Everything is Broken

And everybody's got different ideas on how to fix. I attended today's PERB meeting in Tigard. The primary purpose of today's meeting was to approve the earnings crediting for 2008. This was done with virtually no discussion. Tier 1 regular gets 8%, Tier 2 get tagged with -27.18%, BIF gets tagged with -27.18% (right from the reserves), IAP accounts will be reduced by -27.75%, the employer accounts will lose -27.30, the OPSRP member pension plan gets hit with a -28.63% loss, while Tier 1 variable accounts will experience a -43.71% loss. All tolled, the 2008 "allocation" cost members and employers about $16.6 billion in lost equity position in their accounts.

The Treasury rep present, Ron Schmitz, outlined the current position of the PERF and indicated that the OIC is currently studying whether to change the asset allocation mix. He noted that through all the various scenarios the OIC had run, the asset mix held up as the most stable over the long run. He also noted that 2008 was one of the worst of three years in the past 160 years of record keeping. He presented 10 year moving averages that showed no other time in stock market history where a year like 2008 repeated itself in the next year. It has never happened before. He's somewhat optimistic that we may be at the market's bottom. He also noted that the fund was down an additional 17% through the end of February, but that the March performance recovered at least half of those losses. He made it clear that the OIC has to take into account the uniqueness of the PERS system in terms of its liability side and its guarantee side and that more stress testing will be done before any decision is made to change the asset mix. But note that it will take a virtual consensus by members of the OIC and its investment partners to change the asset mix. So, while the media have been reporting this as though it were a "done deal", it is anything but. There's a long way to go before the asset mix comes into play and influences other decisions PERS will have to make over the next 4 or 5 months.

The rest of the meeting was given over to discussing the Board's responses to various PERS bills wandering through the Legislative process. Two bills of immediate interest are HB 3304, which OPRI sponsored, to provide ad hoc increases to PERS members. The Board and PERS staff pretty well shredded this bill for its sloppiness, its failure to attend to critical details, and the fact that as written, it would become "baked" into the system. The Board ultimately decided to recommend a "No Pass" on the grounds that this was not an appropriate time for such a bill. The Board was open to the idea of a more targeted bill that had no long term financial implications, more along the lines of a "bonus" or a 13th month payment that expires the minute it is given, or an ad hoc increase that could be taken away if the financials no longer support it. There was virtually no support for the bill but the PERS Legislative Liasison will report back to the Bill's sponsor what form a future bill ought to take. All I can say is "shame on OPRI" for introducing such a poorly thought out bill. I'm all in favor of honoring our long retired public servants, but this bill seemed to me to be embarrassing in its blank spaces. OPRI's lobbyist group should be ashamed of this bill.

The second bill the Board spent considerable time discussing is SB 897, which is the PERS Coalition's Omnibus Bill. This bill tries to do an awful lot: it seeks to raise the membership of the PERS Board from 5 to 7 members. The additional members would be a retired member, and another non-affiliated member.

This element of the bill received considerable attention, and I testified in favor of any configuration that allows for a retired member on the Board. I am ambivalent about the Coalition's Bill. I'm a former manager in Higher Education. I've never seen a committee improved by adding more members. I've seen committee's improved by changing the composition of the group, but the amount of time involved in bringing two additional members into an already complex scheduling problem is not one I'd like to be involved in. I am in favor of either form: amending existing stature to permit the PERS member to be active or retired, or to keeping both representatives on an enlarged Board. The Board agreed with my analysis and was willing to support a modification of the existing structure, but was unwilling to accept the proposal for a seven person Board. Only Tom Grimsley favored the Coalition's proposal in this area.

The second element of SB 897 is aimed at addressing the problem that arises when an employment dispute results in a verdict favoring the employee so that the employee, now retired, would be entitled to additional PERS benefits under the Court-ordered ruling. The idea was to make the person "whole" for the employment dispute resolution. There was no active opposition to this part of the bill.

The third part of the SB 897 involves the issue of "Data Verification" and no doubt derives from the Kay Bell case. The Coalition is asking PERS to provide a process for members nearing retirement to verify certain data that becomes the central component in retirement calculations. PERS Staff recommended, and the Board concurred, that any legislation defined to involve "data verification" be centered around three "core principles": (1) agency data must be valid, accurate, and complete, and the agency (PERS) should have supporting structures, including reports, reviews, and penalties, that secure that result; (2) the agency is obligated to provide data that is clear, consistent and in a transparent manner, but data that is not valid, accurate, or complete should not create an entitlement to a benefit beyond that earned by a member's actual employment history; and (3) All of the retirement system's stakeholders are individually responsible to ensure that data is valid, accurate, and complete, and the agency needs to have adequate resources to provide systems and processes that facilitate the fulfillment of that responsibility.

The PERB concurred with the staff's recommendation and will communicate this back to the the bill's sponsors in the Legislature.

Finally, at the end of the meeting the Board did something unusual. It asked for questions from the audience. Bill Robertson (from the Robertson Federal Case) asked the PERB and Paul Cleary if they could articulate the pieces that come into play to make a decision regarding a change to the assumed actuarial interest rate. The Board and PERS agreed to provide such explicit linkages on the PERS website.

