Beast of Burden

Just when you thought things couldn't get much worse, the Oregon Legislature has decided to fast track a PERS bill that will make retirees the beasts of burden to carry the load for funding public schools.  From the beginning, this has been set out as a contest between two conflicting contracts - the PERS contract, and the so-called contract with schools to provide a quality education for our students.  So now, the issue comes down to robbing retirees to pay for "the children".  Not only is this just wrong, wrong, wrong, what lesson does it teach the children.  Leaving aside the question of whether ANY children will benefit from the legislative action, there is the larger question of the lesson that "keeping your word", "honoring a contract", "promises must be kept"  teaches our current-day students in this environment of "they SHALL pay".  I wonder if the Legislature even notices the irony of "its for the children" when weighed against "a small break in the retiree COLA contract".  I guess trust is not a commodity they teach in school today and the students of today need not worry about their future concepts of right and wrong.  The Legislature has just told them that "breaking a contract" is OK if it is "for the children".

My last post outlined part of the terror to be visited on retirees as soon as July 1, 2013, in the form of a reduced COLA (1.5%) in 2013, followed by a graduated COLA based on income level that will be implemented in July of 2014.  I'll spare you the details again since they were in my last post.  But this fiscal sleight of hand takes roughly $45 million in lost COLAs to current retirees and through the magic of compounding, actuarially apply a Betty Crocker recipe, and turning up with a $400 million reduction in PERS employer contribution rates.  This money, or at least the money retained by the schools, will be redeployed to do things "for the children".  Several groups are strongly favoring reductions in retiree COLA (even if not the current proposal), but nothing in the current bill will actually help the situation on the ground.  The public schools have always been a vast wasteland of unnecessary spending, although none of the unnecessary spending has ever been at the classroom level.  So, when I testified before the joint House and Senate Rules committee on Wednesday, I asked exactly how the Legislature planned to insure that every penny of the money stolen from retirees will end up in the classroom where the children live.  How does the Legislature plan to monitor expenditures of this $400 million to insure that my granddaughter's classroom sees every single dime of money that you've taken from her grandpa's retirement fund.  I am a cynical person.  I spent my entire career in education, although higher education instead of K-12.  I remain close to the scene at my former employer.  I get weekly emails telling me the latest goings on.  So while teaching positions are frozen, tuition continues to rise, faculty continue to be paid well-below comparator institutions, the University can find enough money to hire a new "Vice President for Customer Service".  I confess to being flabbergasted by this appointment.  Who are PSU's customers?  What will the VP for Customer Service do?  Assuming that the students are the customers, will the school then adopt the retail adage that the "customer is always right"?  This kind of fungibility of funds in education is what worries me greatly about this latest attempt to steal money from people who have already worked their entire career, have spent 10-12-14 hour days trying to help the good citizens of Oregon and who now not only get to be regularly trashed in all the local media, their own employers conspire against both actives and retirees to take more money so that we can all enjoy the benefits of a "Vice President for Customer Service".

If that isn't enough, the bill currently floating through the legislature at warp speed also includes a provision to end a practice that has been in effect since 1995.  This is a very complicated issue, and on the surface it appears that it should be a slam dunk reduction.  But like all things involved with PERS, there is a long history, a very complicated history that involves multiple cases before the Oregon Supreme Court, changes in the IRS provision nearly immediately after Oregon addressed the problem, and a lot of people who have no idea that their current benefit contains a fractional adjustment to the gross benefit that is the result of Oregon being forced to tax PERS benefits after a US Supreme Court case in 1988.  The problem isn't the solution to the matter - PERS members who live outside Oregon no longer have to pay Oregon income tax on their PERS benefits, although they did until 1996, the real problem is that PERS has never been entirely clear about what the benefit "bump" was for.  Consequently, if you ask the typical retiree living in another state, someone who moved there to be closer to family, to be nearer better medical care, or to help out other family members, few, if any of them, even know that their benefit is in jeopardy.  So SB 822, the latest piece of legislative flypaper catches all retirees with the COLA change, and it affects 19,000 retirees living away from Oregon who receive approximately $55 million in extra benefits every two years as a result of a legal case that occurred early in their working careers.  

Your can write the legislators involved - Senator Richard Devlin and Representative Peter Buckley - or you can write to the Governor to argue that these cuts are ill-advised, possibly illegal, and will wreak havoc on retirees if they pass and won't benefit the schools (or at least a few overpaid administrators) either.  You can also indicate that you think that there is not a small amount of irony in teaching our children that breaking promises is OK if you are the beneficiaries of the broken promises.  Unfortunately, I doubt that our students will see any of the money from this latest raid on the PERS fund.  I'm willing to take bets that less than 20% of $400 million reaches the classroom, while the remainder goes to support the bloated and corrupt bureaucracy of the public schools.

