The Garden of Gethsemane

Both the Oregonian and the Register-Guard are whooping it up that they finally "won" a victory over PERS.  Their victory includes the release of names and amounts of PERS pensions paid out by November 2011.  Later in March 2012, the same newspapers will receive additional information on those same retirees (ALL OF THEM) including employer, final salary before retirement, method of retirement calculation (like we had a choice), and years of service.  The argument used by the newspapers to get this information is that PERS is a public agency, bound by open records, and that PERS recipients are being paid with taxpayer dollars and their information is not private.  Let's examine these claims:

• All retirees are paid with taxpayer money.  FALSE.  There are 900 agencies contributing to PERS.  Some of these agencies are small, some are huge.  Many agencies - Higher Education and SAIF, for example - receive relatively little money from the state and its taxpayers.  The money to fund those agencies largely comes from fees, tuition, grants, contracts, foundations.  In Higher Education, the agency I'm most familiar with, tuition money alone covers virtually all of the costs of faculty and staff.  All salary and benefits are paid from the tuition and fees the students voluntarily pay to receive services from the University faculty.  The same is true of the Community Colleges.  The state money that comes to these agencies is used largely for upkeep and maintenance.  So, the money that passes through the hands of the students (perhaps from their parents, perhaps not), ends up in the hands of the faculty and staff.  We are public employees only in the sense that the agency we work for is a "public agency", but our salary and benefits do NOT come from public funds.  There are many, many agencies whose funding comes entirely or nearly entirely from user fees, not taxpayer money.  None of these employees should have their records exposed.
• The Oregonian and Register Guard "won" a victory.  FALSE again.  The newspapers bludgeoned a settlement out of PERS.  There is no legal jurisdiction that has ruled on the legality of this release.  The judge who received the consolidated cases merely signed off on the settlement because that was the only way the cases could be dismissed.  A true "victory" would have required that a court registered a legal decision on this release of information and told PERS (or the newspapers) exactly what the law requires.  PERS decided to cave in because they were going to lose a PR war, having already spent $140,000 in legal fees to fight the order to release the information.  Although that amounts to about $1.20 per retiree, the Statesman Journal was already on their case over the money spent on outside counsel.  PERS was placed in a no-win situation in the public relations battle.
• Finally, what started as a request for retirees making more than $100,000 per year in retirement, has now turned into a witch hunt for all retirees.  The retirees making more than $100,000 per year could be predicted quite easily.  There are probably 500-600 public employees in positions that pay salaries higher than this.  Most of them who have been career employees probably receive retirement benefits over the 6 figure amount.  Big deal.  The way PERS was set up, this was inevitable and I'd be shocked to find that there are more than 70 or 80 retirees earning more than $100,000 per year who weren't making that amount in their working days.  They receive those pensions because they took considerable risk with their PERS portfolios during their working days and happened to benefit from the OIC's fantastic investment success.  They could have lost most of their pension as well, but they didn't.
• Finally, the concern for public employees, especially those elderly members who get victimized by family, investment counselors, and other not nice people, is especially insensitive.  Retired members are generally pretty conservative with their money.  They don't advertise their benefits because older people generally don't do this.  It has nothing to do with their status as retired public employees.  I don't want people bugging me about my benefits and how I earned them or getting advice about how I can double my money in 30 days or less.  Moreover, the older we are, the more susceptible we are to financial fraud.  I fear for my older colleagues who do not have the energy, wherewithal, or endurance to withstand the kind of potential financial abuse to which they will assuredly be subjected.  My financial business is between my banker, my broker, my wife, and me.  No one else needs to know.  I will reveal this much.  I retired in 2002 and received about 90% of my final average salary.  When I started receiving Social Security, my total benefit exceeds 6 figures.  I never earned 6 figures in my career and I still don't except if you include Social Security.  Including Social Security, my total benefit is about 105% of my final average salary.

I truly do not know what the public expects to learn from a data dump of the retirement benefits of roughly 110,000 individuals.   They are going to learn that there are a small number, probably less than 4% of the total, who receive significantly large benefits and their stories will vary all over the map.  As far as I'm concerned, if any news media calls you and asks you to comment on your benefits and how they were earned, answer with a firm "NO COMMENT". Do NOT assist the media in any way to figure out how your benefits were earned.  They started this fight, but we don't have to help them with their own job.  Without information from you, all they can do is guess how you got to your benefit level.  I would tell them nothing.  In the meantime, if you suffer any form of financial harassment AFTER this information is published, by all means seek legal counsel.  You have a legal right not to be abused, and the newspapers might as well be forewarned that you reap what you sow.

Right now I feel like I am waiting in the garden of gethsemane praying for tomorrow not to come.

 

 

Scream, Aim, Fire

This probably describes the way many PERS retirees feel today after learning that PERS caved in on the various public record requests to release a fair amount of information to the media about current retirees.  While PERS got some concessions of what would be released and won a reprieve to allow notification of retirees about what information will be released, we basically got sold down the river.

This coming November, the local media (Whoregonian, Stateless Journal, Eugene Register Hard) will be getting a list of all current retirees along with their current retirement benefit amount.  What the media does with this information is anyone's guess, but it is hard to imagine anything useful coming from it.  I expect to be harassed unmercifully by those people who think public employees are worth "shit" and all are overpaid at work and in retirement.  I'm not looking forward to this information being released.  On the other hand, perhaps all of those idiots out there who are convinced we are bringing home at least 6 figures will be shocked to discover that few of our fellow retirees actually get 6 figures and, moreover, those that do could have been predicted by my pet roach.

Things get uglier next March (2012) when PERS will be compelled to release year of retirement, final average salary, agency, and job classification at retirement.  PERS has been able to limit the damage to this information and will not have to compile all of the other information requested, and this information alone will not be enough to generate identify theft ---- at least that's what everyone thinks.  The reality is that there is enough information that will be released that any intelligent identity thief could put together a credible dossier of information and financially rape almost any of us.  The good news /sarcasm on/ is that PERS will notify us before they release this information /sarcasm off/.  I'm so relieved that I can prepare to be screwed just knowing it is going to happen.  Perhaps it will be time to file a name change with the courts.  Maybe I'll call myself Prince.

For what it is worth, the PERS Coalition is examining the settlement to see whether there is any way to seek an injunction or file litigation to stop the release of any of this information.  I personally don't think there is any way to stop this crass invasion of privacy.  They are not releasing addresses, phone numbers, beneficiaries, social security numbers, employee ID numbers, or historical work data.  It doesn't look terribly likely that the Coalition will be able to do much about this, and I can't imagine the public employee unions spending the money to stop this.

All I can say is that you've been notified and warned.  The next time you see your name somewhere in print, it just might be in the Metro section of the Whoregonian.  Maybe Steve Duin will bake a column just for us.  Or maybe Elizabeth Hovde will write one of her classically snarky, unfriendly, and public-employee bashing columns about all of us piggies (and now she'll have names) slopping at the public trough.  The next sound you may hear from public employees may be the scream, followed by aim and fire.

Northern Exit

Considerable confusion still exists about the newly enacted HB 2456.  This bill, just recently signed by Governor Kitzhaber, removes the state income tax subsidy to PERS members who (a) retire on or after 1/1/2012 *and* (b) who had creditable service prior to October 29, 1991.  The confusion stems from a rumor -- absolutely untrue -- that anyone who moves out of state after 1/1/2012 will lose the tax subsidy.  There is no truth to this rumor.  If you retire on 12/1/2011, you will still be able to live out of state without loss of the income tax subsidy no matter when you choose or need to move.  Those of you who are concerned about this can rest assured that a move to Washington or other parts provided you are fully retired before 1/1/2012.

I hope that clarifies.

Hard Bargain

As most people know, the PERS Board voted yesterday (July 29) to keep the assumed rate at 8%.  The local media seemed surprised by this decision and focused on a random comment made by one of the Board members that he didn't think the 8% was sustainable, but that he respected the wisdom and judgement of the Mercer actuaries.

Most reports didn't discuss some of the issues raised in the actuary report.  One issue is that the mean, median, and modal assumed rate across the public employee pension plans typically surveyed (about 120) sat right at 8%.  A few of the higher assumptions (8.5%) had been dropped to 8%, but over all public plans surveyed, 8% remains the prevailing assumption.  Mercer also makes its own analysis and its capital markets survey forecast that over the next 20 years, the likely rate of return using the asset mix similar to the PERS portfolio is 7.88%, while another actuarial firm, SIS, using the same data predicts returns of 8.16%.  As you can see, the central value between these two highly respected firms is about 8%.

The Board discussed other rates including 7.50% and 7.75%, but were confronted with the conundrum that by lowering the assumed rate, the employers (and hence the taxpayers) would be on the hook for even higher contributions.  The Board attempted to balance the need for long-term stability in rates against the short-term shock that lowering rates would result in.  In the end, the Board voted 4-1 to retain the 8% rate.

Many argue that the Board is foolish, is a tool of the unions, and a variety of other things.  In fact, 4 of the 5 Board members are from outside the system and work for large or small private companies with their own pension plans.  The public would have you believe that the last 5 years have been harsh and that returns are well below 8%.  This is true but misleading.  Only 2008 had the strongly negative returns of -27% that skew results significantly lower.  Leaving out 2008, PERS returns have been well above 8%, and the 7 year average return - the closest to the actuarial prediction range is 7.6%.  So, while 8% might seem high against the average, the average includes -27%, surrounded by years of 13% and 20%, and 15%.  The long-term PERS average continues to bump close to the 8% mark.  I suspect if I were on the Board, I might have pushed for an assumption of 7.75%, but that would have been reevaluated in two years anyway.  I know most people would have been unhappy with me for doing so, but I think it would have struck a fine balance between the need to have stability and the need to keep employer rates stable.

On the whole, I think the PERS Board did the only rational thing it could do given the information available.  Each PERS member owes the Board a thank you and I would encourage each of you to write to a Board member (or two or five) and thank them for their vote to retain the 8%.  It was a hard bargain and the Board made a sensible decision, deciding not to throw members to the wolves of the public and the media.

