension benefits.  [To be fair here, I *think* the writer intended to say that the 2003 reforms set the assumed rate as the maximum earnings crediting for Tier 1 at 8%, not that it was “dialed back”.  The “dialing back” occurred because the 2003 reforms forbade PERS from crediting regular account earnings above the assumed rate to any Tier 1 member.]
  • Finally, the article continues to blame the 2008 stock market meltdown for much of today’s current problem.  While there is no doubt that the 2008 losses exacerbated the problems of PERS and every other pension system in the US, the article omits one salient fact.  By 2007, Oregon PERS was 106% funded; the 2003 reforms began to reduce future costs, capping Tier 1 returns at the guaranteed rate and no more helped considerably, and good stock market returns helped erase the UAL and re-fund the system.  By 2007, PERS had amassed nearly $1 billion in its contingency reserve, an account designed as a rainy day fund to protect the system from unexpected events.  About 2/3 of the way through 2007, the employers were still absorbing the increases that began in 1997, but spread over what seemed like an eternity, and they were still complaining bitterly to the PERS Board about the rate increases.  About this time, the actuaries proposed the concept of rate collaring - a way to keep costs within a more predictable corridor based on the funded status of the system.  After some discussion, the Board adopted the rate collaring method, which limited increases to employer rates to 3% if the system was less than 80% funded; 6% if the funding dropped below 70%.  In addition, the Board (completely reconstituted after the 2003 reforms), agreed to shift most of the contingency reserves (near $1 billion) to employers to further buy down their contribution rates.  (In an exquisitely agonizing piece of irony, the 2000 employer-initiated litigation that led to the 2003 reforms was about the Board FAILING to fund the same reserves adequately).   So, when 2008 rolled around, the stock market tanked by 27%, and PERS and the employers were left with no contingency reserve with which to buffer the 2008 losses.  Of course, the 2008 losses led to further major increases in employer contributions, but they didn’t take effect immediately (as they should have) because of the smoothing (which introduces gains and losses over a prolonged period of time), and the rate collars.  Once again, in 2013, acting against all sensible legal advice, the Legislature, egged on by employers, passed Legislation to reduce the statutory COLA.  This reduction was projected to reduce the UAL by $5.8 billion over 20 years.  In a move that defied all logic, the Legislature not only passed the legislation, but it allocated more than 10% of the projected savings to agencies to spend in the 2013-15 biennium.  Most agencies went on a spending spree with the extra cash instead of using it to further retire their pension obligations.  Just as the 2015 Legislature was ramping up, the Oregon Supreme Court ruled that this, too, was a breach of contract in a unanimous decision, blowing a $580 million hole in the Legislature’s budget, digging the UAL deeper, and paralyzed the Legislature from trying any further efforts to reform PERS.  (As a financial footnote, once 2018 finishes, the 2008 stock performance disappears from typical 10 year averages.  From 2008 to 2017, the overall return for Oregon PERS has been 5.9%, which includes the  -27% return in 2008.  If we assume that 2018 will earn nothing more than the current assumed rate of 7.2%, the 10 year average for the period of 2009-2018 will be about 10.2%, significantly greater than any of the assumed rates during the period).

This is a short (?) rebuttal of many of the points in Walsh’s article.  Sadly, this rebuttal does not have the audience that Walsh had.  Walsh and the NYT managed to magnify the misinformation over an audience more than 1000 times greater than a similar piece written for any local, useless rag.   Moreover, it added credence to the misinformation regularly reported in our local newspapers.  Further, Walsh’s piece has been reprinted in whole or part in at least 20 Oregon community newspapers, with nasty editorials about the “PERS Beast” or the “PERS Dragon” appearing in those and other local outlets.  This has, unfortunately, energized and bolstered the anti-PERS zealots across the state’s media and political chattering class.  As a result, it has made what was likely to be a significant issue in the 2019 Legislative session, into a MAJOR (if not central) issue in political campaigns, including the upcoming May primary, the November election for Governor, for the Oregon House,  one-third of the Oregon Senate, and a Supreme Court seat or two.   So, this leads to the obvious question.  What could the Legislature do?   A lot will depend on the outcome of the November elections and the resulting composition of the Governor’s mansion, the House, and the Senate.  All currently rest in control of the Ds, but control is tenuous.  Neither house has a “supermajority” needed to block or to enact any kind of anti-PERS legislation, or to enact or block any tax revenue measure, including raising the pitifully low Corporate Income tax (did I mention that Oregon has the 6th lowest corporate tax in the US?).  The 2017 Legislature ended in effective gridlock.  All signs point to both parties working exceptionally hard to increase their numbers in the Legislature.  Regardless of how this turns out, I expect the anti-PERS crowd (largely the crew of homies from the Bend/LaPine/Sunriver/Redmond area) to continue their assault on PERS benefits.  I would expect legislation on pension caps (the number $100,000 appears over and over again), forcing an end to the employer “pick up” of the employee contribution, anti-spiking (removing further accumulation of sick leave, vacation time, overtime, comp time, and outside sources of income), and even some legislation intended to either incentivize inactives to cash out of the system, or to force them into accepting smaller pensions.  The worrisome part of these proposals is that the Legislature may just throw up its hands and pass something against rational legal advice and let the Oregon Supreme Court sort it out.  They gambled on this approach in 2013 and lost bigly, digging the hole the system is in today.  The Supreme Court of 2019 will be different from the Supreme Court that ruled unanimously in early 2015 against the retroactive grab at the COLA from the 2013 Legislature.  I was pessimistic going into the 2017 legislature; I’m downright depressed about 2019.   Not only do I expect 2019 to shadow a “hard rain falling”, I also expect “Lawyers, Guns, and Money” because the “shit has hit the fan.”  I wish it weren’t going to get nasty, ugly, and brutish, but I’m expecting the 2019 session to be one of the most contentious in my 48 year history living in Oregon, and PERS will be center-stage in the action.  To make matters even worse, PERS goes in at a real disadvantage this time, as its long-time resident expert and current Executive Director, Steve Rodeman,  retires on June 1, 2018.  The new executive director will come from outside PERS and Oregon, and will go into the 2019 Legislative session at a distinct disadvantage in not fully understanding the system, and all of the complex interactions that any legislative action might produce.  Rodeman excelled at clear communication of anticipated and unanticipated consequences of legislative actions, thus preventing most legal quagmires before they were created.  In addition, the PERS Board loses its Chairman in August 2018.  While the Board Chair does not report to the Legislature, the fact that John Thomas has been one of the most knowledgeable Chairs in PERS history, the new Chair, who will be new to the Board as well, has a steep learning curve in front of him/her and will have to depend more on staff (many also new and inexperienced) for guidance.  This will create an information vacuum that no one will be able to fill quickly enough to do a credible job dealing with the potential fallout from any proposed PERS legislation.  Thus, I expect a lot of anti-PERS legislation to be proposed during this period of extreme political pressure and information/leadership vacuum.  Trust me that revenue reform is the only real long-term solution to Oregon’s problems, but Oregon will only get some sort of a more balanced tax system over the bodies of future PERS retirees.  Worse still, the NYT article may be the wedge that finally creates the schism between the older members with better retirement benefits and the younger employees in the system who have less generous benefits.  I expect the demands for generational equity to create a flash point for legislators and unions representing many public employees in 2019.  

