Burning and Looting

You know you are in a world of hurt when the lead witness in the testimony in favor of the full blown red herring bill called SB 857 is the robber in Chief for Oregon, John "who used to be a 'do no harm' physician" Kitzrobber.  The bill began its life last week as a proposal to form an nterim committee to study potential PERS reform.  By this morning, the cat had escaped from the bag and the lovelies who represent Oregonians, acting complicitly with the Guv had cobbled together 4 amendments to the original bill.  The dash 3 amendment removes all the language inthe original SB 857 (the gutting) and replaces it with changes to the COLA adjustments to SB 822, adopted about 7 weeks ago.  This bill imposes only 2 levels of COLA and screws everyone just a little bit more.  It changes the COLA max from 2% to 1.25% (for everyone up to $60k) and 0.15%for amounts greater than $60k.

The dash 4, 5, and 6 amendments take to new COLA language and provide a multiple choice of options for legislators to choose among.  Rather than describe the complicated choices, it is really about two issues - by how much shall the actuarial equivalency factors be adjusted for inactive members (choice include the commercial annuity average rate, or the current assumed rate minus 4%), and the effective date for the changes (August 1 or September 1, 2013).  Those dates are crucial to understand.  If you aren't eligible to retire either due to age or service or both) you are screwed (unless the court overturns these changes before you retire) as your money match benefit will see a 37% or more reduction.  The PERS Board is considering changes to the assumed rate, which will affect Tier 1 earnings guarantee on August 1, 2013 and thereafter.   Since the time is not adequate for the bill to be completely processed by close of business tomorrow, anyone who is inactive and who is already eligible to retire is taking a huge risk if tomorrow passes and a retirement application for July 1 isn't already in PERS'hands.  If the legislature passes this bill with an effective date of August 1, missing tomorrow's last eligible day for a July 1 retirement means that you cannot retire without exposing yourself to the severe effects of this bill.  Of course, you can gamble that the Legislature would have this bill not take effect until September 1, leaving you an additional month to organize for your retirement.  If this were my decision, the benefit difference between a July 1 and an August 1 retirement is trivial.  Moreover, a July 1 retirement gets you the 2013 COLA of 1.5%, which isn't available if you retire after July 1.  In the end, even assuming a September effective date, in these circumstances the July 1 date might actually be more beneficial than waiting til August 1.  Of course, if the effective date is August 1, you will not only lose out on the July 1 COLA, but also suffer a 37% cut in the benefit you would have received had you gone July 1.  I don't give advice, but the choice here seems completely self evident.

Lest you think this bill isn't going to survive the end of session games, think again very carefully.  The bill has the support of the Governor, Senate R and D members, OSBA. OBA.  We don't know how the bill will fare in the Oregon House, but it is fair to say that theD caucus holds all the needed votes to pass this bill even if the Rs were to hate it, something highly unlikely.

The culls we have managed to elect to represent us have aligned to perform a full scale arson on benefits of retirees -70% of all the "shared sacrifice" this session, - the soon to retire if not quick enough inactives -about 10% of the "shared sacrifice" - and the rest from the hospital provider tax and a further insult to retirees in a general phasing out of the senior medical deduction.  All in all, this has been the most hostile assault on senior citizens ever mounted in the state of Oregon. I hope the legislators running for reelection on this record will be reminded of how badly they tried (and possibly succeeded) to burn and loot benefits earned, promised, and contracted benefits.

Ship of Fools

This will be very brief.  In a classic gut and stuff the Senate Finance and Revenue Committee will hear a bill that will further reduce the retiree COLA, and will savage certain inactive members who retire under Money Match.  I don't have time to describe these bills as I am literally on my way out the door.  But the short version is that if you want to avoid the impact of this bill, should it pass, you need to get out tomorrow for July 1.  From what I've seen the bill is actually worse than what has been discussed; it might not take effect until September 1, but another version has it taking effect August 1.  If you are not a gambler, get your tail in gear and get your papers in tomorrow by 5 pm.

 

More later.