In all it was an interesting meeting. The forward looking calendar holds the greatest interest as it is clear that the first of a number of discussions about the next formal actuarial valuation will take place at the May 29th Board meeting (there is no April meeting). I cannot emphasize too strongly how important this meeting will be to those wanting to know what kinds of moves PERS may be considering in the future. The whole question of actuarial assumptions, including the assumed interest rate, will be up for discussion starting in late May.

Fleet of Hope

For those of you concerned about yesterday's "hit" piece in the Whoregonian, PERS has posted some helpful facts for you today. You can read it here. If you like what you see, go over to PERS Oregon Discussion to discuss.

Second Time Around

In their typical desperate search for news, the Boregonian's Sunday edition (today) has a front page and inside "A" section article on the financial troubles at PERS. It isn't like this is anything new. The paper has had several articles previous to this that say pretty much the same thing. Today's new twist is that they are whining about the potential for a change in the investment mix and effectively claiming that the taxpayers will be on the hook for backfilling PERS if the market doesn't recover. Well duh. In any taxpayer funded system, the taxpayers are always on the hook if the needed revenue doesn't materialize to fulfill contractual obligations. What makes this news? What is different now than before.

The reporter also makes the snarky comment about the actuary recommending that the PERS Board remove the 18-month "rate collar" that protects employers from market vagaries for at least 18 months after they occur. But does the Oregonian report WHY this rate collar exists? Nope. Again, they make it appear that there is some unknown force preventing this from happening. What is preventing it from happening is that the PERS Board exists solely for the benefit of the employERS, who don't want to pay their obligations in a timely manner.

The Oregonian doesn't also consider one of the other possible implications of changing the investment mix. They never mention the possibility that the change of the investment mix *could* also lead to a lowering of the assumed rate, which would make the system solvent more quickly, but at the expense of both employers and employees. They don't mention this because either they are ignorant, or because they don't want to antagonize the employers.

What is clear from the article, and especially looking at the online version where comments can be posted, is that the article has succeeded in fomenting the public's anger about the PERS system and its beneficiaries. Yet again, we will be called upon to defend ourselves and our benefits, just when we thought the flogging would stop for awhile. I've resigned myself to the fact that the Oregonian will never stop beating on the system, and that everytime they do, it will be the fault of public employees and retirees. Get used to it. Believe me, it is not better the second time around.

Gouge Away

Welcome to the world where up is down and black is white. We are, of course, talking about everyone's favorite three letter agency, the IRS. The new tax laws just enacted by Congress have thrown all us retirees a curveball. Pension income, such as what we receive from PERS, is taxed as ordinary income and is subject to the same withholding rules. On the other hand, the new tax rules, "Making Work Pay" or somesuch, treats pension income as ineligible for the new tax treatment. Thus, a paradox. The withholding tables that PERS uses are for ordinary income, but retirees don't work (some do, but their pension income doesn't come from active work). PERS is caught between a rock and a hard place. Because they have to treat pension income as ordinary income, the new withholding tables from the "Making Work Pay" bill includes the adjustments to credit single workers with an extra $400 and married workers with an extra $800. So, the good news is that PERS will be withholding using the new schedules as of April 1. The bad news is that at the end of the year, we'll all find out that PERS has been underwithholding because we are ineligible for the tax breaks. Having fun yet? The only temporary solution is to go online, download a new W-4P withholding form and REDUCE your withholding by one exemption. In this way, you will ensure that the PERS doesn't underwithhold. But changing one exemption will probably end up reducing your monthly benefit by more than what you need to offset the tax break you're not entitled to get. If you are thoroughly confused, thank Congress for this gift. If you understand what is going on, then give yourself a small pat on the back. If my explanation helps you, then give me a small pat on the back. Oh, me. I'm doing nothing.

Heartless

A fair number of readers have emailed me for some update on the various cases still "out there" awaiting some ruling. In particular, readers are interested in when Judge Henry Kantor will do something, anything by way of a ruling. Judge Kantor must be the slowest Judge in the history of the judiciary. The only case I am aware of awaiting a ruling is the White case, which argues against the settlement agreement in the City of Eugene case. Judge Kantor took written testimony in that case last summer and early fall and was scheduled to take oral arguments in early October. For reasons unclear, he decided that there was nothing relevant to be gained by oral argument and so he cancelled the oral testimony and reported that he would rule from the bench. It is now March 2009, some six months later and we've heard nothing, nada, zero, zip. Not a peep. Easter is April the 12th and perhaps the chickies will peep then, but I have no real hope that Judge Kantor will. I don't have any more of clue when Judge Kantor will declaim on White than anyone else. Whenever it comes, it will surely be anticlimactic as the loser will appeal the case to the Oregon Court of Appeals and ultimately to the Oregon Supreme Court. About the only thing about which I am certain is that the last of the litigation surrounding the City of Eugene case, and the 2003 legislative reforms will probably not come until 2012 or 2013. I find this utterly heartless as many PERS retirees may not live to see any form of justice in these cases. I wish I had more information, but nothing is seeping out of the cracks, the sewer, or anywhere else.

Listen To The Lion/The Lion Speaks

PERS has posted a Frequently Asked Questions about the 2008 economic downturn. It is reassuring if you accept that there aren't any other mitigating factors. You can read the report here. What is significant is what question isn't asked and what question isn't answered. Read it and see if you figure out what the missing question is. Enjoy your week.