 

 

Back To Black

While I was gone the Oregon Supreme Court issued an order joining the Arken and Robinson cases for the purposes of issuing a final opinion.  While the cases are different, they cover enough similar ground that the Court apparently feels it can issue a "one size fits all" decision.  Greg Hartman doesn't know whether this is good news or bad news, but he opines that it probably means that they are closer to a final decision than he would have expected at this point.

This coming Friday, the PERS Board holds its bi-monthly meeting.  The agenda is long and there are many issues to be discussed.  For members approaching retirement in 2011 or 2012, the most significant item will be the Mercer presentation and recommendation of demographic and actuarial assumptions for the 2010 and 2011 system valuations.  For members, the critical assumption will be the assumed earnings rate going forward.  While Mercer's previous studies have shown that the current 8% is within the range of variation in their simulation studies, there is considerable pressure being brought to bear by many sources to lower the assumed rate to around 7.5%.  If this action were taken, it would take effect on January 1, 2012 and would affect future Tier 1 regular earnings (the "rate guarantee"), and, more significantly, will change the mortality factors used to calculate benefits in retirement.  The impact will be negative to members and post 1/1/2012 retirees alike.  However, the wild card in this discussion is that the assumed rate also affects the expectation of contributions from employers.  There is an inverse relationship between the assumed rate and employer contribution rate.  If PERS lowers the assumed rate by 50 basis points, employer rates would be expected to rise to offset the loss of revenue from a lower assumption.  Whether PERS will try to "decouple" the employer assumed rate and the Tier 1 assumed rate is an unknown right now.  If they don't, the employers will try to fight the reduction just as hard as the Tier 1 members.  The meeting packet is posted on the PERS website right now, but there is no hint of which way Mercer is likely to go.  They hinted at a slightly lower assumption in May, but it wasn't transparent.  This time around they will have to go out on the limb and make a recommendation.  They will be damned if they lower the rate and damned if they don't lower the rate.  Expect some lively discussion.

So, there is lots of black clouds still looming over the PERS horizon.  One of those clouds will either be lifted on Friday (no change in the assumed rate), or the deluge will begin (it gets lowered).  The other cloud awaits us at the Oregon Supreme Court, where a decision in the Arken and Robinson cases will probably come before summer's end.

Miles To Go

On Thursday, the Oregon Legislature bid sine die and all went home for the remainder of the year.  PERS members and retirees escaped from any significant harm, although HB 2546B did finally pass and so our fellow members who retire on or after January 1, 2012 and who live out of Oregon and who accumulated PERS credit for work performed before October 1, 1991 will see that the income tax subsidy they were entitled to disappear.  The Legislature wisely avoided the potential legal pitfalls associated with trying to take this subsidy away from those members already retired.  In all, this was the sum and substance of the Legislative "tinkering" with PERS for this session.  Beware, however, that a lot of people are still unhappy with the Legislature and, more especially, with Public Employee Unions.  Now that we have annual sessions of the Legislature, it is possible that more harmful bills will be researched and proposed during the shorter Legislative session beginning next February.

Now that the Legislature has been removed from the current equation, the next hill to climb is with the PERS Board.  On July 28, 2011, the Board will consider whether to change the assumed earnings rate from its current 8% to a lower amount.  The most likely lower amount will be either 7.5% or 7.75%, although neither is a certainty.  Mercer, the actuarial firm in charge of PERS' mortality tables, has to decide whether to formally recommend lowering the rate.  To do so has profound consequences for all active and inactive members as well as employers.  While all earnings under the 8% rate are protected, a lowering of the rate for future earnings would mean two things for members.  First, all subsequent earnings will be reported at the lower guaranteed rate.  In the short run, this has little immediate effect on members; in the longer term it does.  Because the mortality tables are built from a set of assumptions, chief among them is the assumed rate of return on investments, lowering the assumed rate will mean that the actuarial tables will change and the benefits paid out will be lower because the expectation is for lower earnings.  On the employer side, interest rate assumptions are inversely related to employer contribution rates.  If PERS lowers the assumed rate of return, the employers will be expected to contribute more to insure that the "true-up" when a person retires is as small as possible.  With all the various "accomodations" employers have been given to pay for their increasing rates, the short-term effect on the employers would be to raise their contribution rate.  In this particular instance, employer and employee interests are aligned, at least for the first few years.  I'm sure that the PERS Board will find some way to lessen the burden on the employers, but all this means is that the "unfunded" portion of the PERS fund will grow.  So, if you are interested in commenting on this possible change, having input on not changing the rates, you would be extremely wise to plan on attending the PERS Board Meeting on July 28, 2011 at the PERS HQ in Tigard.

Finally, as the icing on the cake, the benefit payments that retirees receive on the first of every month got a bit FUBARed on Friday July 1, 2011.  As reported on the PERS Web Site, there was some sort of coding error that resulted in one of several possible things happening with the July 1 check.  First, as many of us discovered, the check got deposited in our savings account rather than our checking account.  This is a known problem at OnPoint, Advantis, and several other credit unions here and elsewhere, including out of state banks.  The second thing is that some deposits were simply rejected because there was no savings account to put the deposit in.  The people in this situation are the worst off because of the holiday weekend.  It will be mid-week next week before all this can be straightened out.  Finally, some of you may have noticed your check went to the same old place.  You were lucky.   If you have any issue with this, you are asked to call PERS on Tuesday morning July 5 so they can help get this sorted out for you.  PERS assures us that this programming issue will be resolved before we receive our August 1, 2011 checks.

I hope you all are planning to be involved in safe activities over this long weekend.  Don't get too much sun, drink plenty of fluids, practice safe fireworks, do not drink and boat or drive.  In other words, behave normally.  If you are crossworder, practice safe lex.  Above all, be thankful we live here and not in some of the other less friendly places on the planet.

Dimming of the Day

Sine die will probably be pronounced sometime tomorrow towards the end of the day. At this moment, only two PERS bills survived the grueling process that is the Legislature. HB 2113 was a PERS housekeeping measure that reconciled some inconsistencies in the language of the OPSRP and the rest of the Chapter 238a. The other bill to pass was HB 2456B. This was (and remains) a very controversial bill. In its original form, it would have taken away the income tax subsidy received by every Tier 1 retiree who served in some capacity prior to October 1991, provided they lived outside of Oregon now. Under the threat of legal action, the Legislature chose to accept the amended bill proposed by OPRI that would affect only those individuals who retire on or after 1/1/2012. While this is a vast improvement over the punitive original version, HB 2456B doesn't reason save any money and will be used simply to illustrate to constituents that the Legislature, faced with 20+ bills to scale back PERS benefits, acted responsibly to only pass those bills that had a reasonable chance of surviving a court challenge.

So, what does HB 2456B do. First, it applies ONLY to members who have worked for a PERS employer longer than 22 years. It has no impact on members who began their PERS employment after October 1991. Those members were no eligible for the income tax subsidy anyway. Members who have 22 years or more of service, or who served in a PERS position prior to October 1991, will be affected by this bill ONLY if they plan to live outside Oregon. If you have more than 22 years of service, live in Oregon, and have no plans to move, the bill doesn't affect you at all.

Out of the 70,000 or so members eligible to retire now or before January 1, 2012 there are probably only a few thousand that meet the requirements to be hit by the bill. Most, will have short stints prior to October 1991 and most will lost, at most, 2% or slightly more, of their final benefit.

The calculus of this bill is bizarre. PERS estimates that it will cost approximately $600,000 to reprogram all their systems to pick out retirees ineligible for the income tax subsidy, while the Department of Revenue estimates another $100,000 to provide the information PERS needs to verify its information. PERS estimates that they will recover approximately $10,000 to $15,000 per month of unpaid income tax subsidies. This means that during the first biennium the cost of implementing HB 2456B will be approximately $700,000, which will be offset by approximately $300,000 in revenue from not paying the benefit to ineligible retirees. Thus, after two years, the state will be in the hole $400,000. In subsequent years, the state will continue to recover approximately $300,000 per biennium; this leaves 2013-15 at minus $100,000 net. So four years after this bill has been in force, the state will not have even broken even. Finally sometime in 2015-17, the state will reach the crossover point and savings will exceed costs.

This is one of those bills that leaves you scratching your head and saying: "...and this benefits the state and taxpayers, how?".

Although I am not optimistic, I continue to hope that Dr. No will apply his veto pen to this ridiculous bill. This bill offers no benefits to anyone, and simply ends up being a mean-spirited attempt to punish "someone" for the supposed (but non-existent) PERS "fiasco". Note to taxpayers: there is no PERS fiasco. Oregon PERS is one of the best run public employee pension systems in the US. End of story. If left alone, it will right itself as it has done in the past 8 years. Leave it alone.

Hold On, Hold On

The Oregon Legislature is approaching sine die with considerable dispatch. For PERS members, this is good news so long as the Legislature doesn't make any wrong turns along the way. To date, not a single PERS bill has passed and has been sent on to the Governor. There are a number of bills that could take flight almost any day, but the majority of bills have already died a death by a thousand ignores. Those that remain in one form or another are the two bills pertaining to revoking the tax subsidy for out of state retirees - HB 2456 and SB 656 576. The former would remove the subsidy from future retirees; the latter from all retirees living out of state. Odds are that neither has the votes for passage. There are several PERS-originated bills that are designated as "housekeeping" - HB 2113 and HB 2114 - that should have passed easily, but remain tied up in the Ways and Means Committee. Finally, there is a single bill that could make the 6% employee contribution and associated pick up strictly voluntary. So far, Republican attempts to bring the bill to the floor without a Committee recommendation have failed. This bill is also likely to die without further issue. Despite the repeated, relentless, and strident calls from the media to do something about PERS, the Legislature has steadfastly resisted efforts to inflict further "reform". As the leaders of both parties stated at the beginning of the session, they did not want to pass out any legislation that wouldn't stand up to critical review by the Oregon Supreme Court. So, despite all the pressure, we have finally found a group of Legislative Leaders who possess a spine and a willingness to buck the media, the Portland City Club, and Phil Keisling, to resist measures that have little chance of surviving a Supreme Court challenge. Although it may be premature, I want to offer kudos to the leadership in the Legislature for showing, um......., leadership.