The other piece of delicious irony in SB 822 is that our opposition in the Oregon School Boards Association (OSBA) represented by loudmouth Jim Green from Salem and sleazy and unctuous Bill Gary from Eugene are deeply concerned about the unfunded actuarial liability (UAL).  Their concern would touch me if any of the savings from retirees actually did anything to reduce the UAL.  But, as good representatives of the OSBA they would be remiss if they actually helped reduce that nagging concern, especially if they have to choose between "the children" and the "UAL".  So, the schools get $400 million worth of play money to enjoy as they wish - because there is not any oversight on how they spend it - while the UAL lingers at $14 billion dollars and MIGHT be $11 billion after the schools have ravaged through 10 biennia of $400 million + in savings taken directly from retirees and future retirees.

Oh, and did I mention that this bill also asks the PERS Board to push about half of the employers' required payments down the road until 2015-17.  So, the net effect of all this fiscal chicanery is to generate $400 million in phantom dollars for the schools to spend on executive boondoggles, new offices, maybe one or two new computers, and a new administrative lounge or two, while the employers of all PERS employees get to defer about $400 more million dollars in payments that should be due now, today.

The sad fact in all of this is that while we are Beast of Burden for the 13-15 biennium, I have no expectation that anything will change between now and the next big legislative session in Feburary 2015.  I expect that the money will be squandered, that PERS will be in no better shape, and the rapists will be coming for more contributions from retirees, but will have gathered all the low-hanging fruit out there.  Good luck.  I hope they are in training now, because the next time they try to take money from us, we will be better organized and prepared to walk these clowns out to the end of tiny branches and watch them fall like rocks.

Have a nice Easter.  

Blowing Smoke

Finally, the Senate and House Co-Chairs have provided hints on how their COLA proposal would go for current and future retirees.  Representative Peter Buckley outlined the bare essentials of the proposal in an article published this morning in the Medford papers.  Basically, as I understand the proposal (took me awhile and a couple of others helping to figure out the vague not-yet-final proposal), it would reduce the first year (2013?) COLA for all retirees to 1.5%.  Presumably, this is done to permit PERS time to program their computers for the gigantic cluster foul to follow in later years.  According to Buckley, the proposal would truly begin in the second year (2014?) of the biennium.  Members would be given 2% on the first $20,000 of benefits, 1.5% on the next $20,000 in benefits, 1% on the next $20,000, and 0.25% on everything over $60,000.  

It takes awhile to figure out how any individual might be affected by these proposed changes.  The bottom lines are that (a) PERS is guaranteed to find a way to screw this up (this involves some complex programming for PERS programmers who don't seem to be too talented in this Department) and (b) long term employees will suffer from about a 50% cut in the COLA as it is currently written.  It IS better than the Governor's proposal, and it MAY pass legal muster, but this will surely not incent people to stay in the employ of a public employer for a full career.  This coupled with all the other proposals designed to deprive people of PROMISED benefits (talk about BAIT AND SWITCH) will discourage anyone with one firing neuron from staying in public service for an entire career.  I don't know about other people, but this is a greatly discouraging sign that the state and public employers will promise anything to keep people working and then pull the rug out from underneath them when they near or are at the ends of their career.  Not happy and not feeling responsible for the current state of affairs.  

How come no one is asking about the impact of Ballot Measure 5, Ballot Measure 11, Ballot Measure 47?  How come no one is asking employers what they did with the "savings" from the 2003 cuts to PERS (that are actually working), the emptying of the contingency reserve in 2007 (right before the 2008 crash), and why I have a hard time sympathizing with a bunch of greedy, money grubbing administrators in the public sector.  They aren't being hurt, why should I?  If you want to see excesses, look at the benefits of the current Superintendent of the LO School District and his wife.  Talk about screwing the public.  Why should I pay the price for their excess greed?

The proposal by Buckley and Devlin is disappointing in extremis because it is just blowing smoke out the behinds of the Legislature.  There is no way it will pass in the form it is in.  It is only likely to be worse.  How's that for scary?