It Is What It Is

It appears that the circus in Salem is finally winding down.  The R clowns have relented on the Hospital Provider Tax and will vote to extend it when it finally comes up for a vote.  That clears the way for the final denouement of the 2013 Legislature, the K-12 Budget.  Both from Salem sources and later confirmed by those master reporters at the local moribund rag, the Boregonian, the attempt to savage inactive PERS members is pretty much dead this session.  Our friends with the Oregon Business Council have cheerfully offered their assistance in developing a proposal to decouple the Money Match annuitization rate from the assumed rate during the period between the end of the 2013 Session and before the 2014 session takes up in February 2014.  From what I know, the objective will be to go after all future Money Match retirees, not merely the inactives.  So, while it is good news that inactives have some breathing room for now, that room will be short lived before this next attempt to devalue PERS benefits won't wait too long before striking again.  If that isn't enough good news, there is always the actions of our other friends, the two power ladies in the Senate and House - Ginny Burdick and Tina (I won't cut PERS benefits unless there is shared sacrifice) Kotek.  These two wunderkind are still busking for pennies to throw at the schools to help them reach their new hostage level of $7 billion, up about $250 million from the budget agreed to in the Co-Chairs budget.  Since the Rs won't sign off on tax increases (except for the Hospital Provider Tax, which is not an increase, but an extension of a tax in existence since 2003), and the Ds won't approve any tax cuts, the only viable source for that extra money is --- wait for it --- retiree COLAs.  Wait, you say.  SB 822 cut retiree COLAs.  Indeed it does, but this seems to be no longer enough money for the raptors in Salem.  We might just be facing even more cuts to our COLA to help the schools out.  What I fail to understand is how the Legislature does not get the fact that by increasing the school budget to $7 billion (if it happens, which is questionable) for the 2013-15 biennium, that $7 billion becomes the new base budget for 2015-17.  When you've already ravaged retirees for all that is realistically possible, or better yet, you have to repay retirees because what you are doing is illegal, then what.  If the economy doesn't improve between now and then, there won't be any more money for schools that even for now.  Where will the needed funds come from?  Oh wait, I forgot about the decoupling of the Money Match annuitization rate.  That ought to free up enough cash to help the schools again.  But you can only go to the PERS well so many times before the well runs legally dry.  I guess the Legislature could try SAIF again.  After all, that worked really well the last time.

So, I guess I'd describe this post as sort of good news if you are not yet retired.  Your ship hasn't landed yet, but the Oregon Business Council will be working its tush off to make sure that when you do land, it will be really rocky.  For retirees, your story isn't over yet, but the drama won't last much longer.  The good news there is if they go after the retiree COLA some more, the legal argument will be stronger but no new legals will have to be sacrificed in the production of the legal show.  It is the same old same old.   Money goes in, money goes out, and it is what it is.  Time for today's cliche-ridden post to end.  

The Beat Goes On

I don't like to be publishing a post just for the sake of saying something.  Nevertheless, this post falls into that category.  There are lots and lots of rumors about what may still happen as the Legislature gets closer and closer to its mandatory sine die date of July 13, 2013, but so far there has been no real action on any of the rumors.  There seems to be a lot of miscommunication even between members of the same committee.  At a Town Hall on Tuesday night, Richard Devlin, co-Chair of the Joint Ways and Means Committee told an audience that adjournment would be sometime between July 3 and July 10.  The next night at another Town Hall, Peter Buckley, the other Co-Chair of the Joint Ways and Means Committee told a different crowd that adjournment is still scheduled for June 28.  If Buckley is right, next week is going to be extremely busy.  I rather doubt Buckley is right.  In the meantime, the significant budget - K-12 - has been delayed and delayed with the next vote scheduled for June 26.  The Hospital Provider tax still has not been scheduled for a vote, unless I've missed its schedule.  Somewhere in this maze may be one or two more bills related to PERS - one to reduce further the COLA for retirees, and another (or included with the COLA modifications) to reduce the annuitization rate for inactive members who retire under Money Match.  Neither bill has a chance unless the Ds in the Legislature get commitment from a number of Rs (greater than 2) to vote for the proposed $200 million more in increased taxes.  So, there is still a great deal to accomplish in what is a very diminishing time period. One clue about potential PERS changes lies in the bill to appoint an Interim Committtee on PERS that would be tasked with reviewing ways to change PERS benefits (to future retirees) that would survive legal challenges.  The task force has a vague charge, but is designed to report to the interim leadership of the Legislature just before the 2015 session and disband and sunset before the actual convening of the 2015 session.  The bill has a number but I don't know what the schedule for hearings is, or whether it even needs hearings.  I'm pretty sure the Legislature can appoint a task force by mutual consent of the party leadership.  Do recall that a similar task force existed prior to the 2003 session, and virtually all the bills, adopted and rejected, originated from that task force.  The fact that such a task force is being contemplated again suggests that the Legislature may be uncomfortable going forward with much more (if any) changes to the benefit structure without a detailed legal, political, and economic analysis.  I'm agnostic on the appointment of such a committee.  Indeed, if they were seeking representation from a retiree, I would certainly volunteer to participate.  But, I'm pretty sure no one wants me on their committee <g> for pretty obvious reasons.  Deep thinking does not seem to be a qualification that is desirable in such a setting.  But, stranger things have happened.  