Goodnight Old World

If ever there has been a crazy week, this must be it.  I won't bother with the screwy things going on in my life just before Memorial Day, but for people who follow PERS news, the week borders on bizarre.  Of course, we have the news reported on Monday about the Ways and Means Committee possibly abandoning the revised HB 2456 and reverting consideration to the grossly illegal version original proposed.  By now that's old news, but it hasn't happened yet and there is still time to write members of the Ways and Means to object to any action except passing the REVISED bill.

Everyone who has been sentient for the past week or so is aware that the Portland City Club put out their long-overdue report on PERS, in which it concludes that the sky is falling again and trots out a whole bunch of bogus reasons why the stock market isn't going to recover the unfunded actuarial liability, ever.  They then propose a package of novel - to them - changes that will save $2 billion nearly instanteously.  As you can imagine, none of these savings will come by charging employers more or making employers pay their bills when they are due.  No, this must always come from the members of PERS to reduce benefits measurably.  There are lots of useless bits of detritus in this bill - noise akin to earwax and toejam - but my personal favorite recommendation is to end the IAP account for Tier 1 (and Tier 2?) members and redirect the employee contribution into lowering the UAL.  In effect, this is tantamount to shutting down Money Match except for a small number of Tier 1 members whose balances are high enough when the accounts were closed in 2003 that they would continue to get a pension benefit large enough from the Tier 1 account balance.  For everyone else, this would mean that they would take a 6% pay cut to cover the UAL and get no benefits whatsoever from the money.  They would retire under Full Formula.  Oh, and there is that small matter of cutting the Full Formula factors from 1.5% per year to something around 1%.  The objective is to produce a benefit of about 45% at retirement that, coupled with Social Security, would be about 80% of pre-retirement salary.  From my quick survey of PERS retirees on Social Security, I haven't met a single one whose Social Security Benefit approaches the 35% that the City Club assumes.  My Social Security benefit is about 16% of my PERS pension.  Even if I had waited until I was 65, my Social Security wouldn't ever be more than 20% of my pension.  I guess the genuises at the Portland City Club just picked a number out of the air, assumed no one would check it, and came up with an average social security amount.  And for this, we waited nearly a year to get the report.   I hope this report dies a slow and painful death, as the research is sloppy, the facts barely supported by evidence, and the questions asked led to the conclusions they wanted.

And, if that weren't enough, I discovered another Legislative "game" that can be played late in the session.  It used to be that "gut and stuff" was the game of choice of legislators.  They would wait until late in the session after a bill had gotten a hearing but was heading no where, and they would gut the contents of the bill and stuff in new language remotely related (in principle only) to the original topic and present the bill as "not" a new bill.  People have gotten wise to that trick and so a new trick was used this year (I'm sure it has been done before, but I never paid much attention).  Representative Jason Conger (R, Bend) apparently "reserved" his right to introduce one bill late in the session.  This appears to be a courtesy extended to a few people every year.  So, on Monday, while all eyes here were diverted to the possible calamity in the Ways and Means Committee over HB 2456, and the editors of major newspapers were chin-wagging over the City Club Report, Conger introduced an 8 point "School Survival Act" (don't quote me on the name of the act).  The first two elements of the act would (a) kill the 6% pickup in its present form and make employees choose between keeping it or using it to prevent layoffs and furloughs or to lower cost of health care premiums; and (2) brings back the limitation on the retiree COLA to no more than the average of PERS benefits, $2000 per month.  So, active employees would get to choose which poison they'd like to use on themselves, and retirees would get no COLA on amounts above the average PERS benefit.

Then, we have the delicious news that the Mercer Experience Study presented today at the PERS Board Meeting (I won't be there, doctor's appointment, see paragraph 1 for other craziness), is leaning towards a reduction in the assumed interest rate to 7.5% from 8.0%.  This isn't a done deal and Mercer itself recommends more time to study and get input from stakeholders, but this decision will be made at the July meeting.  If PERS adopts the change, it would take effect on January 1, 2012 and would affect all actives then and anyone who retires on or after that date.

Without any of this going on, with no changes actually approved, PERS is on track for another record year of retirements.  They estimate 11,000 for 2011, but this is before any of these things described above could possibly happen.  If any or all of the things described above were to take place, it is important to remember that there are, according to the latest numbers from PERS (Monday May 23, Board Meeting Packet), 70,000 members currently eligible to retire today by age or service or both.  I'm guessing that if the Board reduces the assumed rate from 8.0% to 7.5%, the retirement numbers will swell to well over 20,000 by 12/1/11.  I can tell you that if it were me, and I had put in my time, I'd be gone in a microsecond if that were the case.

Finally, there must be a special hell reserved for my colleagues in the Oregon University System who decided way back in 1996 to accept the OUS' one-time offer to withdraw from PERS and join the OUS' "Optional Retirement System".  Money deposited into PERS remained in PERS but future money went into a variety of accounts managed by the system.  The system has always been part of the Oregon State Government and paychecks have always come from the State of Oregon.  But this doesn't seem to matter at retirement, as some at PERS have decided that the period between 1996 and retirement, IF YOU ARE IN THE ORP, do not count as state service for the purpose of eligibility for the RHIPA pre-retirement health care subsidy, which is only available to "state" employees based on years of service.  For reasons totally opaque to anyone, they are fighting counting the period post-1996 as service to the state.  All I can say is that for those of you in that system, watch out for this diamond back.  It will hit you at the worst possible time, and it seems to be the result of an bureaucratic and arbitrary decision by someone in that Department at PERS.  Hopefully, as I write, this will be straightened out.  Retired people shouldn't have to fight these kinds of battles over healthcare.

As you can see, it is only Thursday and the week is jam-packed with fun news to contemplate and to cogitate.  And here you thought your retirement days were going to be like swinging in the hammock in the backyard.  Who knew you'd have to train for ultimate fighter just to retain what you earned.

Have a nice Memorial Day Weekend.  Use it to remember the old days, because the new days are looking different everyday.

 

Caught By The Light

A firestorm is brewing in the Legislature and elsewhere over HB 2456.  The story goes like this:  the originally proposed bill would have removed the income tax subsidy from PERS current and future retirees who live in states other than Oregon and who pay no Oregon Income Tax.  Before the bill came up for review in the House Business and Labor Committee, OPRI decided that the original bill was unacceptable, and quite probably illegal.  Nevertheless, the bill original bill seemed to be getting traction, and OPRI decided to introduce an amended bill that would make the punitive and illegal parts of the original HB 2456 go away.  Their changes, encapsulated in what was known as the dash 7 amendments,  made the bill prospective only and would apply to those PERS members who retired on or after 12/31/11 and who did not reside in Oregon when they received monthly benefits.  After reading the Legislative Counsel's thoughts on the legality of the original HB 2456, the House Business and Labor Committee voted HB 2456-7 (the OPRI version) out unanimously.  The bill then went to the Ways and Means Committee (since it involves money), where it has sat for some time now as more pressing bills were considered.  Since the dash-7 bill has arrived at the Ways and Means Committee, several things have happened.   The most significant change was the Portland City Club's long-gestating report on the state of PERS.  This was followed today by the Oregonian's scathing editorial calling out the Legislature and the Governor to do something about PERS before the session ended.  Given where everything is in the Legislature and with less than a month before the Legislature calls sine die, the pressure is ratcheting up to do something to get a handle on PERS.

I will have a separate post identifying all the factual errors, distortions, and faulty assumptions in the belated City Club Report, but I want to focus on one element that is suddenly regaining traction.  The City Club report (and this was repeated in the Oregonian) still cites the $72 million savings that would occur if the income tax subsidy were eliminated for all PERS retirees, not just those retiring after 12/31/11.  Notwithstanding the legal analyses that show the post facto application to existing retirees to be a breach of contract, the more significant point is that the bill in its original form will not save anything close to $72 million.  That figure was from PERS who simply estimated the savings from not paying the subsidy to anyone living out of state as of a date certain.  That figure did not include implementation costs, enforcement costs, administrative overhead, and the difficulties of turning the subsidy on and off again for members who pass back and forth through Oregon residence.  If we are lucky, the net savings on a heavily reprogrammed HB2456 will be about 25% of the amount estimated by PERS - about $18 million - before taking into account the legal expenses involved to defend the breach of contract.  While this might be viewed as being better than a "hit in the head", it is far cry from the amount reported by the City Club and repeated by the Oregonian.  It is really disturbing when numbers get repeated uncritically from one source to another all because researchers and writers fail to ask the right questions.

The real problem with the original HB 2456 is a legal one.  Given the tests typically applied by the Oregon Supreme Court to whether a change is permissible or not, the set of guidelines used comes from none other than the Hughes case, which involved the income tax subsidy in the first place. It would be ironic, to say the least, that PERS and the Legislature find itself back in court trying to undermine part of the agreement put into place following the Hughes decision regarding the income tax subsidy.  The Legislative Counsel has already weighed in on this and concluded that HB 2456, as originally written, would be a retroactive change to a PERS agreement and would, therefore, be considered a breach of contract.  The reason the revised bill was introduced in the first place was to avoid that very trap of passing a sweeping bill that would be overturned by the Oregon Supreme Court as a breach of a retiree's contract.  Once a retiree starts to receive the tax subsidy, which is backed up by a piece of paper called a Notice of Entitlement, PERS is on the hook to continue to pay the subsidy.  Nothing in existing law gives PERS or the Legislature the right to turn off the subsidy in the future.

The dash 7 version of HB 2456 is before the Ways and Means Committee.  The belated City Club Report and the bashing by the Oregonian have gotten members of the Ways and Means Committee stirred up and, according to rumor, members want to revise the bill again back to what it was before the Dash 7 amendment was passed unanimously.  While the dash 7 amendment doesn't save a lot of money in the near term, there is probably a considerably windfall over time.  More importantly, the dash 7 amendment doesn't have the critical legal flaws that the original HB 2456 bill had.