Sunday, February 11, 2018

Soul Suckers

On schedule, the 2018 Legislative session is up and running.  While this short (35 day) session is unlikely to produce any serious fireworks, several of the usual cast of soul-sucking Rs - my own Representative Julie Parrish, and the dynamio trio from Central Oregon - continue to try to exact pounds of flesh from active PERS members  None of these proposals is likely to go anywhere, but they offer a glimpse into what the 2019 session could offer, unless we are able to unseat some of these clowns in November. My opinion of Julie Parrish is unprintable, even on my own, uncensored blog.  Suffice it to say that she is as strong as an ox, half as smart, and mean as a junkyard dog.  (How is that for a string of mixed metaphors?)

On the better news front.  All PERS investments did well in 2017, and Tier 2 and IAP accounts will be credited with 15%+. Those with variable accounts and are not retired will see closer to 20%.  Tier 1 members will still get the 2017 Guarantee of 7.5%.  The 2017 CPI-U for the Portland-Salem metro area was up 4.19%, which means that the COLA for pre-October 2013 retirees will be the maximum 2% with an additional 2.19% heading into the COLA bank.  Those retiring later will see a lesser COLA, but the surplus will still go into their COLA banks to be applied against their pre-October 2013 maximum 2% COLAs.  In more news, the first retiree monthly check to be affected by the withholding tables resuting from the December 2017 Tax Reform will be issued on March 1, 2018.  This should result in less Federal withholding, possibly less State withholding, and higher net benefits.  For some, this really represents a tax cut; for others, me included, this is going to result in us having to completely rethink withholding strategies as it is unlikely that our taxes will really go down when they are due in April 2019.  The IRS has constructed their new withholding tables with an eye towards underwithholding, which means you might be in for a surprise in April 2019, unless you plan ahead.  As soon as you finish your 2017 taxes, you ought to start planning for 2018.  There is little room for error during 2018, to avoid unpleasant surprises in 2019.

The stock market correction that began the week before last has many people freaking out.  I am not one of them.  History and statistics show that drops of 10% or more occur, on average, about every two years.  I have no idea how this has affected the PERS Portfolio, but expect the media and Legislative wags’ hair is on fire far more than the OIC.  Remember that part of the reason for lowering the assumed rate every two years since 2013 is the result of the Oregon Investment Council’s de-risking strategy. The time to be concerned is October 2018, not now.  Me, I’m looking for bargains and keeping the faith in my own portfolio.

Finally, Executive PERS Director Steve Rodeman has announced his retirement effective June 1, 2018.  I don’t know whether Steve will be retiring his shingle, or simply taking his PERS Benefit and moving on to a private sector posting.  Steve is the last senior manager I know personally (since 2003), and his departure completely breaks all my ties with PERS staff since 2000.  Getting direct information and advanced copies of documents will be more challenging than ever now.

Since I will be in town for most of the short session, I will be following PERS-related developments as they arise.  So far, the main action is a move to take judges and legislators out of PERS, a move to bring back some investment options in the IAP, after PERS' ill-conceived and poorly received move to target-date funds based on age, and a move to allow retirees receiving the tax remedy to lose it if they move out of state, or restore it if they move back, on a much quicker schedule that is current practice.  More from Soul Sucker U (SSU) as it happens.

Friday, December 22, 2017

The Far Side of The World

I’m going to end the year on a semi-positive note, by simply making the post the lyrics to a song I love (the title of this post).  A bit of context.  This song was written and recorded in early 2001, before 9/11 and after the 2000 elections.  It remains as fresh today as it was in 2001.  It is an optimistic song, and describes my own wishes and goals for the next few years.  I give it to you as a Holiday greeting and well wishes on your own retirements.   (Lyrics are copyright, Jimmy Buffett 2001).

 

"Far Side Of The World"

Ramadan is over,
The new moon's shown her face,
I'm halfway round the planet,
In a most unlikely place.

Following my song line
Past bamboo shacks and shops
Behind a jitney packed like sardines,
With bananas piled on top.

I ran away from politics,
It's too bizarre at home.
Away I flew, tuned into Blue
"Maybe Amsterdam or Rome"

Awakened by a stewardess,
With Spain somewhere below.
On the threshold of adventure,
God I do love this job so.

So while I make my move
On the big board game
Up and down a Spanish highway,
Some things remain the same.
Girls meet boys
and the boys tease girls
I'm heading out this morning,
For the Far Side of the World.

Oh I believe in song lines
Obvious and not
I'd ridden them like camels
To some most peculiar spots.

They run across the oceans
Through mountains and saloons
And tonight out to the dessert
Where I sit atop this dune.

I was destined for this vantage point
Which is so far from the Sea
I've lived it in the pages of Saint-Exupery

From Paris to Tunisia
Casablanca to Dakar
I was riding long before I flew
Through the wind and sand and stars.

Caravan
Ride that hump
And Timbuktu's a jillion bumps
Sleeping bags and battle flags
Are coiled and furled
That's the way you travel
To the far side of the world!

A Sunset framed by lightening bolts
Burns a lasting memory
And a string of tiny twinkling lights
adorn the sausage tree.
While the embers from the log fire
Flicker, fly, and twirl
Then drift off toward the cosmos
From the Far Side of the World.
Well it's Christmas and my birthday
and so to that extent
The Masai not the wise men
Are circling my tent.
I teach them how to play guitar
They show me how to dance
We have rum from the Caribbean
And Burgundy from France.

New Year's Eve in Zanzibar
With Babu and his boys
High up on the rooftop
You can relish all the noise.

They are dancing on the tables
People bouncing like gazelles
Two 0-0-1 is ushered in
With air raid horns and bells.

Time to sing time to dance
Living out my second chance.

Cobras and sleeping bags are coiled and curled
That's the way it happens
On the Far Side of the World.

Back at home, it's afternoon
Six thousand miles away.
I will still be there when I get through
Attending this soiree

There are jobs and chores and questions
And plates I need to twirl,
But tonight I'll take my chances,
On the Far Side of the World.
That's the way it happens
On the Far Side of the World.