Anyway, that's the news for this week.  Another week or two of agony for retirees, and another week or two of agony for inactive PERS members eligible to retire.  Just remember that anything enacted with an emergency clause takes effect the day the Governor signs the bill.  Again, you've been so advised.  Take from that whatever you want to take.

Train of Fools

Things have been awfully quiet on the PERS front for the past several weeks.  With so much sturm und drang over PERS dominating the entire session, with so much media muckraking driving much of the discussion, with the heavy lobbying effort by the group FIX PERS NOW (and all its high profile backers, including the CEOs of nearly every major Oregon business and public utility), and the Governor's wish to be a lame duck, there is no shortage of speculation about where the next "shared" sacrifice will be coming from.  If you were to hit the bookies on London street corners, the gaming parlors in Las Vegas, or Chinook Winds casino, you would probably find the oddsmakers taking bets that the next victims of the "draw and quarter" club will be (surprise!) PERS retirees who have, apparently not felt the cold steel of a loaded gun severely enough; they might be in line for another round of financial rape with further cuts to their COLA increase because, obviously, the pain of SB 822 hasn't been enough "shared sacrifice". The logic must be that if the legislature is going to be sued over cutting the retiree COLA anyway, why not go for more cuts.  The litigation won't change, so, what the hell?  Of course, that isn't enough for the blood-suckers in Salem, so the next candidates for a significant financial haircut will be those unretired, inactive PERS members.  Obviously, they had the gall to leave, and thus don't deserve the benefits they were promised so lets cut THEIR projected benefit by roughly 37% by cutting the interest rate assumed for computing monthly retirement benefits.  Apparently these fools think that because the inactives are not represented by any of the PERS Coalition partners, the inactives will have no labor or organizational support for litigating these cuts.  I think that would be a bad assumption to make.  There are more than inactives in the mix whose oxen will be gored by a change like this.

 

I don't want to alarm people that these things WILL happen, but I'd also not wager any money that they won't happen.  For those curious enough or worried enough there is a town hall meeting in Lake Oswego's Heritage House tomorrow evening starring two of the major players in this year's Legislative session.  Senator Richard Devlin, co-chair of the Joint Ways and Means Committee, and Representative Chris Garrett, Speaker Pro-Tempore of the Oregon House will be on hand to discuss the current happenings, future directions, and take questions from the audience.  The Heritage House is at 398 10th St, Lake Oswego and the party will start at 7 pm.  Lake Oswego has usually supported these events with decent turnouts.  I suggest arriving about 10-15 minutes early if you want parking and a seat.  This may be your last chance this session to have an opportunity to have any input into whatever the train of fools in Salem have cooked up for those of us dumb enough to believe that our work was wanted, needed, and honorable, and that the retirement promises we accepted in place of tangible up-front cash were has honorable as we were.  This session has finally put the lie to that fairy tale, and confirms the real opinion towards PERS members.  It also completely redefines the meaning of that feel-good phrase "shared sacrifice" as the Democrats new slogan for sharing PERS retirees' money with everyone but PERS retirees.  Apparently, PERS retirees are the only ones who get the privilege of sharing their sacrifice with everyone else.  That low rumble you hear in the background should not be ignored; it is the train of fools barreling down the track at high speed towards retirees and inactive PERS members.

 

More after tomorrow's love-fest with Devlin and Garrett.  Hope to see you there.

Idiot Wind

The week has passed with no additional news on the fate of PERS in the Legislature.  Two days of "high level" discussions at the Governor's mansion with leaders of both parties produced nothing of substance, and have managed to leave PERS members and all agencies receiving money from the State of Oregon on tenterhooks.  The failure of the Ds, the Rs, and the Kitzrobber to reach any sort of budget and PERS agreement increases the likelihood of either a session running into July and/or a special session when all the parties have cooled off and start to feel pressure from their constituents.

