Repo Man

Our Governor Retread keeps popping out with ever more ideas to "help" the PERS system, its members, and its retirees.  Although this is not a new proposal, expect the Legislature to take up the issue of "pension spiking", which is getting a lot of coverage over on the blogs at the Oregonian and the Statesman Journal.  I have no idea where people get their information, but it surely isn't coming from PERS or from fact-based accounts of what really goes on when someone retires.

The notion of "pension spiking" comes from another planet, not Oregon.  The idea is that people consciously hold on to sick leave, comp time, overtime, and vacation to spike up their final average salaries.  Let's suppose for a moment that this were the case.  What impact would it have on an individual's retirement.  Let me use myself as an example.  When I retired, I had 2500 hours of sick leave on the books, and 30 days of vacation time.  OUS paid out my vacation time and deposited 6% of the payment into my Tier 1 regular account.  The sick leave, which represented almost 17 months of paid time off was reduced to a dollar amount and half of it was added to my 3-year highest salary total and leveraged up my Final Average Salary by about $3000 per year.  Now, here comes the tricky part.  The ignorant would assume that somehow my PERS benefit was affected by that increase in my Final Average Salary by $3000 per month.  And this seems to be the essence of the bitching and moaning about the spiking (I'm sure that overtime and all those others "perks" may raise the FAS by some finite amount).  Somehow people think that everyone who has these benefits uses them to enhance their PERS benefit.  Unfortunately, what you want to believe isn't what really happens.  In reality, I didn't see a dime of my sick leave in my benefit.  My 30 days' vacation time increased my account balance by about $1500.  My benefit ended up being computed using Money Match, which does not bear any relationship whatsoever to all the "spiking" people claim are being taken advantage of.  In fact, I know virtually no one who benefited from a sick leave infusion.  The ONLY way that "spiking" occurs is when an individual retires under Full Formula or Formula + Annuity.  In these cases, the Final Average Salary plays a role in determining the retirement benefit.  But the large question to be asked is "by how much does the retirement benefit increase by 'spiking' up the FAS by, say, $10,000 per year.  If someone has 30 years of general service, the difference between a $50,000 FAS and a $60,000 FAS is approximately $5000 annually.  In other words, under a 30 year career, the dollar increase in FAS increases the retirement benefit by roughly 50 cents on the dollar.  Major problem, right?   You'd think so, but in plain facts, the number of Full Formula retirements from the mid-1990's until the mid 2000's was less than 15% of all retirements.  Only in the past few years with the 2003 reforms finally kicking in have the number of Formula retirements increased to be significant.  Thus, the major hue and cry against pension "spiking" has no basis in fact.  Perhaps it is occurring with more recent retirements, but the impact cannot be very large since, even now, Money Match retirements are the largest percentage of retirements as recently as 2011.

So what's the beef?  There isn't a shred of evidence (or beef) to support the claim that sick leave, vacation, and other forms of compensatory time have had even minor significance on the benefits received by PERS retirees.  This is just another red herring introduced by the main-stream media to inflame the public's ire against PERS and its retirees, but when you look even minimally at the data, the data do not support the claims.  The data are the facts.  The data are the truth tellers, but apparently there is a really strong snow job going on amongst the politicos and third rate journalist who want to become the "Repo Men" for PERS.  Unfortunately, there is nothing to repossess here.  Move along bozos.  You won't save a nickel from taking away non-existent benefits.  

Happy holidays to all my regular PERS friends.  Bite me to the media which continues to totally make up facts to fit their vision of the world.  Unfortunately, reals facts don't lie, but the media lies all the time.