 

 

Happy Holidays To All

Tuesday, November 21, 2017

Tin Foil Hat

If I were a paranoid person, I might be putting on my tin foil hat about now as I ponder two things “hanging” out there with PERS.  The first is a curious email I received about 10 days ago concerning Residency Recertification.  Others received a similar email, but so far as I can tell, a large swathe of others did not.  The email requested that we “recertify” our Oregon residency (or perhaps lack thereof) before December 15, 2017.  The puzzling thing about this email is that it offered no rationale, no reason, no apparent option for those whose residence has remained the same since retirement or after.  The issue at stake is the Income Tax Remedy that retired Tier 1 members get as long as they pay Oregon income taxes.  The law changed in 2013 (SB 822) requiring that Tier 1 retirees who live out of state and who retired before the end of 2011 be ineligible for and lose the Income Tax Remedy.  (Those members retiring on or after 1/1/2012 had already lost the tax remedy if they retired or lived out of state and did not pay Oregon income taxes).  SB 822 captured the rest of the out of state Tier 1 PERS retirees, regardless of when they retired.  The problem is that PERS gets tax information directly from the Oregon Department of Revenue, but the information is always a year out of date.  Thus, when the ODOR confirms to PERS that you paid Oregon income taxes, they are confirming late in one year for the previous calendar year.  PERS has always taken these DOR certifications as both retroactive and prospective, thus providing a window of two years for a residency certification.  But there are problems with this approach because some people don’t make enough while living in Oregon to be required to pay Oregon income taxes, while others file in October, which is too late for the DOR certification sent on to PERS.  So PERS has set up a mechanism where you can self-certify either via a printed form and paper mail, coming in and filling out the form in person, or doing it online via PERS’ OMS (Online Member Service) portal.  But herein lies the problem, and why my tin foil hat antennae are waving around in the wind.  First, the email was sent to what appears to be a nearly random group of people, almost all of whom have lived in Oregon during their working careers and their retirements and have consistently paid taxes in Oregon at the prescribed April 15 timeframe.  That begs the question of WHY these people (including me) had to go in and confirm what PERS already knows, that I am and continue to be an Oregon resident and, therefore, eligible for the tax remedy.  The second problem is that there doesn’t SEEM to have been any effort to communicate with people for whom PERS has no email address, nor with people who don’t have an active OMS account (many don’t; I didn’t until I got this notice).  Third, when asked, PERS doesn’t seem to have a rational reason to offer for the how and why of this email message, other than to say that it went out to a wider group (????) than they intended.  So…………..

Let this be a warning to ALL readers of this site.  Since we don’t know the real reason for this email, and we don’t know how the recipients were selected, my advice to ALL is to either go online to PERS’ OMS portal (go to the PERS web site and it will be obvious) and RECERTIFY YOUR RESIDENCY.  Failure to do so, particularly if you are an Oregon resident, might (we don’t really know the motivation here) cost you a tax remedy for all of 2018.  If you don’t have an email account (how are you reading this blog???), then get the paper certification form the PERS website (you got here; you can get there), print it out, fill it out completely, and send it to PERS.  The DEADLINE for receipt of this form is December 15, 2017.

The other gamma rays penetrating my tin foil hat these days has to do with the NON-APPEARANCE of the new Actuarial Equivalency Factors (AEF), promised by late October or early November.  These are the crucial tables that permit a member to figure out how their benefit would be affected if they retired on or after 1/1/2018.  The significance of these tables is that they take into account all the new assumptions, including the reduction in the Assumed Interest Rate from 7.5% to 7.2% and modifications to the mortality tables.  These factors apply to retirees under Money Match, Formula plus Annuity, and Full Formula with a beneficiary option (in other words, most potential retirees).  The last date to retire under the old AEFs is 11/30/17 for 12/1/17.  People eligible to retire right now are in a predicament because these tables are essential for determining how much a delay in retirement will cost them, both in future value (due to lower assumed rate) as well as the value of the lost retirement benefits from delaying (all other things being equal - longevity, pay, etc).  When I checked the PERS web site about an hour ago, the current (effective 1/1/2016) AEFs are still posted, and I cannot find a link to the NEW AEFs.  As far as I am concerned, this borders on being unethical by leaving people unmoored at one of the most important times in their lives.  A paranoid, tin foil hat-wearing person might think that the lack of these new AEF tables is a deliberate attempt to keep people in the dark so there isn’t a more massive rush to the door than I suspect will already be the case.

As a final note, I am tempted to be generous to PERS in my interpretations,  were the consequences not so severe for current, unnotified retirees eligible for the income tax subsidy, and for those on the very tippy cusp of retirement trying to figure out what to do before November 30th.  I will say that PERS Communications are not the same since David Crosley left the building and retired on June 30, 2017.  PERS has a difficult act to follow, but David’s retirement was hardly a surprise, and his replacement has been with PERS for quite a while.  To me, these two very unrelated events (or non-events) have left a very sour taste in my mouth.  But that isn’t half the taste others may feel if they get trapped by either of these nasty surprises.

Friday, October 13, 2017

Rattle That Lock

I’m getting lots of emails from members eligible to retire, but undecided.  The primary issue is related to whether the change to the assumed rate and the mortality tables will adversely affect members in the near term.  The short answer is that any change to the assumed rate has an impact on not-yet-retired members who plan on retiring via money match, Full Formula with beneficiaries, and Formula plus Annuity.  For inactive members eligible to retire, the answer to me is a no brainer.  Rattle the lock, break the chains and get out by December 1, 2017.  If you wait any longer you’ll lose money, plain and simple.  There is no way to recover the loss because you aren’t earning an offsetting PERS-employer based salary.  If you are working for a non-PERS employer, you have no constraints on your ability to work, so there is no incentive to stay in PERS past December 1, 2017 so long as you are eligible to retire from the Tier you were in at the time you worked for your PERS employer.  For all others, the calculus is much more complicated.  If you are still working for a PERS-covered employer, you have to consider factors such as lost earned income, health care benefits, and future growth in the IAP account, not to mention growth in your Tier 1 or Tier 2 account due to earnings or the assumed rate.  The 2018-19 Actuarial Equivalency Factors (which combine mortality factors, salary growth, inflation, and the assumed interest rate) won’t be known until the end of October or the early part of November (so I’m told).  Thus, the PERS Online Calculator will give inflated estimates of retirements past December 1.  Matt Larrabee, PERS’ Principal Actuary from Milliman, told me after the July meeting that the “setback” for members would be approximately 4 months.  To understand this, you need to appreciate the concept of a “crossover” point.  Basically, if you estimate your benefits for a December 1, 2017 retirement and then estimate your benefits for a 2018 retirement (using the new AEFs, not yet available), it will take you until April 1, 2018 to recover benefits lost from the change to the assumed interest rate.  Thus, on or after April 1, 2018 (approximately, depending on age and other factors), your benefit will the same as it was on December 1 using a different assumed rate and a different set of mortality factors.  If it were this simple, the advice would be obvious.  If you weren’t planning to retire until April 1, 2018 or later, you’d be no worse off than you would be retiring on December 1.  However, this ignores some things that really need to be considered.  1)  Are you ready to retire (a not-insignificant factor for many people)?  2) Can you afford to retire (this has a bunch of subquestions, including the healthcare question, made infinitely more complicated in the past two days by actions at the Federal level)?  3) if you continued to work, what risk does the 2018 short legislative session pose (at this point, minimal, but things can change although I doubt it)? 4) Is the reduction in overall benefit from retiring later, rather than earlier (Dec 1), offset by the additional income you’d make by continuing to work, getting healthcare benefits, and contributing further to your retirement plans?

All these questions should be filtering through your decision matrix about now.  I will have my hands on the new AEF tables as soon as they are made public.  While they are voluminous and difficult to assess globally, I will post them here so that people will be able to see their precise impact.  I can’t advise anyone what to do, and don’t do it.  I make an exception for inactives.  Just keep in mind that nothing good will come your way by waiting past December 1.  While your account may grow, the growth rate will be lower, your life will be (presumably) shorter, and the end result will probably leave you no better off than you’d be just taking what you have on December 1, 2017 and getting yourself out of the cross hairs.  As Pink Floyd said, ‘rattle that lock; break those chains’.  For the rest, the decision is complicated, and you need to think your answer through carefully; it isn’t an obvious one.