Most people don't ask my advice (OK, some do), but I'm going to offer the Legislature some advice here.  Stay far away from the original HB 2456 or any revisions of the dash 7 version that try to put back provisions that were taken out.  It has been almost 10 years since mistakes from the 2003 Legislature are finally being sorted out because of all the litigation spawned.  The Legislative Leadership promised that the 2011 Legislature would not pass out any bills that would lead to the kind of legal limbo that a great deal of the 2003 Legislation ended up with.  An original version of HB 2456 would flat out contradict that promise and would lead back to the legal chaos that has dominated the last decade.  If you must pass a bill, the dash 7 version of HB 2456 is legally the safest way to go and, while it won't save much in the short run, the long run savings may be more than you think.  On the other hand, passage of the unrevised HB 2456 would lead immediately to legal stasis and would continue to mess with retirees'  heads and tie up the courts for years.  The original HB 2456 is bad and probably illegal public policy.

 

 

 

Hard Times

Google has been a bit problematic the past several weeks and so I've had to hold back some comments I had intended to post.  Two posts went astray and I've yet to see them appear here.  So, I'll try to reconstruct one of the two, and will have a new one tomorrow.

It has been awhile since we chatted about HB 2456.  As you recall, this bill was heavily amended to affect only members retiring after 12/31/11.  It will remove the income tax subsidy that some of those retirees are entitled to.  The bill passed out of the House Business and Labor Committee unanimously without the required Fiscal Impact Statement. Apparently, the committee didn't feel it needed to know whether this bill would save any money or not.  Those of us with knowledge of the system and how the tax subsidy works knew that it couldn't possibly save much money.  Now, the Fiscal Impact Statement is out and has received virtually no coverage.  It is hysterical to read as it demonstrates the silliness and meanness of HB 2456.  In the 2011-13 biennium, the bill will cost almost $200,000 more to administer than the system will recover.  A new Legislative miracle - negative savings.  Even after 2011-13 when most of the sinking costs are over with, the estimates of savings are virtually nominal.  The estimates indicate net savings of about $100,000 per biennium - a true genius measure that barely recovers any money at all.

The bill sits before the House/Senate Ways and Means Committee where it will be considered any day now.  I know that members of the Legislature read this site.  Here's hoping that this bill - as badly botched a bill as can possibly be put together and that ends up being simply mean-spirited and nothing else - will be dispatched with the same haste as Osama bin Laden.  Man and woman guys of the Ways and Means Committee.  Pretend you are Seal Team 6 out to save the State of Oregon from stupidity.  I know times are hard, but surely not so hard that you would pass a bill to spend more than you save.  As a policeman on a snowy mountain pass once said to an idiot driver trying to pass a line of traffic going uphill - "get some intelligence".

 

This Sad Song

Last week or so, the Oregon Supreme Court refused to hear the appeal from Kay Bell.  Most of my readers are not familiar with Kay so let me tell (briefly) her story.  In a nutshell, Kay sought retirement estimates from PERS repeatedly as she neared the end of her teaching career.  As the estimates would come in, Kay noted that they contained a significant error.  She regularly and repeatedly pointed this error out to PERS, hoping that they would fix the problem so she could get an accurate estimate of her benefits before she retired.  Alas, PERS repeatedly assured her that there was no error in the estimates.  After hearing this numerous times, Kay decided to retire.  PERS propagated the error in computing her retirement benefit and she started out with benefits significantly higher than she thought she should be getting (of course, had Kay gotten confirmation of the error, she would have worked two additional years rather than retiring when she did).  You can all write the next part of the script.  About 8 months after she retired PERS (surprise, surprise) discovered the error that Kay had been pointing out repeatedly.  They notified Kay that they were immediately reducing her benefit by approximately 25% and they invoiced her for the overpayment they were giving her for 8 months (or so).

 

Kay sued in a civil case in Marion County and won under a jury trial. The court awarded her both damages and civil penalties. The amount of damages was exactly the amount she allegedly owed PERS and the penalty to PERS was an additional $200,000. PERS appealed both verdicts. The penalty was cut to $100,000 after PERS argued that the liability cap in cases like this involving a state agency was only $100,000. Ultimately, the case went to the Oregon Court of Appeals, which invalidated both verdicts. That left Kay and her attorneys with only one option, to appeal to the Supreme Court. And very recently, the Oregon Supreme Court rejected the appeal, leaving the OCA ruling in tact. Kay won nothing and will have to repay all the overpayments from her now more meager pension.

One side effect of this case was SB 897, originally introduced in the 2009 Legislature. It required PERS to validate and to certify as correct estimates requested as part of "validation" legislation that passed unanimously (89 - 0) in the Legislature. Unfortunately, then Gov Kulongski vetoed the bill on the very last day, leaving the Legislature with no way to immediately override his veto. Subsequently, the 2010 special session of the Legislature overrode the Governor's veto by a closer margin - 67-23, and SB 897 became law. The effective date of the validations is July 1, 2011.  PERS has repeatedly tried to defang the validation process but to no avail.  This year's effort to remove the "guarantee" from the law never got a hearing in the House Business and Labor Committee.  Occasionally, retirees and near-term get cut a break.  This year, we got one.  We owe Kay big-time for that.

So, once that process is activated, any future retiree is URGED (that isn't a strong enough term) to seek a validation of all information relevant to retirement at least one year and preferably 2 years before retiring. This is especially important if (a) you've worked for multiple PERS employers; (b) have had any break in service for any reason; (c) have taken sick leave or disability leave for a period longer than one month; (d) all of the above. This, at least,
puts the burden on PERS to gather up all your records and make sure that all service time is properly credited, all employer payments have been made, all employee contributions have been made and both properly recorded. If there are ANY discrepancies, the burden is on YOU to make sure that the necessary legwork is done to ensure that PERS corrects any errors. Once the validation is settled, this locks both parties into the benefits that result. If you
knowingly allow an error to stand, PERS is not obligated to pay you a higher benefit than you've earned, but the whole process is set up to insure that you get what you are entitled to and can make the retirement decision more secure that no "mistakes" will suddenly appear 8 months (or later) after you retire.

While I feel terrible for Kay since she had to be the stalking horse for this bill and ended up with nothing but legal bills for her efforts, she lives in my heart for taking her situation and converting it to something that benefits all future retirees. We all owe Kay an enormous debt of gratitude (similar to the debt we owed Martha Sartain) for exposing her whole financial and work life to the court system.

Idle Minds

The House Business and Labor Committee today suspended its rules and passed out HB 2456 unanimously and sent it on to the Ways and Means Committee with a "do pass" recommendation.  The suspension of rules took place because the Legislative Fiscal Office still did not have the "fiscal impact statement" done for this bill.  It doesn't take a genius to figure out why the LFO hasn't got the analysis.  The simple fact is that HB 2456-7 saves virtually no money after all the costs of enforcement and collection are factored in.  The House Business and Labor Committee spent a fair amount of time to get the bill into its current form and effectively wasted more valuable time on a bill that, in the end, saves the state almost no money - probably barely enough to print the changes to the Oregon Revised Statutes.  It affects future retires eligible for the tax subsidy (only those with service time before October 1991) who do not live in Oregon and pay Oregon Income taxes.  It is hard to estimate how many will move out of state, especially with this looming over their heads, and the mechanisms set up to enforce the bill are cumbersome at best.  All I can say is that I hope that Ways and Means sees the stupidity of this bill and decides that it isn't worth the paper it is printed on.  And they say that "idle minds are a terrible thing to waste".  This proves the wisdom of that axiom.

Chump Change

As things are going right now, the only negative PERS bill to gain any traction in this legislative session is the ill-advised HB 2456 (see below for several posts and a lot of comments about this bill).  The bill is now up to a dash 7 revision.  As modified, it will now affect any PERS member eligible for the income tax subsidy who retires after 12/31/2011.  If you don't live outside Oregon and don't plan to live outside Oregon once you retire, the bill has no impact.  But if you live outside Oregon and plan to stay outside Oregon, the bill could cost you anywhere from about 1-3% of your final gross pension benefit.  Members eligible for the income tax subsidy have worked some or possibly all of their eligible time prior to October, 1991.  There is, of course, one more dire possibility for certain inactives.  If you worked for a PERS employer only prior to October 1991, then you will lose 9.89% of your gross benefit.  Few fit this profile, so it probably isn't worth worrying about.

The revisions involve notification to potentially affected members, as well as a mechanism to switch the subsidy back on if a retiree moves back to Oregon, and off if an Oregon resident leaves Oregon for domicile elsewhere.

This bill, which has generated a tremendous amount of hostility, misinformation, and ill-will (see again my commentary in the posts below), has been scheduled for another work session and probable referral to the House Ways and Means Committee on Wednesday.  The sad thing here is that this pissant bill will probably save the state pennies, not real money.  The Legislative Fiscal Office will have it's financial impact statement on Wednesday, when we will probably discover that the bill will net the state all of about $10 million (if even that) over the biennium  This is truly chump change, given the amount of work involved in enforcing it.  Add more to the PERS and Revenue workloads with no money to pay for the decreased efficiency of both agencies that results.  Pathetic!

How To Become Clairvoyant

What a strange trip this past week has been. I suppose I owe OPRI an apology for the drubbing I gave them on Friday following the hearings on the PERS bills in the House Business and Labor Committee - specifically, HB 2456. I fell into a semantic cesspool with Mike Schaufler's chief of staff over the fate of HB 2456. I had written to Representative Schaufler, as I had done with all of the members of that committee earlier the previous week about the fate of HB 2456. I had made some suggestions about the bill, concluding with the assertion that the bill generates so little cash that it hardly seemed worthwhile given the amount of ill-will and litigation that might result. On Tuesday, April 5, I received an email from Representative Schaufler's Chief of State telling me, in effect, that HB 2456 was not likely to move forward to a work session. That was true, but exceedingly misleading. After perusing the "history" of HB 2456 on the Legislative website, it was clear that the bill was scheduled for a hearing on April 8, which I already knew, but that no amendments had been posted as of that date. I concluded, both properly and improperly at the same time, that the Chief of Staff's words should be taken literally - HB 2456 was dead. Unfortunately, I don't have time to peruse every website on the planet so I wouldn't have seen OPRI's amended version of the bill to trade future retirees for present retirees. Thus, I scolded OPRI harshly for, what appears to have been, something they didn't do. They did not revive a dead bill. They provided an option to a bill that was dead in its original form, and gave the committee a way out of the legal dilemma they had created with the unamended version of the bill.