Sleep Through The Static

Lots of chatter is still around about the possibility of an assumed rate change. As a form of reassurance - certainly not intended to lull into a false sense of security - the study presented by Mercer (Board Actuary) to the PERS Board this past November is a worthwhile read. It is scary on a number of levels as it discusses the system's funding status relative to retirees and immediately future retires, income to outgo projections, and asset mix. The only nominal reassurance can be found in the report's statement that employer rates are set through June 30, 2011. While this isn't a guarantee for anyone, it does suggest that any changes in the base assumptions of the system: assumed interest rate, salary growth rate, mortality factors, investment mix, etc - are set for another 2+ years. The May 29, 2009 PERB meeting is set to discuss the framework for the next actuarial experience study. This study may commence soon, but nothing is set in concrete until calendar 2009 is over. It will cover the period between January 1, 2008 and December 31, 2009. These experience studies usually provide the framework for setting employer rates, valuing the worth of the whole system, establishing any changes to actuarial tables, and a host of other issues that go into the construction of a retirement system. I take from the November 2008 study that the actuary is well aware of the bad experience in 2008 (and most certainly so far in 2009), but that this isn't relevant to the system right now, only for the next system valuation.

I will endeavor to stay on top of this issue. I have heard NOTHING from PERS yet on the issue of assumed rates, except for the indication that it could be part of the discussion at the May 29, 2009 meeting. I plan to be at that meeting and I will continue to keep my ears to the ground. In the meantime, I suggest that members near or at retirement age continue to monitor this situation closely, but to not take precipitous and irreversible course unless you are not comfortable with the suspense. If you are NOT ready to retire, for heaven's sake, don't make any decision rashly based only on rumor, speculation, and absent any fact. You will regret such a decision if you make it in an uninformed manner.

Kinky Sex Makes The World Go Around

Did I get your attention with that title? Hope so. Today's entry is a short explanation. I hope it helps people understand the relationship between employer contribution rates to PERS and the actuarially assumed interest rate. I've been receiving a lot of questions about this and I feel that a short, simple, explanation is in order. If you've been following my comments over at PERS Oregon Discussion, this shouldn't be new information, but it will be the first time I've put it down in one place.

To think of the employer's contribution rates, we need to think about employee salaries, the Full Formula, the assumed interest rate, and the projected growth of salaries over a career.

Imagine a new employee with a $35,000 annual income. When this person became PERS eligible, he/she and his/her salary became part of the employer contribution matrix of PERS. Imagine that employee having a 30 year career and try to forecast what his/her salary will be 30 years down the road. There is no simple way to do that, but actuaries make certain assumptions about salary growth. Suppose, for the sake of argument that salaries grow (on average) about 4% per year. That means that our $35,000 per year employee in year 1 will be making about $131,000 per year at the end of 30 years of work. Surprisingly, this formula works very well in forecasting final salary. It worked for me, for many of my friends, and for many acquaintances who shared their salaries with me.

With me so far. Our hypothetical employee is projected to be making $131,000 about the time he/she comes up for normal retirement in 30 years. The full formula (for Tier 1 and Tier 2) requires that the final retirement benefit be equal to Final Average Salary * 1.67% per year of service. A 30 year employee making a FAS of $131,000 (or close) will require a pension under the formula of roughly $65,000 annually drawn from two sources - employee contributions and employer contributions. Employee contributions (regardless of who pays them) are statutorily fixed at 6%. The employer is required to make up the difference between what the employee contributes and what is required to fully fund that pension.

Both parties have assumptions (especially Tier 1 members) about the growth of funds. Currently, the assumed rate of growth is 8% for both. In the past, the employers contributed just about the same amount as employees, but as Money Match overtook the formula, the employers were required to come up with increasingly larger amounts of money to "true up" the employee's account at retirement. But, the entire funding depends in large part on the Full Formula. So suppose, both employer contributions and employee contributions are assumed to only grow 6% instead of 8%. Money grows more slowly, the money match ceases to be the dominant method of retirement, and the Full Formula retakes its primacy. Well, if the employee's account balance grows more slowly, and the employer has no guarantee on its earnings, the final "true up" to get to the Full Formula takes more employer cash. The actuaries control for this in employer rates. They try to spread out the costs of that Full Formula retirement over the employee's work lifetime. Thus, the employers contribute significantly more than the employees do to the final retirement. If the average earnings rate declines from 8% to 6%, but the formula doesn't change, the employers have to contribute more than they would have to if the average rate were higher.

Over the long haul, there will come a point where the cost to employers will be lower than it is today once Money Match disappears completely, but the Full Formula is *the* method of retirement for all classes of PERS members. The plain fact is that so long as salary growth continues to average a positive amount (which it will), the employers will be paying more under a lower assumed rate than under a higher one. The higher assumed rate lets the market take care of the employers' excess costs, while the lower assumed rate dumps more costs back on the employers up front.

I hope this helps people better understand the relationship between employer contribution rates and the assumed interest rate. It varies inversely in a pure pension (Formula) system. This is the reason why so many private employers want to move employees from a traditional pension (defined benefit) to a defined contribution (401K-like) plan. The costs are determinate in a DC system, while they vary considerably in a defined benefit system.

Apologies in advance to all actuaries. This is a very simplified example. I know that the determination of employer contribution rates is far more complicated than this, but I think that in a traditional pension system, the basic principles I've explained above hold pretty true.