 

 

Pressing On A Bruise

Both the Oregon Legislature, the Governor and god knows who else continues to perpetuate a fact that is totally lacking in proper context. The "fact" is that more that half of current PERS retirees earn less than $24000 in PERS benefits annually. They use this fact to claim that a COLA cap will take care of the poorest members of the 110,000 plus PERS retirees. They make the COLA program appear to be an anti-poverty measure for the poorest retirees. Unfortunately, while the fact is true, it lacks a truly important context that dramatically alters how one interprets the earnings figures.

The crucial fact - one that many of us have been claiming for some time - is that the $24,000 figure is (a) drawn from thin air (b) does not accurately capture the truth about PERS employment and (c) punishes the career employees at the expense of short-timers.

Using PERS' own data, submitted to both the Oregonian and the Statesman Journal last year, we find 63611 PERS retirees earning less than $2000 per month and retired with an average of 14.5 years. The remaining PERS retirees, earning more than $2000 per month, average 26.5 years of service and number 53361 retirees. This split in the data confirms the compelling observation that a COLA cap set at $24,000 is both arbitrary and rewards short-time employment, while it is particularly punitive to employees who dedicated their careers to public service. Not only does this send a proverbial message of "f - you" for your lengthy service, it also acts as a strong anti- recruitment message for a career in public service. I truly hope that the Legislature doesn't fall victim to this maximally cynical message. Talk about pressing on a bruise. Ouch!

Making Promises

The current Oregon Legislature has spent an inordinate amount of time figuring out how to screw over PERS retirees already drawing benefits.  From the beginning, starting with Governor Kitzhaber's budget that proposed to cap the retiree COLA at 2% of the first $24,000 of benefit, the legislature has been doing pretzel twists in an effort to second guess what the Oregon Supreme Court might allow as a change to a benefit that has been enshired in statute for more than 40 years with no change.  Both the Legislative Counsel and the AG's office have independently concluded that a dollar cap on the COLA isn't likely to persuade the Supreme Court of its legality.  For the past month, a group of fiscal analysts, the Legislative Counsel(s), and various highly placed politicos have been meeting secretly to find a legal way to reduce the future benefits paid to current retirees.  It is a no brainer legally if they want to go after those who haven't yet retired, but the issue of stealing future benefits from those already retired has been problematic.  The issue the Legislature and the Courts confront is that of ALL the benefits paid to PERS retirees, the COLA is the most clearly articulated, longest standing, and most direct promise made to retirees.  And that promise has existed since the day every retiree retired, if not from the first day they were hired.  So, the Legislature faces the daunting prospect of trying to alter a benefit that has been etched into the annals of the state statutes since 1971, and in its current form since 1973.

After weeks of meetings, the Legislature seems to have hit on their "solution" to the problem.  They will settle for a lesser reduction and lesser savings in exchange for something that will keep PERS' programmers up nights and days trying to figure out how to comply with the typical byzantine rules of the Legislature.  While no one knows exactly what those mental giants in Salem have come up with, it is pretty clear that they've decided that they *might* get away with a graduated COLA.  The idea is that lower benefits would reap the highest (2%) COLA, while the COLA percentage would decline with income.  One can imagine a COLA with 4 cut points - 2%, 1.5%, 1%, and 0.5% depending on the benefit level of the individual.  At the moment no one has a clue about where the cut points might be, but we do know that the savings estimated are around $400 million per biennium, which is half what the Governor's proposal would have raised if it survived (unlikely) a court challenge.  The notion of a inversely regressive COLA will give the Oregon Supreme Court fits, because the court loathes discriminatory statutes.  This one, however it works out, is discriminatory on its face since the statute would, in effect, provide a higher benefit increase (possibly dollars, definitely percent) for people who have worked shorter periods of time.  The career employee (30+ years) probably earns the greatest benefit primarily because he/she chose to make his/her life's work in the public sector.  The short timer (a generalization to be sure, but probably more true than false) will end up with a higher percentage increase in benefits for working  a shorter period of time and, possibly, having multiple retirement accounts to draw upon.  I have no problem with the career employee who draws lower benefits receiving a higher benefit increase, but I object to the discrimination that arises from spending an entire career working for a single public employer that makes me out to be the "bad guy" in the state's current budget woes.