So, OPRI is owed an apology for my scolding. It was premature. They didn't revive a dead bill. They provided an amendment that protected those currently living out of state and those already retired, while offering up future retirees to the gallows. Future retirees remaining in Oregon will continue to get the tax benefit, but those who either already live out of state, or those who plan to move out of state, will not.

I have been called out on this by David Reinhardt, lobbyist (and former Oregonian columnist), and by Representative Schaufler's Chief of Staff. I suppose I should be more contrite, but at the moment I'm mostly pissed. I feel like Representative Schaufler's office deliberately misled me or steered me away from what was really going on (it's just me folks and I can't be in twenty places at one time). I stuck my neck on the line and I, deservedly, got it chopped off.

Nevertheless, my point about OPRI remains. This is NOT a good recruitment strategy. You need new members, desperately. Your membership is aging in place and there has to be a way to encourage new retirees to join. Again, for those retiring after 2011, what exactly will OPRI's claim to fame be?

I wish I could be clairvoyant and read through people's words. But when someone takes time to write me a personal email, I don't typically think I'm being burned, misled, or even deceived. Live and learn.

Thankfully, I'm going away from this mess for about a week. This will probably be my last post for this week. I'm going to enjoy a week in the Florida sunshine with John D. MacDonald and friends in Cedar Key, FL.

Cup of Sorrow

Today was "PERS Day" at the Oregon House.  As expected, only five bills were considered.  Two were disposed of quickly (HB 2113 and HB 2114) by referring them on to the House Ways and Means Committee without discussion.  These two bills were "housekeeping" bills introduced by PERS and don't seem to make a lot of difference to most people.  Mostly they were intended to keep PERS legal with changes to the IRS code made over the past two years.  Two more bills, those dealing with eliminating the requirement for the 6% employee contribution to PERS, and a bill that would alter the requirements for the 1039 hire back were considered.  Since the 6% "pickup" is a centerpiece of the Governor's negotiations with state employees, no action was taken on this bill.  Similarly, the 1039 rule changes received tepid support and it is believed that this bill will die without further issue.

The surprise was the introduction of multiple amendments to HB 2456, the bill pertaining to the tax subsidy for out of state retirees.  In its original form, the bill would have changed benefits retroactively for retirees currently living out of state, and had the unintended consequence of placing in state retirees whose income is so low that they don't currently have to pay Oregon Income taxes.  The key amendment was introduced by OPRI, which would make the bill apply ONLY to retirees who retire on or after January 1, 2012 and who subsequently move out of state.  While this eases the burden somewhat in that no current retiree would be affected by this punitive bill, it appears that both OPRI and the PERS Coalition sold out future retirees to stave off litigation costs.  I fail to understand why this compromise was introduced when the original bill was effectively DOA.

What puzzles me is that now HB 2456-3 will get a work session, which is the necessary prelude to moving the bill out of committee and onto the House floor for a vote.  The original bill was estimated to have saved employers $72 million dollars.  However, because of the language of SB 656, passed in the 1991 Legislature, less than 2/3 of the $72 million would actually be saved.  A better figure was about $48 million.  Then, there would be administrative and enforcement costs expected to cost about half of what the savings were.  This left only about $24 million in actual savings from the bill.  The majority of the savings would have come from current retirees.  By eliminating them from the mix, the net savings from this bill are probably more like $3-$5 million.  In a budget with a $3.5 billion shortfall, saving $3-$5 million dollars is hardly enough to keep the lights on for one day across the state.

I'm also disappointed in OPRI and the PERS Coalition for their complicity in making a dead bill come back to life.  Maybe I don't understand the calculus of politics in the Legislature, but it strikes me that the long term ill will of this eats at OPRI's future seed corn.  This is an organization that needs to grow to stay relevant.  The older generation decreases with time and you want new retirees to form the backbone of your membership.  By taking this position and resurrecting a bill that was probably dead, they have sold out a whole generation of retirees who were actually qualified for this benefit by virtue of the two main settlements that put the package together.  While it is true that future retirees will continue to get the benefit IF they remain in Oregon and IF they had work prior to 1991, it still seems like a bad political decision to anger and constrain future membership growth by taking actions that explicitly harm future members.  Maybe I'm naive, but I think that OPRI may have bought itself a cup of sorrow with this decision.  OPRI may have calculated that this would affect only a small number of future retirees, but the truth is that you never know when circumstances might force you to move from Oregon when you hadn't planned on doing so.  If I were planning to retire after 12/1/2011, I would be really pissed at OPRI for removing a degree of freedom in my retirement planning.  Even if I weren't planning on moving, stuff happens and I wouldn't want to have my benefit at risk for any cut just because I moved out of state.

I'm hoping that OPRI understands the damage they may have inflicted on future membership.  You have a hard sell when it is known that you willingly and complicitly aided in the "take away" of any benefit.

Finally, it needs to be understood that there are somewhere in the vicinity of 58,000 currently active or inactive PERS members who are age and/or service eligible to retire.  I know many of the inactives live out of state.  If I were one of them, I'd be planning to retire before December 1, 2011.  Otherwise, the mere fact of living out of state could cost you a couple of percent of your retirement benefit.

 

Take It Out On Me

Finally, at last, "PERS Day" at the Oregon Legislature.  After waiting until the last possible moment, the House Business and Labor Committee has revealed the PERS agenda for this year's legislature.  On Friday, the Committee will hear the following bills - HB 2113, HB 2114, HB 2456, HB 3218, HB 2989, and HB 3116.  Since Friday 4/8 is the last day to hear such bills, we can presume that no more surprises await PERS members and retirees.  HB 2113 and 2114 are "housecleaning" bills introduced by PERS.  HB 2113 pertains to legislative members of PERS and prohibits them from participating in PERS or any PERS-administered 457 plan (see also, HB 2989).  HB 2114 pertains to inactive OPSRP (Tier 3) members and primarily involves the IAP withdrawals of those members who become reemployed in a PERS-covered position again.  HB 2456 is the bill that prohibits PERS from paying the tax subsidy to retirees residing outside of Oregon (This bill has to go to House Ways and Means Committee after clearing Business and Labor).  HB 3218 proposes to reduce the PERS "pickup" from 6% to 3% maximum.  Finally, HB 3116 prohibits a public employer from re-employing a retired member of the system for one year after retirement.

To be frank, none of these bills is a surprise.  What will be a surprise is if any of them make a pass through the House Business and Labor Committee, the House Ways and Means Committee, the entire House, then the Senate, and finally the Governor.

While members and retirees now know what to worry about, it is a long way from here to passage.  HB 2456 is probably the cruelest of bills, but it isn't clear what the actual form of the current bill is.  It may have been modified from its initial proposal, as may have been all the various other bills.  If you are interested in testifying on any of these bills, You must be present in Hearing Room E, Legislative Building, at 8:00 a.m. on Friday April 8, 2011.  If you have any electronic testimony you are asked to have it to the committee 24 hours in advance (mailto:  theresa.vanwinkle@state.or.us) .  Persons wanting to testify and make either video, DVD, powerpoint or overhead projection presentations should contact committee staff at least 24 hours ahead of the meeting.  If you need ADA accomodations, you should phone the Capitol and ask to speak to Karen Hupp or Juliene Popinga at 1-800-332-2313 at least 72 hours in advance.

 

The Beat Goes On

In a bizarre twist of fate, the rumors have started to fly out of PERS headquarters, that the PERB and Mercer have agreed that the assumed interest rate - the one that determines employer contributions, Tier 1 minimum guarantees, and the actuarial factors, should be increased to no less than 8.1%, which is in line with Mercer's estimates of the next 20 years' returns.  This will improve the funded status since the assumption will allow valuations to rise, while not costing an arm and a leg.  After years of rumors that PERS would drop the assumed rate, the latest employer rate analysis led Mercer to suggest to staff that a small rise in the assumption would allow employer rates to drop slightly going forward without breaking the bank.  This topic will be on the agenda in the May Board meeting and will be finalized in July.

PERS sources say that this is the only way the Board can get the employers and the members "off their backs" and reduce the number of whiny phone calls they have been getting ever since rumors started to fly that the Board might lower the rate.  "If we could stop all the whining, sniveling, and complaining about the assumed rate, we can get our work done in a timely manner" said a PERS representative.   "We spend so much time holding members' hands and reassuring them that we aren't mean, nasty, and devious, that we could recover at least 3 FTE to deal with the latest cow pies the Legislature is about to hand us, not to mention doing all of the ridiculous 'validations' required by law since the beginning of 2010."

 

 

Oh, Wow It's You Again

The PERS Board held its March meeting today, both at an unusual time and definitely an unusual day of the week. Today's meeting was scheduled to finalize the 2010 earnings' crediting to all accounts. There were a number of other items of significance, which I will talk about below.

There were no surprises in the earnings creditings. Tier 1 regular accounts earned the assumed rate of 8.00%, the Benefits-In-Force Reserve was credited with 12.44%, Tier 2 accounts 12.44%, IAP accounts 12.13%. The Contigency Reserve picked up a cool $81.3 million, bringing its total to $734.4 million, while the Tier 1 Rate Guarantee Reserve took another $230.6 million, reducing its deficit to a nominal $211.1 million. All counted, the system has about $55.5 billion in assets on the books.

The lion's share of the meeting was given over to yet another Mercer example of financial modeling gone amuck. I am not going to try to summarize this presentation. It is 41 pages long and should be read by everyone who bothers to download the agenda packet from the PERS site. The basic message of the whole analysis is that employer costs will continue to rise, at least through 2013-2015 before they stabilize at somewhere near 20% of payroll, assuming all the actuarial and economic assumptions hold true. Mercer also modeled the impact of Pension Obligation Bonds on the venues that issued them. For those who issue POBs in 2002 or 2003, the longterm wisdom of that decision appears to be that they will "win" over the long haul by about 100-120 basis points. This means that they will have saved the money expected when the bonds were issued. For venues issuing POBs later, say about 2007, the news is not so good. Because of market timing, these employers are likely to see a 100-150 basis point "loss" relative to debt service costs. None of this is news, but it was nice to have it presented in pretty graphs of multicolors and in a Powerpoint presentation.