Enjoy your weekend.

Party People

It is pretty clear now that the PERS Board doesn't want any more at their party. At yesterday's Board meeting (by phone), the Board took the position that they would oppose a bill proposed in this year's legislature (no bill number announced or introduced, but drafted) that would increase the PERB from 5 to 7 members. The objective of the bill is to require a sixth member from the retiree ranks (good) and a seventh member from the unaffiliated (not in PERS) ranks (yawn). The Board is open to the idea of having a retiree (instead of an active) on the Board, but not to increasing the Board size. Tom Grimsley (the current active Board member) was the only one who spoke in favor of this proposal; the others objected because they thought it would make the Board more cumbersome and have more difficulty arranging meetings. So their solution would be to trade out the active member for the retiree, leaving the Board composition at 5.

I can imagine the real thinking is that the concept of having two members on the Board who both experience PERS as "members" might be too much information for the outsiders. Ironically, the most vocal opponent was Brenda Rocklin, who sits on the Board as a PERS Member from Management.

It will be interesting to see how this bill fares in the Legislature. If the bill does not come up for a hearing before March 31, the current Board will discuss it at its March 31 meeting.

You can read the report on the rest of the agenda at the PERS Oregon Discussion group. See link to group on the left.

Ring Them Bells

Of warning. As predicted here months ago and discussed here for at least 4 years, the shoe may be about to drop. This article from today's Boregonian tells the story. You don't need to read between the lines. It is pretty much all there except for making it official. The assumed rate of 8% appears to be on its last legs. In future posts we will discuss more fully the impact this would have on members and future retirees. To be fair, we will also discuss the impact on employers. This is not a done deal, but the article reveals a great deal about the plans, especially when we have members of the OIC and the PERS actuary interviewed.

Isn't It Ironic?

In 2003, the Legislature passed a bunch of reforms that affected PERS members and retirees in a series of negative ways. Much litigation followed and preceded the Legislature's actions. One of the changes that resulted primarily from the City of Eugene case and the "settlement" of said case, involved a change in the way PERS computed the employer match to variable account earnings at retirement. The bottom line is that when this passed, many members who were expecting dollar for dollar matches of their variable accounts discovered that the new rules required the employers only to match the variable accounts to the extent that the earnings had been in the regular account. During the 90's and again for the past three or four years, members were losing money at retirement due to this change in the matching requirements. Fast forward to 2008. In 2008, the variable accounts posted a -43% loss - a staggering loss by any criteria. While this is really bad news, it actually turns out that this loss won't be realized at retirement, especially if you retire in 2009 or 2010. Why? Because the shoe is on the other foot this time. Because the employers are required to match the variable earnings with the earnings only on the regular, members retiring shortly will receive an employer match on 2008 earnings of +8% - a 51% gain compared to actual earnings. This means that the net effect of employee earnings (-43%) and employer match (8%) will produce a slight net gain for members in the variable for 2008. So instead of having to match a -43% loss (a bonus for the employers), the employers now get hoist on their own petards and have to pony up an 8% gain for the variable accounts in 2008. Somehow, I think that the savings to the employers over the past few years will be completely wiped out by 2008.

This irony amuses me no end. The cleverness of Judge Lipscomb and Bill Gary have come back big-time to bite the employers on the butt at a time when they can least afford to have this happen. It tickles me to see these folks slowly twisting in the wind. Your cleverness, your brilliance, and your eagerness to sock it to PERS members and retirees has finally come back to haunt you. So sad.

Tomorrow Never Knows

The IRS is going to be required to clarify the potential conflict that arises from the Obama administration's "Making Work Pay" when it comes to retirement systems like PERS.

From PERS to me today:

"The new tax withholding tables incorporate the Making Work Pay credit. This new credit applies only to earned income. Under the Internal Revenue Code (IRC), pension income is specifically excluded from the definition of earned income. However, the IRC also indicates that withholding from pension payments is to be administered as if the pension payments were a payment of wages by an employer to an employee for the appropriate payroll period. This creates a potential conflict that has been presented to the IRS for clarification and direction on whether pension systems like PERS should implement the new withholding tables."

So until the IRS clarifies this further, it is not at all a given that PERS benefits will be affected by the new rules.

Creep!

Today one of our dumb-ass legislators made the suggestion that PERS retirees ought to forgo 8-10% of their retirement benefits to help the economy. This moron, Rep Wayne Krieger (R), District 1 had the audacity to comment:

"Krieger suggested that if all those receiving PERS government retirement gave up 8-10 percent, it would almost wipe out the deficit. Oregon is the only state in the union that pays 100 percent of insurance costs for employers. He states he is not against government workers at all, but thinks most folks would be willing to give up something in the recession to help so we can make it through this difficult period. "

I don't know what planet Mr. Krieger cruises on, but he is blowing smoke out his ass (forgive my language, but this just infuriates me no end). My advice to Mr. Krieger is to chat-up former Senator Greg Macpherson to find out what happens to legislators who decide to go up against PERS retirees and PERS active members. He isn't against government workers but then basically slams them against the wall with this comment that "Krieger has noticed the government does not do a good job when they have to make cuts. They go on as though things are OK. " I say bullshit Mr. Krieger! You don't know what you're talking about. Try being a government worker for a day, or two, or a week. We've got thousands of readers here who might want to correct your lying and dissembling anti-public employee attitude. Just remember Greg Macpherson when you come up for re-election in District 1. That's around Gold Beach in southern Oregon. You folks reading from down there ought to make sure you end this guy's legislative career on the grounds of gross stupidity.