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).

Friday, July 28, 2017

It Could Be Worse

After all the stürm und drang of the Legislature, the final piece of next year’s puzzle has fallen into place.  The PERS Board today adopted its new assumed rate for the 2018-2019 calendar years.  The Board spent very little time debating between the extremes of 7.1% recommended by the OIC and its consultant, and the slightly more optimistic forecast of other consultants used by Milliman at 7.2%.  In the end, the Board went to 7.2%, largely because the actuaries gave them the latitude to adopt any rate between 7.0% and 7.25% as a responsible choice.  A few wanted to split the difference at 7.15%, but there was no opposition when Board Member Pat West (the member rep on the Board) moved to adopt the 7.2% rate.  It was quickly seconded by the employer rep on the Board, Lawrence Furnstahl of OHSU.  The rest of the Board quickly approved the motion and, in a blaze of light, the meeting was over.

After the meeting, I checked with Matt Larrabee, the principal actuary for Milliman, who confirmed for me that the setback would be 4 months for a typical retiree.  This means that if you delay retirement past December 1, 2017, it will take you 4 additional months of working to recover the benefit you would have received if you retired on December 1.  While the most directly affected members are those who remain eligible to retire under Money Match (less than 13% of all non-retired members), it will have an impact on beneficiary options for Full Formula retirees as well.  The changes to mortality had virtually no impact on the rates, as changes in one element were offset by other changes.  Overall, the totality of the economic assumptions other than the assumed rate itself, had a near zero impact on liabilities for the system.  The impact to employers on the uncollared rates will be approximately 1.9% of payroll, less than it could have been.

There was no opposition by any stakeholder to the change, at least not at today’s meeting.  In fact, the Board didn’t even offer the possibility of public testimony, and the Board Chair John Thomas repeatedly interrupted almost any speaker at the podium to sermonize.  While he’s done a good job as Board Chairman, and clearly knows financial analysis, I find him personally tiresome as though he is lecturing small children.  Thankfully, I’ve chosen not to attend Board meetings because of his overall mien.  I went today solely because the decision was important to a lot of people, and because I’m still adjusting back to Portland time from my time spent in Iceland.

All in all, the title pretty much covers my feelings.  It could have been a lot worse.

This will be my last post for awhile, in large part because we are moving into “ordinary time”, where nothing of the moment will take place.  The next time for something significant to occur will be the working report from Governor Brown’s group studying how to lower the UAL by $5 billion.  That will, in turn, lead to some legislative momentum that might occur during the short Legislative session next February.  However, any substantial changes to PERS will probably not come before the 2019 Legislature.  If nothing positive happens between now and then, we might expect to see some attempts to significantly alter PERS.

Wednesday, June 28, 2017

Another One Bites The Dust

The 2017 Legislative session began with a bang, and goes out with a whimper.  PERS reform was on everyone’s mind as the session began, and we saw at least a dozen bills and amendments that attempted to “reform” PERS.  But, from the very beginning, the Democrats made clear that without corporate tax reform, they were not going to be the “bad guys” for more PERS reform.  Thus, they presented the Rs in the Legislature with the uncomfortable choice between corporate tax reform and PERS reform.  The Rs chose to wimp out on corporate tax reform, and the Ds decided they weren’t going to be on the hook with voters and the unions for any more PERS reform.  So, the Legislative session will end sometime soon with neither goal accomplished, and the situation even worse when they return in 2018 for the short session and in 2019 for the long session.  Those who hung in and retired before the Legislature did anything bad are now spared the uncertainty for the future, while those who decided to gamble have bought themselves another 6 months or so before PERS itself makes some crucial changes that will exacerbate the problem statewide, although the change is necessary.  Next month (July), the PERS Board will make decisions about the economic assumptions necessary for the next system valuation, which is the basis for setting employer rates for the 2019-21 biennium.  These assumptions include the assumed interest rate, salary growth, mortality tables and the all-important actuarial equivalency factors that will take effect on January 1, 2018.  Two of these three assumptions are likely to change significantly.  The assumed rate is likely to go to 7.25% (or possibly lower, to 7.0% - see California’s recent decision), while the mortality factors are headed to greater longevity per the IRS tables that just changed.  In total, a 25 basis point reduction in the assumed rate, coupled with a normal secular growth in mortality should produce a 3 month setback in benefit (you have to work 3 months longer to recover the benefit you’d receive 3 months earlier under a higher assumed rate).  People affected by this change are all whose best benefit is “Money Match” retiring on or after January 1, 2018, and all Full Formula retirees who choose an option with a beneficiary.  Full Formula retirees who select Option 1 (no beneficiary) are NOT affected by changes in mortality or assumed interest rate, as the benefit is simply the product of the formula itself.

Those of you who are gambling that you can escape without any further pain are, unfortunately, delusional.  The situation is likely to get worse in the near future, and the next long Legislative session, if not the 2018 short session, is likely to include some unavoidable changes to future PERS benefits.  I don’t see how this can be avoided, and most people “in the know” agree with my assessment.  I can’t predict what will fly and what won’t fly.  But I expect that desperate times may beget some desperate measures, even those with a slim likelihood of getting through the Courts.  Court membership changes with each election and one of these days we may get a court that is not so sympathetic to the plight of active workers.  If you are near retirement, I advise you to consider seriously making plans for exiting the system before the 2019 Legislature convenes in early February 2019.  The pressure will be excruciating on that body to do something about escalating PERS costs.  The Board’s decision on rates might be the trigger to push some reluctant legislators over the edge, and financial exigency might force the Courts to consider some changes that we might not have thought legal in the past.  I don’t imagine any cuts to current benefits of the already retired, but if you aren’t retired by the beginning of 2019, I can’t save you from yourself.  It is naive to think that the PERS problem is going to go away.  I think this year’s Legislature squandered some opportunities to remake the corporate tax structure more equitable for the personal income tax payers in the state.  I think the mainstream media squandered its chance to have any influence by its constant drumbeat of bad news that blames “greedy” employees without considering the role of the greedy and irresponsible employers in the current fiscal miasma.  I can say “I told you so” only so many times, but until the media examines the role the employers have played in creating the fiscal crisis of PERS (by not paying what they owed, when they owed it), the situation is going to get worse and worse.  I don’t have a solution to the problem except to repeal Measure 5, which is the ultimate cause of this problem.

This year, the Legislature had a chance to do something meaningful, but blew it.  As Freddie Mercury screams “Another One Bites The Dust”, this Legislature will go down as the least productive, least effective, and most useless in recent memory.

This will probably be my last post for awhile.  I’ll be in Iceland for a good part of July (taking pictures and having fun), but will be back in time for the PERS Board Meeting at which the assumed rate change will be announced.  I’ll probably post something then after the decision is final.  Don’t expect new Actuarial Equivalency Factors to be available to me or to anyone else until the latter part of October, so don’t ask me for specific details about this change until then.  I will have no more information at the end of July than I have now.  We’ll all have to wait.  The actuary doesn’t begin its recalculation of AEFs until after the Board approves the economic assumptions for the next two years.