Some of the more interesting takeaway points from this analysis were: (a) it assumed that the assumed rate would remain at 8% for the forseeable future, that payroll growth would accrete at about 3.75% per year, and that the 50th percentile of earnings of the fund would be about 8.1% using the Mercer Capital Market Performance, Asset Mix, and Earnings Assumptions. This seemed to telegraph that Mercer isn't considering recommending any changes to the assumed rate, although they didn't model specifically under different assumed rates (that may come at the May meeting, when economic assumptions are considered before the 2011 valuation begins). This point was NOT mentioned at any point during the discussion of the Mercer report and I felt like it was the Elephant in the Room of the whole discussion. Everyone sees the elephant but no one wants to discuss it --- yet.

The last part of the meeting was given over to a legislative update. The good news is that of 43 bills introduced into the Legislature, NONE have been scheduled for a hearing. The bad news is that according to Capitol scuttlebutt and rumors, April 8th will be PERS day before the House Labor and Business Committee. If this is true, then we should see the agenda for this meeting by about April 4 since there is a 72 hour requirement before a bill gets a hearing. So far, PERS will get hearings on 2113 and 2114, HB 2115 is not likely to get a hearing (this is the bill to eviscerate SB 897 from the last legislature). No one knows what other bills may get heard, but again, the PERS legislative liaison heard that the bills likely to be heard are bills pertaining to the 6% pickup, the tax subsidy for out-of-staters, and the IAP return-to-work provisions. Joe O'Leary, the new PPLAD Administrator at PERS suggests that this is the calm before the storm. He expects the joint House/Senate budget to be released tomorrow and that will guide the remainder of the session (see today's Oregonian or Statesman Journal for information on the agreement between the House and Senate negotiators on the "Legislator's Budget". Do keep in mind that Dennis Richardson was one of the three members of the Committee as co-chair of the House Revenue Committee.

After the meeting, I had a chance to talk with a couple of friends, one of whom is quite concerned about the proposals the State has laid down for the negotiations with AFSCME and, presumably, SEIU. While the big details of those negotiations have already leaked out, some other details have not. If I take this source at face value - and I have no reason not to - the state's proposal is far more egregious and punitive than most people seem to be aware of. I'm merely reporting what is rumor for now. Unless I receive confirmation from someone in the know, you should also classify the following information as rumor, but be willing to try and verify.

Everyone knows that the state offered a tiny raise and then asked for concessions on health care premiums of about 15%, continuation of 8-10 furlough days, and elimination of the 6% pickup. That has widely been reported and I have no doubt on that. What hasn't been reported, according to my source, is that the state is ALSO asking employees to cover the state's increases in costs for PERS itself, roughly 4.5% of payroll. They are also asking part-timers(those between 0.5 and 0.8 FTE) to give up their partial health care subsidy (about $332 per month). For the sake of argument, I'm going to assume that my source is correct. If so, then it appears that the state is offering a 1% raise in the first year of the contract, a 2% raise in the second year of the contract, and is then taking away 6% for the "pick-up", asking employees to contribute 4.5% of the employer costs for PERS, continue to take 8-10 furlough days, and pick up about 15% of the cost of their health care. My question is this. On what basis does the 1% raise and the 2% raise get computed? This contract offer, if true, is guaranteed to drive workers out of public employ, or to drive many to food stamps. I hope to the high heavens this rumor isn't true, but I fear there may be more truth than fiction.

Also keep in mind that if the state succeeds in passing on increased employer costs of PERS to the employees, then a change in the assumed rate no longer aligns employees and employers around the 8% figure. So long as the state had to pay the cost, there was an incentive to keep the assumption as high as possible. But, if the assumption is buried by passing on increased costs to the employees, then who cares whether they lower the assumed rate. Just remember that as the "state" goes, many other employers will follow.

Believe me, I was far more disturbed by what I heard after the meeting than I was by anything I heard at the meeting. Please, somebody in authority, tell me it isn't true.

Roaring of the Lamb

A bit of good news to report. PERS posted the COLA for 2010 today. The CPI for 2010 was 1.25%, which means that anyone who retired prior to 2008 will get a full 2% COLA this August 1. Members who retired after July 1, 2008 and before August 1, 2011 will get 1.25%. Bills to reduce, change, or eliminate elements of the COLA for retirees have made it nowhere so far in 6 weeks of the Legislature. It is reasonable to assert that if we haven't seen any action by early April that the combination of the Governor and the divided leadership in the Oregon House will have scuttled any attempt to further "reform" PERS.

Do not be seduced into complacency by this news. There are still two places where change can occur outside of the Legislature. First, collective bargaining discussions have just gotten underway. The Governor has proposed that the unions agree to having members pay up to 15% of their health insurance costs, while also contributing 6% to their PERS IAP plan. I don't think it likely that the unions will agree to exactly this, the unions understand that they will have to entertain and accept some givebacks this year to help Oregon through the current fiscal crisis. The second place is PERS itself. This is the year that the PERS Board will revisit the actuarial assumptions that underlie the PERS plans. At issue will be the "assumed interest rate". There is considerable pressure to reduce the assumed rate from 8% to something lower. Do understand that neither the employers nor the employees want this to happen. In the employers case lowering the assumed rate means that employer contributions will increase, while lowering the rate for employees means both lower guaranteed earnings for Tier 1 members and also lower pension benefits for all members. Both the negotiations and the considerations by the PERS Board will take place publicly and in full daylight. Members will have an opportunity to testify in any hearings regarding the assumed rate before PERS Board, while members will be polled extensively on terms of the Union contracts.

The good news in all of this is that we are unlikely to see a situation like exists in Wisconsin. Fortunately for Oregon and for Public Employees, the unions play an important role in developing and electing political leaders and they, in turn, don't want to alienate one of their clear bases of support. Governor Kitzhaber told the unions this to their face earlier this week

So the little lambs roar as spring comes in. Hopefully we won't see them slaughtered as Spring gives way to Summer.

Hit The Road Jack

And don't you come back no more.  Just got a note from a friend that ALL of PERS' fill-in-the-forms sessions for a March 1 retirement date and an April 1 retirement date are full.  I don't know how common this is, but the Legislature's 23 bills no doubt has some of those 60,000+ members eligible for retirement planning to kiss their employers' goodbye.  This isn't a surprise given what is going on in Wisconsin, the huge anti-PERS sentiment here in Oregon (lest you doubt this, just follow up on any PERS-related article published in any of the various newspapers around the state, and you will see the venom spewing out towards PERS members and retirees in the letters column or on the blog comments).  I have suggested since these bills were first published that March 1 or April 1 would be the optimum date to depart to avoid "most" of the legislature's more draconian actions.  The only bills that *could* affect new (and old) retirees would be one of the bills intended to meddle with the COLA provisions.  I think that these bills face an unlikely future given how carefully woven into the statutes the COLA provisions are.  The current provisions - 2% maximum COLA, banking of excess COLA, 5 years vesting to COLA, and COLA on full benefit have been in their current places since 1971.  If ever there were statutory and contractual issues, these we be at the top of any list.

In the meantime, the state and other public employers may not have to cut as much from their budgets when huge waves of eligible retirees decide that "enough is enough".    I suspect that many more may decide to "hit the road" before July 1.

Don't Think Twice

The mailbag overflows with questions from worried PERS members wanting to know how to time their retirement to miss anything the legislature might do.  There is no simple answer to this question.  If you weren't planning to retire now, thinking about it as a way to avoid what the Legislature might do is just plain silly.  If you aren't READY to retire, you shouldn't give up your job and retire just to protect some benefits you might get.  The Legislature is in its third week and not a single PERS bill has been scheduled for a hearing.  This leads another group of members to wonder whether they should worry at all.  Also the wrong answer.  Just because bills haven't been heard yet doesn't mean they won't be heard.  It is true that a fair number of the 23 PERS bills are off in the danger zone of potential contractual violations.  The House leadership has made it clear that they want NO bills on PERS to pass that will be undone by the Oregon Supreme Court.  That doesn't leave very many bills to pass that avoid that potential fate.

What to do?  Let me go back to my principle that if you weren't already planning to retire this year, then you shouldn't be thinking about retiring this year.  You aren't ready and you won't like retirement because you'll be worrying about all the money you aren't making by working.  If you were already planning to retire in 2011 anyway, then timing might be an issue.  Since a few of the bills, especially those pertaining to the retiree COLA, are presented currently as applying to both new and pre-existing retirees, you don't gain anything by retiring early.  Bills that attempt to cap the pension benefit at the Final Average Salary are potentially devastating to some actives on the verge of retiring.  If you are in that category and want to be ahead of that prospective change, then getting out before the end of March would be the best plan.  This date slips the longer the Legislature doesn't take up such legislation.  Bills to eliminate the 6% pickup have little impact on someone retiring later this year.  The 6% doesn't make much of a dent in anyone's retirement, yet.  So, if you were to lose this, you really aren't risking enough to sacrifice a few extra months of income.  But if any of the legislation worries you to the point that you can't sleep at night, AND you were planning to retire anyway, then don't think twice - get out now.  You'll be happier, your sleep will improve, and you will avoid the worst of the possible changes.  But, if you do get out now, don't come back blaming me for inciting your decision.  Remember, I don't give advice.  I give information and it is up to people to decide what to do with that information.

On an unrelated note, congratulations to Paul Cleary of PERS.  He's one of the lucky Agency Directors who gets to keep his job in the Kitzhaber administation.  Maybe I should send a sympathy card instead.  It is going to be a tough year to be in charge of PERS and spend those days after days trying to be patient and cheerful while giving good answers to nasty legislators like Dennis Richardson who'd sooner take away his mother's PERS pension than allow us to continue to survive on ours.    Good luck Paul.