I have to remind myself that we're into the second month of "silly season". This is the second month of the Oregon Legislature. Legislators with no intelligence and nothing to recommend them for future service usually come up with these dumb-ass ideas about now to gain some headlines. Fortunately, most of these guys end up in obliquoy. Sayonara Representive Krieger.

If I Had A Hammer

I'd use it. I'm starting to get some reports of members who retired after the formation of the IAP (1/1/2004). PERS has a number of ways that members who retire can receive their IAP balances. Of course there is the ubiquitous lump-sum. In this mechanism you can just roll your balance over into an IRA and be in total control of the balance. However, many people want to have PERS manage the money and distribute it in one of several methods available. The common method is quarterly distribution over a five year period. It is this category that seems to be biting retirees lately. The normal routine is that retirees get their quarterly installment plus (or minus) earnings between the 11th and 15th of every month. The IAP money seems to be managed by State Street Investors and the third party administrator seems to be ING - the Dutch financial enterprise. I've started to get emails from people who are claiming that the payments due between 11th and 15th of February are already late and PERS isn't sure when they will receive them. Do we have a case of ING holding on to the money? ING is having some liquidity problems? Or something purely coincidental? I hope it is the latter. I've got some chunk of savings in an ING online account and have earned a good chunk of interest. I hope that ING isn't starting to fiddle with IAP members' money. If they are, it will be time to use that hammer.

Lights In The Sky

Today we take a break from our usual litany of grievances against PERS to honor two of my heroes in the pantheon, both celebrating their 200th birthday today. It is probably no coincidence that both of these people were born on the same day in the same year several thousand miles away. Each profoundly influenced the world in different ways. One grew up to become the 16th President of the United States who was the first to recognize the malignancy of slavery and proposed emancipation of the slaves in the US. This was neither a popular view nor a dominant view, and it nearly resulted in the destruction of a relatively young United States. Ultimately he was assassinated for his "radical" views. Nevertheless he was one of the most progressive Presidents in United States history. Abraham Lincoln, born February 12, 1809.

On the other side of the Atlantic, my other great hero was born on the same day in 1809. He too was constitutionally opposed to slavery, but his upbringing taught him the folly of enslaving people. He was a quiet, pathologically shy person, who wrote extensively about nature. He eschewed his training as an country parson to go on to become the first naturalist to actually put together a theory based on hundreds of thousands of observations that would explain not only how all life forms were related, but also to develop a mechanism that would explain this. Contrary to popular belief, he never used the term "evolution" to explain his mechanism. This was not because he didn't believe in evolution, but because evolution didn't mean what it means today. He used the phrase "descent with modification". Charles Darwin, born February 12, 1809.

When I think about people who had profound influences on the way I think, the political stances I find myself taking, and my grab-bag collection of knowledge, I can identify no two more influential people in my life.

Happy birthday Chuck. Happy birthday Abe. You changed my life for the better.

Waiting In The Weeds

As a followup to my post yesterday, I've been able to glean the following from PERS. The assumed rate analysis is part of the actuarial studies that are required every two years. The last actuarial study reported was the 2006 study, published during 2007. The next actuarial study - for 2008 - will be presented to the PERS Board at the May 29, 2009 Board Meeting. As part of this study, it is normal for there to be a consideration of the assumed rate. The relevant sections of statute that cover this are contained in ORS 238.065, and in the Oregon Administrative Rules OAR 459-005-0060. I think I would be watching the next Board agenda pretty closely to see what sort of discussions are planned around the actuarial valuation and analysis.

The Path of Thorns

The Oregonian has the first glimpse of what the future might look like for active and inactive Tier 1 members. As reported here on multiple occasions spanning back to early 2004, the OIC has been pressing for a reduction in the "assumed interest rate" from 8% to something significantly less. The employers have squashed any discussion in the past, but now that the issue has become public again (recall Ballot Measure 8 in 1994), it is more likely that the discussion will carry some weight. Read the Oregonian's report here. It paints a sorry picture and begins the first salvo in the path of thorns. I hope I'm wrong, but methinks this will gain more traction as time goes on.

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.

Do They Know It's Christmas

Happy Holidays Everyone!

Holly, Jolly, Christmas

Here's wishing you the very best of the season. May your holidays be filled with warmth, light, family, and joy. Thank you for your devoted readership as we mark the 6th holiday season for this blog. My wish for the new years is that PERS ceases to be news and that I am put out of "business." I have significant doubts this will happen, but I do not dream small dreams.