Sunday, June 11, 2017

Big Balls in Cowtown

All the big players in Cowtown have weighed in on what is necessary to reach sine die this legislative session.  The outside players - the unions, the various business alliances, the school boards associations, lobbyists for tobacco, liquor, forest fairies, poisonous mushrooms, mountain oysters, etc - have made their wishes (or their demands) known and what we have is, as they say, a “failure to communicate”.  The Dems in the House, the Senate, and possibly the Governor’s office are sort of on the same page, while the Rs seem to be on a different page in a different book, and the external players have each offered their input on which books are acceptable to them.  The bottom line is that no one seems to have the votes to do much of anything and legislative paralysis looks more and more likely.  The unions claim they don’t support SH 1068 - the PERS changes brokered by. of all people, the unions, UNLESS they get revenue reform that includes changes to the ways that corporations are taxed.  The other special interest groups want the PERS reform, but without the pesky tax increases the Ds and the Unions want.  There are less than 4 weeks left in the Legislative session before the mandatory adjournment date of July 10th rolls around.  Without agreement on these issues, the Legislature is doomed to a Special Session in the Fall.

I’m not advocating for PERS reform, but the problem isn’t going to go away without two things happening:  1) more revenue; and 2) some legal fixes to PERS.  There are two other options available, neither particularly appealing to legislators.  First, there is the problem created by Ballot Measure 5, which probably less than 50% of the current voters were either here for or alive at that time.  This problem is the result of saddling the State of Oregon with the responsibility for funding about 80% of public school operating costs, but leaving the control of the schools local.  That, to me, was a catastrophic failure of Measure 5, and the Legislature could remedy that in either of two ways:  a) taking over complete control of the schools, including hiring, firing, negotiating contracts, and establishing benefit levels; or b) returning total control back to the school districts by removing the obligation for supporting the schools from Measure 5.  The first would give what the original intent of Measure 5 was; the second, would destroy Measure 5, but from people I’ve talked to, most don’t even understand the first thing about how schools are funded.  The second area of mitigation would be to eliminate the “kicker”, which was created to stave off Measure 5-like effects before Measure 5 was even a gleam in the eyes of its proponents.  This wouldn’t solve the funding crisis, but it would eliminate a persistent nuisance in a growing economy.  Why should the state be forced to give back money legally collected for income taxes just because the state economist is unable to forecast the final expenditures in a biennium two full years before that biennium’s end?  If that requirement is necessary, why not have the reverse requirement, i.e. if the state economist overestimates end of biennium revenue, and the state comes up short, why not impose a tax increase?  You can’t expect a tax refund because of an underestimate, while not expecting a tax increase because of an overestimate.  My point is that the whole “kicker” is a monumentally stupid way of running a state.

I’m guessing that the status quo is what many want, although I suspect the only people who really are really happy are the swinging dicks with the big balls in cowtown (OBI, OSBA, SEIU, AFSCME, and all the other lobbying groups) who have played the game of fomenting paralysis as a high art form.  In in the meantime absolutely nothing of consequence has been achieved by the malingerers in Salem who have been bought by all the special interests lined up in opposition to anything but stasis.  What a waste of human capital, and that applies across the aisle.  However, as a trained evolutionary biologist, I can state with confidence that long periods of stasis are often followed by explosive adaptive radiations.  These can be good, or bad, kind of like the proposed asteroid that brought about the end of the dinosaur reign near the terminus of the Cretaceous period.  We can hope for something that catastrophic to wake up those who are asleep at the wheel in Salem.

Wednesday, May 24, 2017

So Long, So Wrong

As this legislative session has dragged on for what feels like an eternity, we seem no closer to any answers than we had when the session started in February.  The words I’m hearing from Salem suggest that the Ds and the Rs are at an impasse over revenue measures,  with the Ds proposing a gross receipts tax that House Dems want to raise about $2.2 billion, while the Senate Dems want to raise about $800 million.  While the Ds are in general agreement over the need for the gross receipts tax, the the Ds can’t even agree amongst themselves about the amount of revenue that should be raised from this tax.  Obviously, the higher the ask, the harder it is to get agreement from any of the stakeholders.  Similarly, the PERS bills (SB 559 and SB 560) seem to be dead with the Rs pushing for them and the Ds resisting.  This gridlock would suggest that a Special Session is almost inevitable, but …… wait for it.

In the midst of this power vacuum in Salem seems to have stepped some of the unions, so I’ve been told by multiple sources.  The term “cost sharing” is being bandied as a partial panacea by various people without bothering to define what that means.  Here’s what it means.  The unions are floating a trial balloon offering to have active workers (those still working in Tier 1, Tier 2, and OPSRP) provide some of the funds to offset increasing employer costs.  Mind you, this is not to cover the UAL, but employer “normal cost”.  I’ve heard several versions, and parts of SB 560 spell out what the Rs would consider a reasonable deal - to completely capture the employee contribution currently going into the IAP and use it to offset employer costs.  That won’t fly because it probably isn’t legal, regardless of how it would be implemented.  So, in step the unions offering a compromise deal.  As the deal is presently structured, employees will have 4% (of the 6% go into the IAP); however, the remaining 2% would be redirected not to the employers (directly), but to a “risk mitigation” account, which would be reserved to keep employer “normal costs” at a relatively constant rate.  The PERS Board would control the fund and would direct resources from the fund if employer normal costs rise due to changing rate structures.  If employer rates don’t rise before an individual retires, then one presumes that the 2% captured from the employee would be returned to the employee’s IAP (plus interest, one would hope).  While nothing about this is fixed, the floating idea is that it would be phased in over several years, so employees don’t take the hit to their IAP all at once.  

I have many problems with this proposal, not least of which is that the unions (who represent employees) are behind it.  Another critical reason I’m opposed to this is because it penalizes all Tiers equally, even though the retirement benefit structure in the three tiers is different.  Everyone loses the same percentage (which seems fair on the surface), but those closer to retirement not only preserve their existing benefits, but suffer from the cut for a shorter period of time.  On the other end, those furthest away from retirement already have the worst of the three retirement plans, yet have the longest period over which to suffer the cut, but also, the longer period over which their redirected money can be captured because of rising employer costs.  Worse still, this does nothing to force the employers to come to grips with the fact that their own profligacy is a major contributor to systemic problems.  This approach provides employers with a cushion against their own fiscal mismanagement, and gives the PERS Board a new way to mitigate responsibility for the employers to pay the full cost of the system, something the employers have refused to do since 1997.  What is floating also does not address the question of the “pick up” itself (i.e. who pays the employee contribution).  Finally, this approach has another “feature” going for it.  If the unions propose it, you can bet they will not sue the Legislature if they agree to it.  For union members and all active members of PERS, this becomes a lose-lose proposition.  

I realize that everyone is in a pickle this budget year.  It is clear that the state needs more revenue, especially as long as we have the “kicker” still in place.  To get more revenue, the Ds need a couple of Rs to join in.  To “buy” those Rs, the Ds are going to have to give on something, and the Rs want PERS reform.  The union’s proposal may be the least bad of a lot of bad options, but I think that the Unions coming to the Legislature’s rescue won’t gain much respect for labor, and may antagonize members.

