I Got The News

We've been in Washington, DC the past two days. The is our first trip as tourists. Previous visits (many) have been business. Today we wandered to the US Capitol, the Supreme Court, and the Holocaust Museum. While on our way to lunch, we passed the relatively new Newseum, a modern museum on the history of the news media. We plan to go tomorrow. But there was a very noticeable feature on the outside that motivates today's post. In the exterior windows is a display of about 100 daily newspaper front pages from dailies around the country. I looked all along the Pennyslvania Avenue frontage where they are displayed. The Newseum confirms our own local opinion of reportage in Oregon. There was not a single Oregon newspaper represented. A couple from South Dakota, Iowa, Maine, and New Mexico made it to the big time along with Pravda, a German paper, and virtually every big city daily. But nothing from Oregon. But those of us who live in Oregon already know that. We don't have any useful newspapers. That's why most of us enjoy our news elsewhere. Our daily Pulitzer-winning birdcage liner is apparently not important enough to make it to the Newseum. That that's news.

Dreams On Fire

Oregon PERS has published a rather thorough discussion and FAQ regarding the current economic situation and its effects on PERS members in all the different tiers. It is a valuable exercise in reading, although it parallels the experience one has when opening a 401K statement, a 403-B statement, or IRA statement. You can find the discussion here. You probably shouldn't eat or drink anything before reading it.

Lawyers, Guns and Money

OK. So I've recycled the title, but the last time I used it was about 3 years ago. In the lawyers department, it is now official that the Robinson case has been certified as a Class Action, meaning that in the appeal to the Oregon Court of Appeals, the Robinson plaintiffs will simply be stand-ins for the entire class of people who were affected by the PERS "invoicing" action. It is not yet known whether the case will be directed to the Oregon Supreme Court and bypass the Oregon Court of Appeals. I know that this issue has been kicked around, but I've heard nothing definitive.

PERS has decided to appeal the ruling in the Kay Bell case. They are contesting the size of the jury-imposed award, something slightly north of $200,000- on the grounds that it exceeds some cap for awards against state agencies - arguably $100,000. PERS is also contesting the ruling that PERS has a "special" obligation to "get it right" for its members and retirees. Jeez. You'd think that PERS thinks that they bear no responsibility at all for accurate record-keeping and for accurate notification of members. The fact that they are arguing they don't have this obligation makes me think that they believe they are just like the banks, hedge funds and everyone else who expects that other people will simply roll over and "excuse" their bad-faith estimates. Gee, sorry that your retirement benefit is only half what we told you it would be. Too bad that you've already given up your job and your former employer has either replaced you or abandoned the position. Gee, golly, willikers we're might sorry, but you know that we don't owe you accuracy. You're pond scum and we really only owe the employers accuracy. P-E-R-S (Public EmployER Retirement System). Hmm, lawyers + money = guns.

Wait Until Tomorrow

Warning: This is a quasi-political post, in contrast with my policy of avoiding such posts.

I was 14 years old when John Kennedy was inaugurated. I watched his speech on TV and was captivated by his youth, his intellect, and his vigor. During the Eisenhower years, we lived a typical lower middle class life - mom stayed home and fumed, dad worked at a series of jobs. My mom and dad were liberals who believed that we (the US) should be doing more to help those less fortunate than ourselves. We barely had enough to feed our family, but my mother managed to scrape up extra food for any stranger who happened by. Life was OK. But when Kennedy came along, there was something tangibly different, an excitement, an electricity in the air. A younger generation was taking over. Kennedy's notion of "service" motivated me to be involved in many activities I might not have chosen had Nixon been elected then. I was a junior in highschool when Kennedy was assassinated. I watched MLK Jr give his "I Have A Dream Speech". I was in awe. I lived in Los Angeles attending UCLA when Bobby Kennedy was assassinated. We watched the event practically live from the Ambassador Hotel. My family stayed in the Ambassador Hotel when I was a child during the Kennedy administration. We were in the hotel at the same time a Russian ambassador was touring the US at the height of the cold war. We got to see just how tough the KGB guards were as they cleared a path for this ambassador (whose name escapes my swiss cheese memory).

Today, MLK Jr day 2009, brings back a flood of memories as we are poised to sweep out the worst political nightmare in my 60+ years of memory. By my clock, we have less than 24 hours left before a new president will be inaugurated. At noon tomorrow (eastern standard time), Barack Obama will become the 44th President of the United States. I will again watch his inauguration with the same anticipation I recall in watching Kennedy's speech 48 years ago. I don't think of Obama as "another Kennedy" or another MLK Jr. I simply feel the same excitement about his inauguration as I did as a 14 year old in 1961. I've been so turned off by politics over the past 30 years that it took me a long time to even get interested in the Presidential campaign just over. I didn't support Obama until he became the official nominee. Then I started listening to what he said. I watched carefully after he was elected. I've been following each development, each appointment with incredible interest. (I've also watched the unfolding of the financial catastrophe with near equal interest.) And as I sit poised to watch Obama's inauguration, I am imbued with hope for the future. This isn't a glib hope, but a long-term hope that things will eventually get better. I don't have any advice for our new President. I merely offer him and his administration my heartfelt best wishes for success in turning our national nightmare into an opportunity for new beginnings. I hope I can say the same thing after 4 years of Obama. Best of luck Mr. President (elect).