Working On A Dream

My blogging colleague, Jack Bogdanski, is holding his annual "buck-a-hit" day today. The purpose is to donate money to five local charities that do lots of good in the community. My wife and I have offered to help Jack out this year by donating a substantial sum of money to the Oregon Food Bank, a charity that inspires us and reminds us of the lessons our mothers taught us. If you would like to help out in this worthwhile endeavor, just head on over to Jack's site. Each unique visit triggers a $1contribution to one of these charities, up to 5000 unique "hits". Just spending 20 seconds clicking through the link above will get you the good feeling of contributing a dollar without having to reach into your own pocket. Of course, if you are feeling charitable yourselves, you can click links on Jack's site to send specific dollars (yours) to any of these five groups Oregon Food Bank, Children's Heart Fund, Human Solutions, Virginia Garcia Health Clinic, and Sister's of the Road. If you find my blog useful, consider it a favor for me to visit Jack's site. This is an extremely tough year for every charity. Anything we can do to help out, whether it is spending about 20 seconds of today, or spending a few dollars of your own money, helps those charities work on their dream. My dream is a world where no one is hungry.

Sleep Through The Static

Questions recently posed on two different PERS newsgroups suggest that people remain interested in the status of the Arken/Robinson cases (remember them?). It has been so long since Judge Henry Kantor ("I will rule quickly ..." NOT!) announced his final ruling in these cases that most of us have let them fade from memory. These cases remain important in the annals of PERS retiree history, and may eventually reach some sort of ultimate resolution. In any case, nothing new has been posted about these cases and several questions prompted lead plaintiff Michael Arken to share an email he received last September, to a poster over on OPDG. I am quoting from the email here: "I thought you would have heard about Arken/Robinson. The following is from Hartman's office. Received by me on Sept. 29th:In the Arken case, Judge Kantor has signed the judgment and the Multnomah County Circuit Court has issued a notice of entry of judgment. Yesterday, we prepared for filing the Notice of Appeal to the Court of Appeals. We are still researching the possibility of asking the Court of Appeals to certify the appeal to the Supreme Court. As we learn more about this option, we will let you know. (He signed the judgment in the Arken case dismissing all the claims. That judgment has now been appealed to the Court of Appeals.) In the Robinson case, Judge Kantor has asked the parties to decide whether it is necessary to certify a class at this time. Jim Coon,counsel for Robinson petitioners, is reviewing that option. Once a decision is made we will notify you."

Thus, it seems that there is an appeal filed with the Oregon Court of Appeals in Arken. In Robinson, the issue is primarily whether the case is certified as a "class action." Recall that the PERS Coalition lost on all counts in Arken, but won a significant victory in Robinson. There is no doubt in my mind that the defendants in the Robinson case (PERS), will appeal Kantor's verdict, but that is on hold until and whether the Robinson plaintiffs and attorney decide to pursue the verdict as a class action.

In the meantime, the White case, which challenges the entire settlement agreement in the City of Eugene case (Lipscomb), is still occupying space in Judge Kantor's office. He decided in late September that no hearing was necessary and that he would rule on the basis of the substantial factual record before him. If Judge Kantor is true to form, it will be somewhere near the summer solstice before he issues a ruling.

So, please enjoy your holiday season. You can go back to sleep for about four or five months before any new information is likely in these various cases.

The 7% Solution

Is unlikely to happen. There has been much recent discussion about the likelihood of PERS dropping the actuarially assumed interest rate ("the guarantee") from 8% to something lower. While the current economic climate suggests that a rate guarantee of 8% is probably too high, there are many forces in play to argue that such a change is unlikely in the near future.

Without getting too technical, suffice it to say that the actuarial rate guarantee plays into many aspects of the PERS system. PERS has the legal authority and the fiduciary responsibility to use an assumed interest rate that is attuned to economic realities and fiscal experience. The 8% rate was established in 1989 and so it has been in force for 20 years. Prior to that the rate was lower. There is no precedent that I can find where the system *lowered* the assumed rate. Actuarial tables and their associated mortality factors, which drive the optional benefit forms PERS retirees can select from, are built from the assumed interest rate. Reduce the rates and the mortality factors will change. This will, in turn, lead to lower monthly benefits. Similarly, the Tier 1 regular account balance is driven entirely today by the assumed rate (the 8% guarantee) since no new funds have flowed to Tier 1 accounts since January 1, 2004. At a lower assumed interest rate, account balances would grow more slowly. Again, a lower account balance at retirement will lead to a lower monthly benefit and coupled with lower mortality factors, drives the monthly benefit down significantly. Finally, the employer contribution rates are driven by several factors, not the least of which is the assumed rate at which employer contributions are expected to grow. If the assumed rate is lower, employer contributions will rise because less of the anticipated growth will come from the assumption about earnings. This is the trickiest idea for most people to understand, but any careful research would demonstrate its truthfulness.

Even from the briefest introductions above it is easy to see that both PERS members and their employers have interests that are completely aligned. The coupling of the assumed interest rate makes both parties agree on the direction of the assumed interest rate.

Recently, I had an email exchange with Greg Hartman about this, while a PCC colleague had an almost identical conversation with Paul Cleary, PERS Executive Director. Both mentioned the same set of facts. First, employer rates have been set for 2009-2011 on the assumption of an 8% rate. This means that no change will be made until the next time the PERS actuary undertakes its next system valuation in 2010. That will be used for the 2011-2013 rate setting. Second, the 2009-2011 mortality tables have already been set to take effect on the first of next month. They, too, assume an 8% earnings rate. The take home message here is that none of the crucial decision-making about the assumed interest rate would make any sense until 2010 for implementation in 2011. Both Hartman and Cleary make the same point about the next system valuation. The 2009-2011 rate-setting and mortality table implementation do not take into account the dismal situation in 2008. Those losses will get recognized in the next system valuation in 2010. Since those losses bear on employer rates, there is a strong likelihood that employer rates will rise significantly resulting from the 2008 system losses. If PERS were to add to that a change in the actuarially assumed interest rate, employer rates would rise even further. It was a steep rise in employer rates that triggered the series of events that led first to the City of Eugene case, the 2003 Legislative reforms, and the string of litigation that followed. It is doubtful that anyone has the stomach for that again.