It is easy for me to criticize all efforts at PERS reform; none of them affect me.  But I try to look at this in a more long term perspective.  Does this proposal do anything to address the long-term problem with PERS?  Nope.  The UAL will still be there no matter what happens.  Does the proposal offer generational equity?  Nope.  Those with the best benefit structure pay relatively little compared with those who are just starting their careers or are in the first decade of their careers.  Will this help attract the best possible workforce?  Nope.  Every time you take something away from people just coming into the system, it makes it harder to recruit and retain talented and enthusiastic workers.  Finally, we have no clue how much this will actually save, and whether it would be enough to stave off further raids on active worker pension promises in the future.  It seems to me that the primary purpose of this proposal is to insulate employers from the inevitable lowering of the actuarially assumed interest rate by the PERS Board effective January 1, 2018, which will have the effect of raising the employer’s normal cost for the employee’s retirement.  So, in the end, active members will get the shaft from two ends - reducing the amount of money going into their IAP, plus lowering the payout structure for annuitized benefits at retirement.  And, we still don’t know how this affects or doesn’t affect the “pick up” itself.  Logic dictates that it shouldn’t affect the “pick up”, but nothing logical has emerged during this session yet.

As this saga continues well into the beginning of summer, it is beginning to look like a case of “so long, so wrong”.  

Wednesday, May 17, 2017

Waiting in the Weeds

While last week’s post was a bit dour, this week’s is less so.  Tuesday’s revenue forecast contained mostly good news, but not quite in the way I expected it.  Because of my own confusion about how the revenue forecast(s) [note the plural] work, I underestimated the power of forecasting to turn two different forecasts into winners for everyone.  The forecast for the 2017-19 budget is up by about $200 million over the previous forecast, dropping the shortfall from the last guesstimate of $1.6 billion, to $1.4 billion.  At the same time, the forecast for the 2015-17 biennium ending balance is up by $400 million, which will trigger the “kicker” if the forecast turns to reality when the final budgets are closed out by late August.  If the revenue drops significantly below the $400 million threshold, then the “kicker” won’t be triggered and the excess can be rolled up into the 2017-19 budget to offset the shortfall even further.  In addition, corporate tax revenues for 2015-17 are up, which means the possibility that the corporate “kicker” can be rolled into K-12 budgets on top of any other revenue they might get.

All this combined reduces the pressure on the Legislature to come up with big revenue enhancements, but the Rs in the Legislature have announced that the budget is good enough for them that NO revenue enhancements are needed, since the shortfall can be covered by program cuts.  For PERS members, this means more wheel-spinning.  The Rs are the ones pushing for PERS reform; the Ds are pushing for revenue enhancement, particularly the corporate income tax.  These two forces stand in direct opposition to one another; there is no way the Ds will agree to PERS cuts, or many other cuts, without the Rs agreeing to corporate tax reform.  So, while more draconian PERS cuts *might* be off the table, PERS cuts, in general, remain so long as there is a possibility that the Rs might agree to some revenue increasing measures.

Expect this saga to drag on for awhile, and lead to, possibly, a stalemate that results in the need for a special session after the revenue situation for 2015-17 is sorted out in the latter half of August.  This only pushes the problem for PERS members further into the future, staying the date of execution until later.  There may be some movement before sine die in late June or early July, but I’m growing discouraged that anything will be settled by then.

I wish I could offer something more informative, but, like you, I’m still waiting in the weeds.

Wednesday, May 10, 2017

Way Down In The Hole

PERS members are coming down to the Wire (bad pun for some) to make final retirement decisions.  Nothing of substance has moved in Joint Ways and Means, but broad hints have been dropped about what might await those members near and far from retirement.  The two main areas are for members to pay more for their retirement benefits (redirecting the 6%) and getting less for their money (spreading out the FAS calculation over 5 years instead of 3, disallowing sick leave accrued after 1/1/18, using a first-in-first out method for charging sick leave after 1/1/18).  Not much chatter about all the other “features” of SB 559 and 560 (the $100,000 FAS cap seems to ebb and flow, but its implementation seems problematic, and it doesn’t really save as much money as people thought it might because of its delayed implementation to preserve accrued benefits).  It also seems fairly likely, at this point in time, that June 1 is still a safe date to retire and avoid any possible impact from the legislative changes.  Of course, if none of the changes take effect until January 1, 2018, one could wait to retire as late as the last working of November for a December 1 retirement.  The calculus of choosing that date over June 1 or possibly July 1 is complicated however.  If you are still working for a PERS employer, waiting until a Dec 1, 2017 may make sense because you will continue to get your full salary until November 30, you’ll be 5 or 6 months older in the actuarial tables (this isn’t as significant for younger workers as it is for older workers), and your IAP balance will continue to grow by 6% of your gross salary each additional month you work.  If you are inactive, the calculus is different, especially for Tier 1 members.  While your Tier 1 account balance continues to grow by 7.5% annually (0.625% monthly), and your actuarial factors will be somewhat larger on December 1 as opposed to June 1 or July 1, the former date deprives you of a 2% COLA on your initial benefit that you would get if you retired on either of the latter dates.  In addition, retiring June 1 or July 1 (as well as May 1 or April 1) makes you eligible for the July 1, 2017 2% (assuming you have been inactive since BEFORE October 1, 2013), you also will get 0.14% deposited in your COLA bank to be used in the future if the COLA is less than 2% (remember that the maximum COLA is 2%; it is not a guaranteed rate).  So, when you combine these details for an inactive member, adding in the angst and worry over what the Legislature might still do, you are probably at a near wash between the earlier two dates and the later date.  You have to run your own numbers to see how this works for you (this is why financial calculators and spreadsheets were invented).  [edit 5/12:  I’ve heard an unconfirmed rumor that the PERS bills in Joint Ways and Means are DOA because the Gov doesn’t want litigation uncertainty hanging over budgets for the next two years.  I suspect this is a bit of hyperbole; the real reason may be something more pedestrian like the the two parties can’t come to any agreement over Revenue measures, so PERS cuts are off the table.  What this means is that IF this is a proper rumor with some substantiation [something I’ve not been able to confirm so far], a Special Session is likely to be called once the final revenue information is available in the latter part of summer, long after the Legislature adjourns.  I continue to try to verify the legitimacy of the rumor with multiple sources.]