I remain puzzled by one issue.  The Ds and Rs paint their disagreement as one between additional tax revenues and additional cuts to PERS.  Obviously the Rs want additional (read draconian) cuts to PERS, while the Ds "only" want $200 million in additional revenue.  The Rs want $7 billion for schools, but again with no mechanism in the money (or the money from SB822) to insure that the funds actually make it to the classroom before being skimmed off by administrators, superintendents and other highly compensated individuals.  This seems to be foolish and even if the schools were to get all they asked for or at at least all they wanted, what would stop them from coming back in 2015-17 for even more.? We all know that the schools, in particular, have an insatiable appetite for more money, yet astonishingly little additional money goes to the people who need it - classroom teachers, classroom assistants, new books, more modern curriculum, etc.   But let's assume that this is the central wedge issue between Rs and Ds.  More PERS cuts for more school dollars, while the Ds want more revenue and lesser (or no more) PERS cuts.  Assuming this is the case, and also assume that the Kitzrobber was correct when he stated that, with the May forecast, the state has enough money to meet current budget needs and could adjourn and go home.  If this is true, why are the Ds still meeting with Rs.  Why not go home and let the Rs rest of their lack of accomplishments in this session.  Why not let them twist in the wind?

The answer, it seems, rests in what isn't being stated, what's blowing around in the idiot wind.  The elephant in the room isn't PERS right now.  The elephant is the nearly $2 billion in revenue generated by the renewal of the Hospital Provider's tax.  This tax, first approved in 2003 (if I recall correctly), is worth $1.3 billion in revenue to Oregon from providers and Federal reimbursements.  It was slated to sunset at the end of fiscal 2012, but is being continued indefinitely if approved by the Legislature.  The Oregon House approved the continuing resolution in mid-May by a 54-5 vote, but the bill is currently stalled in the Senate, undoubtedly because of R reluctance to support it unless they get additional PERS reform.  Since it is a revenue bill, it requires a 60% supermajority to pass.  The Ds have a shaky 16-14 majority in the Senate and would require 2 R votes to pass the resolution, assuming all Ds hold firm (which itself is questionable).

So, it is disingenuous, in the extreme, to suggest that the differences between the Rs and Ds is over the budget.  The budget is set.  The Rs want another $250 million or so for the schools, and they want to get it by cutting PERS by $1.3 billion.  The math doesn't work out there.  The Ds want another $250 million in taxes for what?  Who can't use additional revenue?  In any case, the issue is really about PERS versus the hospital tax, not PERS versus the Ds desire for an additional $250 million in taxes on corporations and affluent individuals and senior citizens who have medical expenses.

Neither side seems willing to budge at the moment; all the signs point toward a stalemate.  After Tuesday's meeting, in which Tina Kotek walked out, there are no further meetings scheduled.  The Ds can't just vote the current budget and go home because the hospital tax lingers there without the required two R votes.  Whatever happens, it doesn't seem to be happening quickly or at all.  I'm betting on continuing budget resolutions to keep government functioning past the end of the biennium, June 30, a possible adjournment, and then a special session to finish the budget later in the summer, about the time legislators are planning to take their summer vacations.  You better send spouses and kids away now legislators.  It is going to a long, hot, summer for the rest.  Don't blame anyone but yourselves.  You're all greedy, and you reap what you sow.  Enjoy your vacations in Salem.

 

Today Is OK

After a weekend of confusion, chaos, and disbelief, it appears that PERS has updated its "Assumed Rate FAQ" and script used when getting calls.  According to the revised "Assumed Rate FAQ" at the PERS Oregon Official Website -http://www.oregon.gov/pers/docs/financial_reports/assumed_rate_faq_5-31-13.pdf - the date for implementation of the revised Actuarial Equivalency Factors is 1/1/2014, which is what we thought it was supposed to be from the very beginning.  I don't know whether this represents a shift from PERS and the Board, or whether it was just clumsily presented on Friday.  In any case, it would appear that the assumed rate change (to 7.5% or 7.75%) will take place on August 1, 2013, as promised, but the revision to the accompanying mortality tables and annuitization factors won't take place until January 1.  This means that members who expect to retire this year will not be adversely affected by the AEF change unless they retire after 12/1/2013.  While earnings crediting will take place at the new rate (one of the two amounts above) beginning on 8/1/2013, the underlying annuitization tables won't change until 1/1/14, meaning that retirements up to 12/1/13 will be figured under the old mortality tables.  This should ease some of the pressure for potential retirees.  If you want more information, the PERS website is your friend.  It is now there in black and white at the above link, which appears to be updated as new questions and answers arise.