The logical conclusion from this is that, despite the pressure from outside forces to do so, it is highly unlikely that we will see a decrease in the actuarially assumed interest rate anytime in the near future. Of course, a rogue legislature might try to force the issue, but with all the forces who share a common purpose in keeping those rates where they are, it seems unlikely that the Legislature will try to overcome that resistance.

Politik Kills

This post has been a long time in coming, but the time for writing it has now come. It pains me to report that the Oregon PERS Discussion Group (OPDG) is on its last legs. It is suffering from a terminal illness described in this post's title. The group began in late 2003 by Dana Jackson. It took off slowly, but eventually became *the* group for news and discussion about Oregon PERS and all the issues surrounding it. It was a perfect addition to my blog, which began as a web site in early 2002. For the first four years of its existence, OPDG retained its focus and participation was high. It seemed that everyone wanted to know about PERS and since several of us with access to good sources of information posted there regularly, its membership grew. When Martha Sartain died in mid 2007, the group began to atomize. It seems that Martha's wisdom, her ability to "tell it like it is" and her stature as the face of the PERS litigation (Sartain v PERS remains one of the few landmark decisions in the consolidated Strunk cases at the Oregon Supreme Court), seemed to make people feel that she had an insider's knowledge of what was really going on at the legal level.

It is not really possible to pinpoint the precise point at which OPDG began its long downhill slide into irrelevancy, bickering, and petty sniping. It has been at least a year, possibly more, since there has been any spirited discussion of a significant PERS topic. Yes, there have been discussions of PERS-related matters, but the old fire simply isn't there. Earlier this year, I made the decision that I could not tolerate the level of politicization of the Board and its hostile takeover by the extreme political right. I resigned as a moderator, and after many entreaties, started my own Yahoo newsgroup that *is* devoted exclusively to PERS and retirement-related issues. Once the political candidates were known, OPDG began on the relentless path to irrelevancy. There was a constant drumbeat of anti-Obama rhetoric, and attempts to crush and intimidate any opposing viewpoint (especially those who actually supported Obama). This has not abated with Obama's election, the financial crisis, and the end of George Bush's presidency. If anything, the hostility has grown in much the same way that talk radio seems to inflate by the appearance of political opposition.

The irony of this is that OPDG's charter actually warns new members about the very things that are tearing at the fiber of OPDG. Uncivil discussions, name-calling, ad hominem arguments, censoring posts for no obvious reason, etc. The reality is that there are only now four or five regular posters and a few drive-by shooters - mostly from the political far right, and a couple who have tried to defend the more moderate or left wing of politics. The left has no chance on OPDG, because the moderation team is composed primarily of those with opposing viewpoints. In short, for those of us who are celebrating the beginning of a new era in politics, OPDG is like the polar-bear club, with waterboarding.

Because I have no desire to subject *my* readers to the abysmal and unpleasant discussions over at OPDG, I am today removing the link for OPDG from my blog, and from my newsgroup. I will no longer reference any discussion on OPDG and will, in all likelihood, completely discontinue any participation in that group. Its members will still have access to the same news as both this blog and my newsgroup (see left to PERS Oregon Discussion) are completely open, unlike OPDG.

Contrary to the belief of many, there is still plenty of PERS news to report. It won't be daily; it may not be weekly. There is a legislative session coming in about 7 weeks, and with the financial crisis still ongoing, there will be many discussions about PERS and its financial health. It would not surprise me to find that PERS benefits show up again in discussions. Whether this will result in any changes or not, remains to be seen. But you can be assured that I and many others will be watching, listening, and reporting on relevant PERS news. You can be certain to find out here and on our sister-newsgroup (PERS_Oregon_Discussion).

And to the owner of OPDG, I wish you well competing in the political world. There are many other discussion groups on the web you can compete with. But if you wish to become the FOX news archive on the web, I'm afraid that FOX news has its own archive and anyone interested in seeing the views presented on that network can go there. You would be wise to heed the advice of Manu Chao who said it best when he wrote: "Politik Kills". Your group has a substantial membership, but the question you need to ask is how many readers do you actually have. How many have tuned out because the group has lost focus and lost direction. OPDG is becoming like the legendary foo bird. If you don't know that legend, Google is your friend.

Beyond The Great Divide

Lies PERS. The PERB packet for this Friday's meeting contains an interesting (if pleasant) surprise. If you go to the PERS website and look at the 11/21/08 Board packet, you'll see Legislative Concept 332 near the end of the (relatively short) packet. It involves reemployment of retired PERS members. Although the concept is nuanced and would be technically more complex to implement than appears in the document, it contains some relatively good news for those interested in returning to work for a PERS employer. I won't reiterate the document here. It is clear enough to read at the web site. In short, if you've been retired for more than 6 months, this LC wouldn't require you to repay money PERS has already paid you since you first retired. Instead, it would cut off your benefits while you work, and restore them after you retire again. The only catch is that the money already paid would be deducted from your corpus for subsequent retirement. That only seems fair to me.