 

 

Strange Overtones

The Oregon Legislature has been in session for two full weeks now.  Not one of the 23 PERS-related bills have yet been scheduled for a hearing.  Rules devised by the split leadership in the House may be contributing to the slow pace of these bills.  For a bill to be heard, both co-chairs of the House Business and Labor Committee (Mike Schauffler and Bill Kennemer) have to agree.  For a bill to leave the committee, at least two members of each party must vote for the bill's movement.  This puts a fairly high barrier to these bills and probably works to the advantage of members and retirees hanging by a thread right now waiting for the Legislature to move.  Recent reports in the media have included brief quotations from various House members that make it appear that PERS bills may be difficult to move this session.  There is nearly unanimous agreement amongst the movers and shakers of the Legislature that they do not want to pass any bills that will be struck down by the Oregon Supreme Court.  At a minimum, this takes a few of the bill categories off the table as they would run into "contract" challenges from the Court.  Adding to this is Governor Kitzhaber's desire to negotiate with the unions to "solve" some of the issues in bargaining rather than legislation.  By bargaining, there is no possibility of a legal challenge.  Legislation always carries a legal challenge.

If we put all this together, I'm beginning to think that there may be lots of work going on behind the scenes to consolidate some of the bills together, to drop the duplicate bills, and to bring forward only one or two larger bills that have excised some of the legal barriers.

This is no cause for celebration.  PERS members *will* pay for changes somehow.  I can predict what some of them will be, but it is too early to offer my comments, believe it or not.  The changes will be ones that can be made without triggering a legal challenge, are permissible without triggering heat, and will demonstrate that the Legislature is trying to solve the problem.  The bottom line is that PERS is actually nowhere near a trouble point that media makes it out to be.  There are only a few systems nationally better funded than PERS.  The latest earnings for 2010 and the fast start for 2011 PERS at nearly the 90% funded level.  Most actuaries would simply yawn at that number.

This is also no reason to take your eyes off the Legislature.  In fact, I'd be watching it closer than ever.  But I'd also be watching the union negotiations, and the Governor's decision regarding future leadership of PERS (watch the news next week to see whether Mr. Cleary remains as the Executive Director of PERS).

Street Fighting Men

The OPRI Board met on Monday to plan strategy for the upcoming Legislative session.  OPRI is the only organization that directly represents PERS retirees.  They have read through the 23 bills currently proposed and have categorized them into one of three groups:  group 1 is a "fight to the death" group - these are bills that directly affect retirees and will mean less money for them either immediately or in the future:  OPRI will fight all the bills proposing to make any changes to the retiree COLA (HB 2456 and HB 2991), as well as bills that reduce the COLA, or bills that propose to kill the income tax subsidy for out-of-state retirees (HB 2115, HB 2444, HB 2445, HB 2450, and HB 2453).

OPRI is also planning to provide support to the PERS Coalition in its effort to defeat the following bills:  HB 2161, HB 2436, HB 2447, HB 2454, HB 2455, HB 2984, HB 2985, HB 2986, HB 2990, and HB 2996.  These bills will be a level 2 priority for OPRI.  These bills do not directly affect existing retirees, but will affect members planning to retire in the very near future.  These include bills to eliminate the 6% pickup, to cap the pension to no more than 100% of FAS, and several bills that redefine how FAS is computed.

OPRI will merely watch SB 34, HB 2113, HB 2114, HB 2343, HB 2505, and HB 2814.  You can read about any of the bills mentioned above at the Oregon Legislature's web site.  The site tracks the bills as the go through the committee process and is documented carefully.  Also be aware that the Legislature offers audio for hearings that you might be interested in listening to.  The correct internet protocol will be put on the Legislature's web site after February 1, when the Legislature reconvenes.

OPRI has bitten off a great deal in this legislative session - an indication of how important these bills are to its members.  If you are not a member of OPRI, please consider joining.  Dues are inexpensive $10 per year or $75 (?$100) for a lifetime membership.  You can find out about joining at OPRI's http://opri.org.  In addition, OPRI has two funds that it welcomes contributions for.  You may contribute to the OPR PAC, a political action committee that is responsible for funding all the legislative lobbying you will see in full force this year.  Lobbying is expensive and OPRI can use any help it can get.  Donations to the PAC are tax deductible ($50 for individuals; $100 joint).  OPRI also has a legal defense fund.  While there are legal cases in which OPRI is currently participating, this session is bound to produce some clinkers that will require Legislation.

You would do yourself and all your fellow retirees a great service if you would join OPRI and help it in its fight to keep these onerous bills from passing.  You don't even need to be a retiree to join.  OPRI welcomes members from all classes of public employees - active, inactive, and retired.  You will get more than your money's worth from membership (including a newsletter), and a contribution to the PAC.

Details in the Fabric

The 3-day feeding frenzy that is the opening organizing session of the Legislature has just ended.  The boys and girls of Camp Silly will convene again on February 1 to begin the daunting task of winnowing through almost 1700 bills introduced this session.  Some might call this the "full employment act for lawyers, lobbyists, and legislative counsels".  Of the 1700 bills, twenty three (23) are related to PERS, although I think 2 of the 23 are not PERS bills at all.  The bad news is that these bills touch every category of PERS member including current retirees.  Bills affecting retirees all pertain to the COLA.  One eliminates the "COLA banking" provision, one limits the "COLA" to members with 10 years of creditable service (not applicable to current retirees), and one limits the COLA to the first $2000 per month of benefits.  There are three different bills that cover the same topic, namely to eliminate the income tax subsidy provided to retirees who do not live in the State of Oregon.  All these bills will be challenged by OPRI and, presumably, the PERS Coalition.  The remaining bills deal with active members.  Two seem to do with the OPSRP program, one renaming it officially to Tier 3, and another terminating the OPSRP for newly hired employees who become eligible for PERS on or after July 1, 2011 (a Tier 4, if you will).  For active employees, there are two classes of obnoxious bills.  The first eliminates the 6% pickup, and various forms of this bill make it either impossible for employees to contribute on their own, or impossible to contribute at all.  The second class of bills reduce significantly what is included in calculating the Final Average Salary (FAS).  One eliminates overtime in excess of the average for employment category; another eliminates the use of sick leave and vacation time.  Finally, the most obnoxious bill in this category would limit the PERS benefit to no more than 100% of this redefined FAS.   Several bills redefine who can and can't work for a PERS employer after retirement, and one bill directs PEBB to offer high deductible plans and HSA, and another changes how PEBB deals with spouses who are both public employees.  The final insult is a bill that would neuter the most important elements of SB 897, passed in 2010, and hold PERS harmless for errors made by employers in reporting service and related matters to PERS during the verification process.  This is an insult to all those who worked hard to secure passage of SB 897 over the Governor's veto.  Ironically, the revision was introduced at the request of our new Governor.

The good news (if there is any) is that the Legislature chose NOT to micromanage PERS.  This means that issues pertaining to actuarial tables, assumed rates, and the rate guarantee are nowhere to be found in this set of bills.  This doesn't mean these won't appear, but at this point it is highly unlikely.  These are functions that are assigned to the PERS Board and PERS Staff, and these considerations will be taken up in due course at PERS Board meetings and through public hearings, if they are taken up at all.

Collectively, these bills will take a lot of effort to lobby and to defeat.  For active members, the PERS Coalition and each of the unions will be working hard on your behalf.  For retirees, OPRI and its lobbyist(s) will be defending our benefits at the Legislature.  If you go to my newsgroup (see PERS OREGON DISCUSSION) at left, join the group, you can see the summary of all of these bills by number, and participate in the discussion.  It is really important to join the group, not just read the messages.  Strength comes in numbers and the more we have, the louder our voice will be.  In the meantime, OPRI will be meeting on Monday Jan 17, 2011 to discuss these bills and to decide how to prioritize their lobbying effort.  Please make your opinions known on PERS OREGON DISCUSSION before Monday so that you and have a voice in what OPRI chooses to work on.  You can also send contributions (MAY BE TAX DEDUCTIBLE) to OPRI's PAC, which pays for lobbying expenses in the Legislature.  You can find information http://opri.org.

Saving Grace

By the grace of counting posts, it dawned on me that I had hit my magic number of 1000 posts since 2003.  I'm not precisely certain when I crossed that mark, but it has been sometime since the first of 2010.  That is a lot of writing and a lot of people who have read my thoughts.  I want to thank you for making this site the preeminent source of all things PERS.  I don't know if I will make it to 2000 as my energy will wane eventually and my family will want me to travel and be away from all of this.  Nevertheless, this web site is closing in on one million unique hits and more than 1000 unique entries.  Thank you all for your support and your continued reading.  This year could be the final year of this blog as I have reached my threshhold of the things I am willing to keep track of.  I will keep it going for 2011, but once my wife retires on November 30, 2011, I am "outta here".  We will start travelling extensively, visiting our dispersed family and making connnections we've had to miss over all these years.  Keep reading this year and there is lots to report.

Wrong Side of The Street

The Oregon Legislature and our new Governor both showed up in Salem yesterday and work began today.  The Legislature has until January 23rd to get the initial draft of legislative concepts worked into bill form.  Some say no more legislation can be introduced after that date; others claim that bills can be brought anytime.  With that in mind, the first wave of bills have already been introduced and there are 15 of them that affect everything from the way final average salary is calculated, to multiple bills relating to the retiree COLA, and almost everything in between.  So far nothing concerning the assumed rate has appeared, but there are 10 days to go yet.  I expect the list will grow daily, and I will try to keep you updated as much as I can.

Note that virtually ALL of these bills have emergency clauses, which means that they will take effect the moment they are passed and signed by the Governor.  So retirement planning and trying to "beat the clock" takes on a real dicey format.  As far as I am concerned, the last day to get out and be assured that you won't be affected by these emergency bills is February 1.  That said, the COLA bills, as they are currently designed, would affect anyone already retired so that even if you miss the impacts that will serve to lower your benefit, the COLA provisions will affect your pension growth after you retire.  Even current retirees, such as myself, would be affected by the COLA modifications if they pass.

If you want to see the ugliness that will get considered in this session, please go to our PERS Document Library .  There you will find everything proposed for the 2011 session so far located under legislation, with the final item on the list representing the captioned summary of all bills introduced as of 1/11/11.  When you get there and start reading, you know you have landed on the wrong side of the street this year.

Weaver of Lies

Yesterday I attended the Supreme Court oral arguments in the Arken and Robinson cases.  These two cases, along with the White case, which still remains docketed in the Oregon Court of Appeals, represent the last of the litigation over the 2003 Legislative reform, the City of Eugene case, and the subsequent settlement agreement.