Who'll Stop the Rain?

I know, I'm on a CCR kick this week.  Can't help it.  The bad news just keeps coming.  Yesterday - a day when I was out of pocket nearly the whole day - PERS posted a FAQ on their web site following yesterday's meeting, which I was unable to attend.  The FAQ pertains to the Assumed Interest Rate change, which we've been assuming, based on past history, to take place on 1/1/14.  Apparently, the statutes give PERS the authority to change the assumed rate any time other than just the timing of the annual valuation and the boys and girls in Tigard have been busy trying to figure out how to avoid a landslide of business on 12/1/2013.  So, they are proposing a new Administrative Rule that gives them some cover to initiate calculations using the new assumed rate in the month following the adoption of the rate change, if any.  So, what that means is that instead of having a leisurely wait until November 30, 2013 to retire effective December 1, 2013, the Board and PERS appear to be trying to avoid all of that hassle by letting the assumed rate take effect as early as August 1, following adoption at the July 26, 2013.  This, in turn means, that if you wish to avoid the double whammy of revised actuarial factors and a lowered earnings crediting, you'll have to be out of the system no later than July 1 - a new drop date.

There is a small sliver of hope here.  From reports I got from the meeting, the Board and PERS may not have the appetite to go all the way to 7.5% in a single pass.  They may, instead, adopt a slightly higher assumption at 7.75% to ease the transition, primarily for employers, but secondarily benefiting members.  The earnings cut would then be relatively insignificant in the larger scheme of things, but there is increasing evidence that longer longevity in the PERS pool may force the actuary to increase mortality factors at the same time they lower the assumed rate.  This would result in a more notable decrease in benefits than would be suggested by the lower assumed rate all by itself.  Since the 7.75% rate only showed up yesterday, the Board instructed the actuary to come back with projections of how this would affect new retirement benefits and employer contribution rates for 2015-17.  The Board is taking the unusual step of adding a second public hearing on the rule change (see PERS website for the Assumed Rate FAQ and new rule), because they know it will be controversial (and certainly a surprise to me!).  The second hearing will be in the Salem office, and I will post the dates as soon as I know them.

Obviously there is enormous political pressure coming from everywhere for the Board and PERS to do something quickly.  I think this rule change, which appears to be allowed by statute, was something the wide boys at PERS thought up over lunch one day when they were thinking about how to avoid the retirement stampede.  Obviously the best way to do it is to move up the effective date from its expected date to 4 days after you approve a brand new rule.  This is, of course, when there are no guidelines or clear policies in place since the last change nearly three decades ago.

A couple of other things.  Two employers complained publicly to the Board about what we've all known for many, many years.  They complained about the Legislative action to push back part of the rate increases into 2015-17.  They argued, what I've been complaining about publicly and privately in every forum I have been allowed to speak, that the reason employer rates are rising is because the employers have never been required to pay their full share.  Most have just been content to push the ball down the road until another day, until that day comes and then they go screaming to places like the OSBA, OBA, and other titans of industry who act like they care (but are in it for purely selfish reasons) that the sky is falling.  Congratulations to the Cities of Roseburg and Corvallis for telling it like it is.  Unfortunately, as the snarky and fairly nasty new Chair of the PERB said, "we can only do what the Legislature instructs us to do".  By the way, if you are looking for a really ugly description of the qualifications of the new PERS Board chair, you might wander over to a site I enjoy a great deal, www.uomatters.com , written by a UO colleague Bill Harbaugh.  Harbaugh minces words even less than I do.  The remark about the PERS Board Chair is in a comment to a Harbaugh post, not from Harbaugh himself and it is pretty savage and at least nominally accurate.

The other takeaway is that IF (and right now, that's a big if) the rate change goes to 7.75% for now, it is destined to go down further, but the Board is considering doing the reductions in stages and letting the market forces inform changes beyond the immediate term.

If you weren't paying attention to the rest of this, the important message is that to avoid any impact by rate changes, the new retirement date would have to be July 1, 2013.  Don't say you weren't informed.