Lest anyone forget, any reasonable examination of the history of PERS for the past 20+ years will find case after case where the employers have complained about rate increases and have gotten the PERS Board to capitulate in ways that, combined with legislative action, resulted in lower benefits than were promised.  No one wants to address the imperative question of where the savings from every previous set of changes to employer rates have gone.  The employers treat this as a zero-sum game.  Rate reductions must require benefit reductions and so every problem that this state faces automatically requires employees, and PERS beneficiaries to give back something that the employers promised in exchange for both salary and lower employer rates.  When is someone going to call "buillshit" on the employers and ask where all the savings from previous rate cuts have gone.  Because saving them seems to be an alien concept.  If one wants to compare greed, lets pit employers and employees and see who has better husbanded money.  I bet employees win every time.  I wouldn't give employers another dime unless someone can PROVE they are spending their resources wisely and saving properly for a rainy day.
For retirees, I suggest that you assume the position and get ready for another screw job brought to you by the "fiscal analysts", the Legislative Counsel, and the "wide boys of Salem".  Bend over and prepare to enjoy it!

Long And Wasted Years

The Republicans in the Oregon Legislature, seeming to do Dr. No's bidding for him, have proposed a series of "reforms" or "clarifications" (to coin Rep Bruce Hanna's moronic term) to the PERS statutes, and  have laid waste to all the years of work done by public employees in Oregon.  There are more than 50 bills now introduced in the Oregon House and the Oregon Senate that would basically trash retirement benefits for near term retirees and those already retired.  This screw job has been brought to you via the trash mouthing of the imbecile Dennis Richardson (whose IQ parallels a box of dirt), Representative Bruce Hanna (who makes Richardson out to be a genius), Tim Knopp (whose IQ is measured on the Richter scale), and Jason Conger (who doesn't even register life on an EKG or EEG).  Of course, the logarithmic IQ of the Oregonian and the Statesman Journal contribute to the trashing.  These Republicans have taken our Governor's proposals (you know, Governor Kitzhaber who is registered as a Democrat, lives with some chick to whom he is not married, and represents the worst and the dumbest of Oregon politicians.  He is reputed to be an Oregon Physician but the only thing he is qualified to do is to use Oregon's Death with Dignity Act on himself) and have converted them into payday for Oregon Public Employers who cannot save a dime if it is put into a savings account for them and no one gives them the password or key.  I am embarrassed to be an Oregonian after looking at this slash and burn approach to retirement benefits in Oregon.  You were expecting your employers' promises to be kept after they denied you raise after raise.  Hah!  You are dumber than I thought you were.  The employers think you should kiss their butts for the privilege of working for them.  You want benefits - call the Aflac duck!

I don't even know where to begin trying to articulate the ridiculous bills introduced into the Legislature.  It is as if a bunch of monkeys got together into a room, were given a slate with all the appropriate catchphrases against PERS, and they randomly assembled a bunch of bills that could inflict the most damage possble on PERS members and retirees.  Law? Pshaw.  Let's just overwhelm the Oregon Supreme Court until they say uncle and overrule themselves from previous cases (Hughes, OSPSOA, Strunk).  The reps and senators have proposed enough bills and enough variants of those bills that it appears that they are playing spaghetti roulette.  How many bills can we throw against the wall until (a) one or two stick in the Legislature and (b) the Oregon Supreme Court rules the bills legal.  The OSBA completed the throw down yesterday with SB 754.  The OSBA represents the school boards of Oregon.  Let's not forget that many members of the OSBA are already PERS members and draw huge salaries (Chris Dudley, $200,000 per year and his doesnt have to hit any free throws).  The OSBA decided to combine all the offensive bills into one - cut PERS retiree COLA to 2% of the first $24K, stop pension spiking by preventing use of sick leave, overtime, and vacation for FAS, reduce Money Match annuity rate from the actuarially assumed interest rate (currently 8%) to the ridiculously outrageous rate of 4%, terminate the IAP and redirect future contributions to paying down the employER cost of the Full Formula retirement, eliminate both the SB 756 and the HB 3349 income tax subsidy for anyone living out of Oregon.  This cluster f**k would nearly halve retirement estimates for near term retirees and would perform a royal flush on retirees.  Never mind that much of this is probably not legal;  it guarantees that current and near-term retirees can continue to live in a state of dread for at least two more years.  Whatever the Supreme Court ultimately rules, it will be years before PERS gets off its collective ass to reinstate whatever the Legislature chooses to take away.  The courts have been loathe to prevent implementation, or to urge PERS to fix things after PERS finds out the approach is patently illegal.

Watch this space for more news on how our duly elected Legislators (liars many; ignorant more) deal with this group of bills designed to insure that no sane person will ever choose public employment, teaching, or service again for the rest of their lives.  They want quality instruction.  Look elsewhere.  I can't imagine anyone with more than two functioning neurons would ever choose teaching again.  The promises are nothing more than lies designed to lure you into a false sense of security.  Get out now!  I've warned you that there is no future in public employment.  Don't blame me.  Blame the Republicans and our Governor.