The Arken case hinges on the impact of the Strunk's decision to strike down the COLA withholding provision of HB 2003 from the 2003 legislature.  Central to this argument is the fact that with the COLA provision gone, the plaintiffs argue that this left the statute and the "window retirees" in the position they were in on July 1, 2003 - still with 20% credited to their accounts, but not receiving the COLA.  The court ordered the COLA restored in Strunk (2005) while the members were receiving their "fixed" benefit.  PERS argues that because the trial court judge in the City of Eugene case (Lipscomb) had already entered his judgement and order, that the 20% had been vacated and that the only rate in effect, although not formally adopted by the Board at this time, was 11.33%  Thus "window retirees" had no expectation of retaining the 20% when the Legislature adopted HB 2003 in May of 2003.  So far, Arken has failed at the trial court (Kantor), and the issue for the Supreme Court to decide is whether the Legislature intended that window retirees be held harmless if the COLA provision had been struck down.   Much of the questioning focused on the exact status of the Lipcomb order at the time the Legislature enacted HB 2003.  Justice Durham reminded both Bill Gary and Joe Malkin that there is a significant difference between final order, and final justice.  Clearly the final order had been entered, but the case was under appeal at the time the Legislature acted.  PERS had not been granted a stay pending appeal.

The Robinson case pertains to a slightly different portion of HB 2003 and affects a slightly larger cohort of individuals.  At the end of HB 2003, the Legislature late in the process added section 14b (around revision 10 of the bill) to provide an exclusive remedy for the City of Eugene case.  In it, it described two methods PERS could use to recover for the errors identified in the City of Eugene case.  One method was the "COLA freeze", while the other was the use of "administrative expenses".   Since the errors identified in City of Eugene had to do with improper crediting of 20% to regular accounts in 1999, failure to fund reserves, use of outdated mortality tables, and improper calculation of the Money Match benefit, PERS was ordered to correct these.  Because HB 2003 saw so many drafts before it finally fell into its final form, language was entered and removed and it has been difficult to discern either the reason for dropping things from the enrolled bill, or the reason for adding them.  One such word was "Exclusive remedy".  These words were dropped from the final preamble to Section 14b.  Jim Coon, attorney for the defendants in this case (us), argued that the Legislature intended to be done with the City of Eugene case by providing the only remedies that PERS could use to collect.  He argued that the collection statute 238.715 was superseded - in this instance - by section 14b and that PERS improperly billed retirees for monies owed by the City of Eugene errors.  PERS argued that the removal of key words from the final drafts of HB 2003 meant that the Legislature had no such intention to hamstring PERS, but instead offered 14b as *additional* tools that could be used to collect overpayments.  Moreover, Malkin argued that the City of Eugene case involved only 8 employers, not all employers and therefore could not be viewed as the overarching collection mechanism for all PERS employees.  Justice Kistler spent a fair bit of time trying to tease from Malkin why it mattered to the employers what mechanism PERS used since the employers were excluded from bearing the costs, and why also did the money issue, which related to individual retirees, matter to the employers.

The arguments were tedious in the extreme.  I wanted to shout out several times to ask why the justices weren't pursuing a particular line of questioning, but of course it doesn't matter.  No case that I've ever sat through was influenced by oral arguments.  The oral arguments are a dog and pony show where each side gets to take its best shot at the other side while also trying to show the justices why they are so smart.  Similarly, the justices try to get inside the heads of the lawyers by asking some twisted and bizarre questions.  In the meantime, the case is adjudicated entirely through the legal briefs filed on both sides, along with all the pieces of evidence cited in support of the argument.

It is hard to predict when the Court will rule.  I do believe that the court will NOT rule in time for the 2011 Legislature to do anything to fix any errors the Court identifies.  On the other hand, I do think there will be a decision available for the 2012 Legislature to work with, and so I continue to hold that 2012 will be the year of the remedy, for better or for worse.

Only five of the justices were present for the hearings.  Justice Martha Walters was absent but will participate in the ruling.  Justice Jack Landau who joined the Court only earlier in the week recused himself from the case because his son is an Attorney for the firm representing the defendants in the Arken case and consults on the Robinson case.

 

No Expectations

Happy New Year to All.  The next year promises to test our mettle and our souls.  Between the Legislature, the media, and the public, PERS members aren't expected to be treated with respect, kindness, or consideration.  We need to get past this and not take is so personally.  The Legislature is charged with the task of balancing Oregon's budget; they have limited ways to do this.  Our objective is to remind the legislature that we performed our tasks and our work in GOOD FAITH and we expect the Legislature and the State Government (and local government) to honor the agreements we made with them.  We accepted substandard pay to get above standard retirement.  That's a fact that is beyond dispute.  Honoring contracts is a good thing and states that do not honor employment contracts will find that private employee unions dislike doing business with public employers when they don't live up to their contracts.  Our objective this year should be to 1) not whine; 2) present facts clearly; 3) assert the primacy of the contract and that bilateral contracts cannot be changed unilaterally.  Contract, contract, contract, contract is the word for the day.  Keep that word front and center in your discussions with friends and legislators.  The American system of democracy is found on the Uniform Commercial Code, which holds that contracts must be upheld by both parties.  If one party does not wish to uphold its part of the contract, its only choice is to seek concessions from the other party.  The rules do not permit one party to unilaterally pick up its ball, arbitrarily change the terms of the contract, and expect all problems to disappear.  The courts are cluttered with instances where contracts have been broken and the courts have to set the parties back on the correct path.

So as we enter into the Legislative silly season, please keep the fact on contract uppermost in your mind.  You, as a public employee or retiree, did everything that was asked of you to keep your part of the employment contract.  You, in turn, expect the public employers and PERS to do everything it is required to do to uphold its part of the multilateral agreement.  Period, end of discussion.

Thanks to all my readers for using the Amazon links to the left of this blog to purchase their goodies and gifts from Amazon.com.  Those links bring a small commission from every purchase you make from Amazon and apply them to the costs of time, energy, and hosting of this blog and the associated web site.  You pay nothing extra for using these links, but I get a small referral fee for anything you purchase through Amazon.  Believe it or not, it is possible to receive enough income from Amazon to keep a website like this blog running efficiently for a full year.  Do not feel obligated to purchase the advertised items from Amazon.  You can simply use these links to get you to the Amazon site.  Once there from this site, anything you purchase will be credited to a referral from this site.  So, keep the support rolling in by purchasing goods you'd purchase anyway by going through this PERS blog.  Its the way we keep life interesting and by inspiring new posts on a semi-regular basis.  The more money I receive for referrals to Amazon, the more I feel like writing because I know that my extra words will not end up costing me more.  I thank all who have purchased Amazon goods through a referral on this site.  It really helps cut down the expenses of running this blog.

The Legislature convenes on February 1, 2011.  I expect to be posting every couple of days to keep you updated on what our friends in the land of the sillies are proposing.  Obviously I won't post on things unrelated to PERS, but things related to health care and others related to retirement will be covered.

This coming Thursday - January 6 - the Oregon Supreme Court will hold oral arguments in the Arken and Robinson cases.  These cases both apply, primarily, to window retirees and I expect to be at the Oregon Supreme Court at 1:30 to listen to testimony and arguments.  While I don't expect an instant verdict, I do expect the Court to issue their final ruling in a relatively short period of time since the Legislature is in session and they may want to Legislature to take some action that will facilitate the final ruling.  Watch this space on Friday for a possible court update.

 

 

 

 

Happiness is a Warm Gun

And a quick trigger finger.   I'm getting dozens of emails per day asking for advice about when to retire during 2011.  As we all know, the Legislature will convene on February 1, 2011.  During the first month of any legislative session, except an emergency session, the bills are introduced and assigned to committees.  During the second month, the bills start moving through the committees and eventually out on to the floors for a vote if so recommended by the committee in charge of hearing the bill.  We've already seen at least a dozen "suggestions" for ways to reduce PERS costs.  Some of these suggestions are properly in the purview of the PERS Board, not the Legislature.  Others are in the purview of the Legislature.  Still others *may* be effected by the Governor's order.  In a situation like this, it is worthwhile to examine the timing of one's retirement.  The courts have ruled that neither PERS nor the Legislature may unilaterally abrogate the PERS "contract", nor may they enact changes that apply either retroactively or retrospectively.

Armed with this information, I've been suggesting to people that IF THEY WERE ALREADY PLANNING TO RETIRE DURING 2011, that I would consider a retirement on or before March 1 to be the safest bet.  It is unlikely that the Legislature will be able to get anything out of committee, passed, joined by the other house and signed by the Governor much before March 31, at the earliest.  This means that if a bill is enacted as an emergency, it could be in effect as soon as the Governor signs the bill.  If you can possibly retire before March 1 -- and were planning to retire anyway during 2011 -- it is unlikely that waiting a few extra months is worth the potential risk.

Please bear in mind that this is not advice but merely a suggestion.  Some people aren't eligible to retire by March 1, but might be able to retire in August.  Obviously, you can't retire before you're eligible.  Similarly, some people need the income that a few extra months might bring.  What you have to do is to ask the question of whether waiting a few extra months is worth the chance that you might not get the extra income you expected because of some rule change that goes into effect between March 1 and the time you planned to retire.

To my friends at PERS, I am not advertising for anyone to retire.  I am merely advising people about the timing of certain events that are forthcoming in the new year.  The worst thing I could wish for you is a crushing caseload to fill all your spare time.  I know that you've got more than enough on your plate with the nuisance requests from the Oregonian and the Statesman Journal.  I hope you can get some extra bucks from the Legislature to hire a few more bodies.

This will probably be my last post before Xmas.  I'm leaving in the morning for a brief vacation in Minnesota (only I could go on vacation to a place where the high will be 9 degrees for the next four days.  I've got my shorts, my HawaIian shirts, my sunblock and my Maui Jim's already packed).

Merry Christmas and Happy Kwaanzaa to all my friends who celebrate those holidays.  Happy belated Hanukkah to my landsmen who celebrate that glorious 8 days.  And to all, a happy new year.