Next Tuesday, May 16, 2017, at 8:30 a.m., the State Economist will release the final revenue forecast that the Legislature will base its 2017-19 budget allocations on.  This event signals the final push to wrap up budgets, bills that affect the budget, and to enter the glide path towards a desired June 23, 2017 adjournment of the Legislature.  The revenue forecast holds out the prospect of good news, very good news, or good news so good that it turns into bad news.  Everyone knows the economy is up, which thus perplexes people trying to figure out how the state’s revenue is inadequate for the budget needs of agencies in a growing economy.  At last news, the potential budget shortfall ranges between $1.6 and $1.8 billion, depending on who you ask, and what day of the week it is.  The source of the shortfall is unrelated to the economy.  It is result of Legislative stupidity back in 2013 (the COLA legislation that was overturned by the Supreme Court) when the Legislature allocated about ten times more money from the longterm COLA savings, than the short-term savings justified ($60 million in savings vs $885 million allocated).  The court decision didn’t come until late in the 2015-17 Legislature, so the impact of the Court’s ruling was delayed until the 2017-19 session and PERS employer rates rose significantly (because, of course, the employers spent their allocations like drunken sailors on shore leave) for the 2017-19 biennium.  This adds about $400 million or more to the shortfall.  The second factor has to do with the way Medicaid reimbursements changed under the ACA and were reduced under the early days of the current administration.  This is probably about $650 million of the shortfall.  The remainder of the shortfall is largely attributable to inflation that has occurred since the last biennium (about 3.5%) just to maintain current service levels (which should happen minimally in a growing economy).  This accounts for about $500 million or so.  So that explains most of the projected shortfall.  So, in an economy near full employment, with wages and salaries up slightly and tax revenues increasing, what could possibly go wrong?

What, indeed, could go wrong with a growing economy?  Well, for those with short memories, or those who haven’t lived here all that long, a Legislature long ago (1981) passed a monumentally stupid budgeting law.  It is enshrined in the Oregon Constitution as the “kicker” (as in “kick back”).  At a time when property taxes were rising rapidly, Oregon decided it wanted to head off a property tax measure (like Prop 13 in California, passed in 1979-80).  So they created this rule that says, in effect, if the revenue at the end of a biennium exceeds the State Economist’s most recent revenue forecast by more than 2% (e.g. 2.0001%) the ENTIRE surplus revenue is refunded to the taxpayers after the books are closed on the previous biennium (ours will end June 30, 2017).  How this refund occurs has varied over the years, but for at least the past 16 years or so, it has been treated as a tax credit for the following year’s taxes and is based on some fixed percentage of taxes paid in the previous tax year (I would get a huge kicker, but I don’t want it).  So, how does this affect PERS and all the other things mentioned above.  The 2% threshold for 2015-2017 is $336 million.  At the end of the first quarter (Jan-March), the excess in collected revenue over forecast was $206 million.  That leaves, April, May, and June to fill out the remainder of the biennium, and there is an extremely high likelihood that the May forecast (next Tuesday remember) will be forecasting final 2015-17 revenue surplus (and therefore the starting budget for 2017-19) at greater than $336 million.  Of course, the final number won’t be known until all the books are closed on 2015-17 after June 30, 2017 (usually it is late August before all the final accounting and auditing is finished and the budget can be officially closed; this is also the time when the Treasury decides whether the conditions for the “kicker” have been met).  So, if the revenue forecast comes in at $330 million above predictions, the Legislature gets to budget the extra $330 million, which will reduce the amount of shortfall that has to be backfilled, and agencies, and possibly near-term PERS retirees-to-be can breathe a slight sigh of relief because the PERS legislation will be closed out by the time the Legislature adjourns between June 23 and the mandatory July 8, 2017.  But, suppose the revenue forecast comes in at, say, $450 million above final projections.  That ought to be great news but, unfortunately, that’s where the “kicker” comes into play, and the ENTIRE $450 million would have to be refunded (“kicked back”) to income tax payers when they file their 2017 taxes in 2018.  That would mean that the growth of revenue would NOT be available to Legislators to appropriate towards the existing shortfalls.  That could produce an even bigger budget hole, and possibly lead to budget standoffs between the parties who want revenue reform and transportation improvement (the Ds) and the parties that want PERS reform and transportation improvement.  Everything hinges on what kind of deal the parties can make over the contested ground (Ds - revision of corporate taxes; Rs PERS reform).  With less money available, the stress will be greater, and this leads to the possible scenario where neither party wants to budge, and the parties agree to a compromise, temporary budget to start the new biennium, but come back either in a Special Session in the Fall after the final revenue figures are in, or they wait until the even-year session to settle budget details.  Regardless of how they do it, if this happens, it extends the period of uncertainty for PERS members on the cusp of retirement, and with it the anxiety that drives PERS members insane during a legislative year like this.

And, if this isn’t enough to drive people even deeper down in the hole, there is the fact that the PERS Board (very independent of the Legislature) is currently conducting its biennial review of the economic assumptions that underpin the formal system valuation that will occur next year.  This process (required in statute) means that the assumed rate gets revisited, mortality rates get revisited, and after the PERS Board hears from the actuaries and other experts, it will decide to lower the system assumed rate, update mortality tables, and both of those figure into the Actuarial Equivalency Factors (AEF) that convert account balances into streams of payments for retirees and beneficiaries.  The experts have already weighed in on the assumed rate (with forecasts ranging from the high 5% range to slightly below the current 7.5% rate), while the IRS is in the process of updating its recommended mortality tables that are partly incorporated into PERS’ final mortality figures and AEF.  If you look at all the expert opinions, you have to be willing to consider that PERS could drop its assumed rate to 7%, and extend out mortality tables beyond what might have been done in the past.  The bottom line is that if you are Money Match retiree, or a Full Formula retiree with a beneficiary, your monthly benefit will be lower beginning January 1, 2018 even if the Legislature does nothing.  (Do note, that this only applies to people who retire on or after 1/1/18; nothing changes if you are retired before then).

So, there you have the most current update of what is going on now.  There are an incredible number of variables in play, and no clear schedule (except PERS’ own timetable) for when major decisions will be made.  If you thought “you wanted it darker” was dark, now you are way down in a hole, where only math, personal considerations, and external life events can possibly help you with your decision.  Your only question happens to be the title of another song “should I stay or should I go?”.  

 

 

Monday, April 17, 2017

The Gilded Palace of Sin

I have to confess that the title of this Flying Burrito Brothers album jumped into my head after seeing a color news photo of the Capitol Building in Salem with its gilded statue on top.  It also reminded me of the line from an old Gilbert and Sullivan operetta “nothing is ever as it seems”, or its modern incarnation as “objects in mirror are closer than they appear.”  So what is this all about?  I am not a believer in conspiracy theories, blind and willful ignorance, or plain incompetence (I do occasionally make exceptions).  I’m also not one to panic, for myself, or for others.  But, I have to confess that actions in the past week have given me new respect for the power of mean-spirited people, being pursued by an angry and worried crowd, to come up with magician’s tricks to fool people into thinking they’ve won a small (or large) victory, when they have, in fact, won nothing.

Since you all know that I write only about PERS (and recently only about the Legislature and its long history of trying to take benefits away from workers), I have been following the discussion (and contributing to it) regarding the Senate Workforce Committee and its unwillingness to confront PERS in more than a desultory way (I mean that; I take nothing from all the informational meetings except a complete unwillingness to do anything for or against PERS bills except to pick two bills and send them up, with all their attached amendment and without any recommendation, so that the Black Hole known as the Joint Ways and Means Committee can do their bidding in the absence of light).  I think this is a cowardly and unprincipled position, and I suspect there are some deeply hidden agendas being played out by leaders of both parties, the Unions, and a variety of other organizations who want money and don’t really care all that much how they get it.