Enemy

For those of you who don't follow Oregon politics closely, here is something to be worried about. Although the Democrats have control of both bodies of the Legislature (House and Senate), and the Governor's Office, the GOP is pushing very hard to make a comeback, and to influence public policy in Oregon. To this end, they elected a public employee's worst nightmare as the head of the Oregon GOP. The winner of this office - Bob Tiernan - is nearly universally regarded by those cognescenti of PERS as the man behind the curtain in much of the PERS reform. No, Tiernan didn't author any of the legislation passed in 2003 (at least not to my knowledge), but he did help author Ballot Measure 8 on the 1994 ballot, that set the stage for an earlier battle over PERS benefits (the "8% guarantee"), and the evolution of Tier 2. He has palled around with Bill Sizemore, another public employee favorite. While I have no idea what the GOP agenda will be in the coming year, I am confident that they will be pushing for smaller government and further reductions in PERS benefits. Tiernan has been floating around on some blogging sites in the past year and seemed to be positioning himself for some sort of comeback. I guess we now know what he had in mind.

If nothing else interests you in the Oregon political scene, this development should keep you on your toes. Tiernan's election as the head of the Oregon GOP is absolutely not good news.

Dirty Low Down and Bad

The Boregonian today had the painful news that some PERS retirees and actives are going to feel some serious hurt when the 2008 earnings (losses) get posted. First off, retirees who kept money in their variable accounts after retirement will see their variable benefit cut nearly in half in the check for the month of February. The variable investments declined by 48% for the period November 1, 2007 to October 31, 2008. The remaining hurt will be doled out to a variety of classes of people - the Tier 1 actives with money in the IAP will see market returns in the IAP. They are estimated at about -29%. That same figure applies to Tier 2 members on their regular accounts and on their IAP accounts. Tier 1 members with IAP accounts will see a -29% loss in the IAP portfolio, while the Tier 1 regular account will receive the guaranteed 8%.

All tallied, the PERS fund (PERF) has an estimated value of $46 billion at the end of 2008; it began 2008 with a portfolio value at about $65 billion. I am absolutely certain that the various reserves are not sufficient to backfill for the losses, although the Tier 1 gain/loss reserve is probably adequate to cover the 8% guarantee.

The only "good" news here is that the PERS Fund did less badly than most other pension funds in other states. Perhaps that, too, will change once the new accounting rules kick in this year that requires private equity funds and hedge funds to use "mark to market" accounting to value their portfolio. According the Snoregonian, about 25% of the PERF is in these instruments.

Pacing the Cage

With the weather as it has been, I find myself pacing the cage, looking for ways to entertain myself until my neighborhood clears of snow and I can drive safely out of my driveway. Our neighborhood was the home of the big slide that took down a house in Lake Oswego. Well, not exactly. Actually, the house that was pushed in by a mudslide is in a newer part of our neighborhood not officially part of our development. It was put in a few years later. Anyone with two firing neurons could have walked up into the side of the hill where the house was built and see the local instability. I don't understand how anyone was permitted to build there. Since we are below the area that had the mudslide, our HOA will be holding an emergency meeting this week (I'm on the Board) to determine whether we need to do anything to the landscaping or drainage to prevent the problem from becoming ours.

Nothing is new in the PERS litigation arena. Judge Kantor is still sitting on the White case, and the Arken case is now before the Oregon Court of Appeals awaiting a date for a hearing. Robinson is still tied up with the question of whether it should be certified as a class action.

Retirees holding money in variable accounts will be paying the piper on February 1, 2009, when PERS adjusts the variable portion of the benefit to reflect performance from November 1, 2007 to October 31, 2008. It is likely to be quite dismal with estimates ranging to nearly -40%. Some people I know are girding for a significant benefit cut. I suppose the good news is that not too many retirees opt for the variable in retirement, and PERS limits the percentage of your retirement check that can derive from variable. Nevertheless, this *might* come as a shock to some PERS members who haven't been following the stock market too closely.

At the end of January, the Bureau of Labor Statistics will release the annual CPI for the Portland-Salem area. This is the number PERS uses to determine the annual COLA adjustment for all retirees. The best estimates are that the CPI will be in the low 1% area, which means that the "official" COLA will be less than 2%. However, for most retirees, prior years' COLAs have been maxed out at 2%, while the CPI exceeded 2%. When that happens, PERS "banks" the excess over 2% for the retirees and then draws on the "bank" to backfill in years when the COLA is less than 2%. So, except for a small number of retirees, most everyone should see a 2% increase this year. Possible exceptions are people who retired between August 1, 2007 and June 1, 2009. You will see either the actual CPI, or a small bump over the CPI depending on when you retired. The actual amounts will be known in February for everyone.