That’s the background, but what’s new?  In the final analysis, after all the stürm und drang over PERS, two bills seem to have survived and will be forwarded without recommendation (the cowardly act) to the Joint Ways and Means Committee, where the action is done is less-than-public view.  The two bills, well-discussed in previous posts are SB 559 (unamended) and SB 560 (unamended, plus 10 [or possibly only 9, see below] amendments) that will be forwarded without any further discussion.

Last Wednesday, the Workforce Committee held its only public hearing where the public was actually permitted to testify on these two bills.  The primary objection was to the presence of an Emergency Clause in both bills, but especially in Senate Bill 560.  Unfortunately, the magician’s trick worked.  Eyes were distracted from the true problem, and like magicians working an audience, the members of the Workforce Committee promised to amend the bill (SB 560) to remove the Emergency Clause.  And they did in a single amendment numbered dash-15.  But like all magicians, the amendment removed the Emergency Clause from the original bill, as introduced, without touching the Emergency Clause in any of the 9 amendments in which it is replicated.  Worse still, either through willful deception, magician’s tricks, or distraction, the Committee did not grasp (again naivete is not an excuse for this experienced group of legislators), that the REAL problem was not the Emergency Clause (in fact, the Emergency Clause is actually necessary for reasons illuminated in multiple previous posts), but the lack of a date certain in the dash-3 amendment, and the section on the bottom of pages 24-25 of the Dash-10 amendment pertaining to the decoupling of the Money Match annuity rate from the system’s actuarially assumed interest rate.  In both amendments, this particular change is fomenting all the fear, uncertainty, and doubt, not to mention causing untold anxiety for near-term Money Match pre-retirees and leading to a mass exodus of people since the beginning of the year.  In both sections of these amendments, these changes, but NO OTHERS, are targeted to “…take effect on passage”.  All other provisions take effect on January 1, 2018.  With the emergency clause in, the “takes effect on passage” means that the section in question would become law the moment the bill is signed into law (i.e. anywhere from late May to Early July).  Removing the Emergency Clause changes nothing about those sections because the courts would have to decide exactly when the bill took effect.  

The problem could be solved simply by omitting the passage “…takes effect on passage” and inserting “…takes effect with retirements on or after January 1, 2018”.  So far, the situation is made even more complicated because the Chief Legislative Counsel, Dexter Johnson, issued a memo to the Senate Workforce Committee pointing out why taking the emergency clause out is a bad idea.  The reasons are virtually identical to those articulated here in multiple previous posts, in responses to individual emails, and in posts over on PERS Oregon Discussion (see link to left).  Without the Emergency Clause, PERS is prohibited from recalculating employer rates until on or after January 1, 2018, and litigants are unable to begin the legal process of contesting any element of this bill before January 1, 2018.  There are other reasons as well, but the long and the short of this is that the Emergency Clause is necessary so that the legal status of any of these changes can be largely settled by about this same time in 2019, while the Legislature is undoubtedly dealing with other budget issues.  So, after everything that happened last Wednesday, it is likely that the dash-15 amendment will die, the Emergency Clause will remain, and PERS members trying to sort through their options will be left in the same position they were in last Wednesday before the promise “…not to create a crisis or chaos”.  No one can convince me that members of the Senate Workforce Committee were so ignorant, so naive, and so patronizing that they didn’t know exactly what they were doing.  I’m sure they deliberately agreed to removing the Emergency Clause, knowing full-well that it would be put back for the reasons enunciated here, there, and everywhere.

I don’t think I have ever seen a more concerted campaign to distract attention away from the real problem with any bill as I’ve seen in the Senate Workforce Committee.  In the past, legislators were downright nasty to one another over bills as harmful as these; this year, I’m nearly in a diabetic coma from the sweetness of members on this committee who have polar opposite viewpoints on issues pertaining to budgets, PERS, and workforce.  This all suggests to me that Dems, Repubs, Unions, Employers, Oregon Business Council, organizations like OPRI, the PERS Coalition are all involved in many backroom, off-the-grid discussions of how to balance the budget, partly on the backs of PERS members both near and far from retirement.  And this all leads me to brand the Legislature of 2017, meeting under that gilded dome, the Gilded Palace of Sin.

Believe nothing you hear from a Legislator or a Union at this point in time.  Only when you see something in writing, in the form of a bill, an amendment to a bill, or a complete revision of a bill should you take words seriously.  Written words matter; talk is cheap.  So far, nothing said and certainly nothing written offers any assurance that what is proposed to happen will happen in any other way.  Let those words guide your actions.  Make no assumptions, accept no assurances.  It is time for all these people who have been offering vague assurances to put their words on legal paper rather than in in tweets, emails, or E-lerts.  Only when those words make it to bills that matter do any of those stupid assurances have any meaning.  Beware of Emergency Clauses, but beware even more of clauses that have no certain date in them, or bills being forwarded into a Black Hole with blanks where numbers should be.  If you take those assurances at face value, then you are a sucker, and you are playing right into the hands of the charlatans of the Gilded Palace of Sin.

Note added later:  As predicted, the Senate Workforce Committee punted both SB 559 and SB 560 to the Joint Ways and Means Committee.  The votes were both 3-2 in favor of referring without a recommendation.  Senators Gelser and Monnes-Anderson opposed sending either measure forward.  But, in a seriously bizarre twist, perhaps influenced by this blog, perhaps by the sheer number of panicked members, there were three new amendments sent up along with the original SB 560 and the already extant 10 amendments (including the one to eliminate the Emergency Clause).  Of the three new amendments, only Dash-11 and Dash-12 merit note.  While these amendments seem to be variations on the same theme, there are three elements of note in each:  (1) the elimination of the decoupling of the Money Match annuity rate from the system’s actuarially assumed interest rate (the whole section has just vanished); (2) the inclusion of a clear implementation date for all remaining provisions of the bill at 1/1/2018; and, as predicted (3) the restoration of the Emergency Clause.  It would be nice to claim victory or to offer assurances, but this isn’t the way life works.  The effect of this is simply to add more permutations and more combinations of ways in which Joint Ways and Means can choose to implement changes to PERS going forward.  As I noted elsewhere, it appears that we are nearly back a ground zero, with a new group of people to consider changes to PERS not necessarily based on policy considerations, but solely on the basis of how well the changes help balance the 2017-19 budget.  Since the Senate Workforce Committee made no choices, made no recommendations, Joint Ways and Means now has a Chinese menu of options from which they can select one from Column A, one from Column B, and give current and inactive workers an egg roll and a misfortune cookie.  Sadly, this offers those in the position of trying to time retirements to avoid the impact of these changes no guidance whatsoever.  Not only has nothing been clarified, now people are faced with nearly the same list of options proposed long ago by the Portland City Club (except the COLA change is now off the table).  The list of amendments reads like a recitation of that list of changes, coupled with the spaghetti theory of jurisprudence attached - we magicians of the Gilded Palace of Sin do hereby resolve to throw anything we perceive as legal up against the Supreme Court’s wall, and we will take whatever sticks.  It probably isn’t that bad, but it sure feels that way.  [This will be my last post before the end of April; nothing is happening and I’m leaving town.  I’ll be back before anything worth commenting on takes place].