Do keep in mind that this is *only* a Legislative Concept (an idea). It will require this to be converted into an actual bill that makes it through the Legislature and gets signed into law. But it is nice to see something positive come from PERS for a change, instead of the typical punitive stuff that it (and the employers) have been responsible for in the past. Perhaps we're beyond the point of bashing employees and retirees, and employers have discovered that talented and experienced workers are hard to find these days. Maybe they'd like some of us back for awhile. Maybe some of us might like to come back for awhile. Who knows. If we dream a bit, maybe we can see across the great divide.

Changing of the Guards

America has awoken and it has spoken loud and clear. We have elected a new President at this critical crossroads in our history. I have hope again. I'm excited again. And I'm enthusiastic that if anyone can bring some sanity back to the United States, Barack Obama can do so. He crossed the partisan divide, the racial divide, and the gender divide to rack up an historic win in one of the ugliest political campaigns in my memory. Obama largely remained above the fray and let his opponents sully their own reputation by dragging up useless facts from Obama's past. But that is behind us now.

Regardless of how you voted yesterday, I hope that we all take the next two months to consider how this election will change the world's opinion of us, and our opinion of ourselves. We have made history. Let us all hope and pray to the deity of your choice, that President-Elect Obama can parlay this mandate he's been given into the massive transformation needed to restore our country to its greatness.

Life Short, Call Now

The saga of Kay Bell continues. As most are aware, Kay Bell received some pretty crummy advice from PERS, retired based on that advice, and subsequently sued PERS when she learned that the advice was wrong and that PERS wanted money back (This has nothing to do with the problems of window retirees. Bell's case is somewhat unique). The PERS Coalition represented Ms. Bell in a jury trial in Marion County this past year. The ruled ruled unanimously in her favor and awarded her damages in excess of $100,000. Subsequently, PERS filed a motion to reduce Ms. Bell's award to $100,000 to comply with the Oregon Tort Claims Act. The judge ruled in PERS' favor, agreeing to reduce the jury's award and also to deny Ms. Bell interest on the outstanding amount.

PERS has now announced its intention -- big surprise -- to appeal the verdict to the Oregon Court of Appeals. In the meantime, a Legislative task force is exploring ways to remedy the problem that the Bell case has exposed -- PERS' responsibility to provide reasonably accurate pre-retirement estimates, and to find some way to remedy the circumstances when such estimates turn out to be completely inaccurate through no fault of the retiree. It is likely that some of this will be solved legislatively during the 2009 session.

The saga of the White case also continues. Judge Kantor cancelled the hearings on White and advised the advocates that he will either rule in favor of the defendants for summary judgement, or allow the PERS Coalition to file cross-motions for summary judgement. This case has been going on since April 2004 and has yet to be heard formally before any jurisdiction. Depositions were taken last summer with the hope that the case could be resolved during 2007. It is unlikely now that the case will be resolved before 2009, assuming there are no appeals of Judge Kantor's ruling.

If you haven't voted, be sure to get your vote in no later than 8 pm tomorrow night. It is too late to mail your ballot. Find a local ballot drop-off site and carry your ballot there. This election has too many important decisions to shrug off. Regardless of who wins, the country is in for some major changes.

After The Thrill Is Gone

I'm going to violate my rule about injecting politics (except about PERS) in this site. I am writing only to say that this has been the longest political silly season in my entire 61 years of existence. It is no longer fun, no longer inspiring, and just seems mean, nasty, and ugly. There has not been a single campaign whose approach I liked (after the first 15 minutes). I've been badgered for money, hectored for money, abused for money, and no matter how much you give, it isn't enough. All for the privilege of watching, hearing, or reading another savage attack on another politician. I no longer care at this point what happens on Tuesday (OK, hyperbole, I do care), but I am so sick of politics that I wish to be disconnected completely from it for about 2 years. Unfortunately, the way our system is structured, we'll be freed from politicking (not politics) only from about January 1, until after the first 100 days of Congress and the Presidency. After that, everyone starts thinking about and organizing the next election cycle. Yuck.

I'm spending this afternoon with some old friends and some new friends at the home of the children of one of Oregon's most beloved politicians, long-retired from the game. It will be a pleasure to have something else to talk about for a change.

For me the thrill ended about two months ago. What about you?

The Ghost of Tom Joad

It's looking a bit bleak these days. With the stock market gyrating pretty much out of control, with the Bush administration and Congress passing handouts to nearly any business who asks, and the US deficit climbing to record levels, there is little doubt that things will take awhile for us to recover. It should, therefore, come as little surprise that PERS has taken a pretty substantial hit. Recent estimates show that through the end of September, the PERS Fund lost about $13 billion. While it did better than my personal portfolio, that is still a substantial hit that will pretty much wipe out any surplus it has and leave the fund with an unfunded actuarial liability again. Ron Schmitz of the Oregon Treasury estimates that the fund may only have between 90 and 95% of funds required to meet all demands of all members. While this is a paper number that has no real meaning with two thirds of the membership still working, it also means that there won't be any treats available when PERS trick or treaters come around tonight or during next year's legislative session.

The good news is that PERS is better prepared to weather the crisis than most public employee retirement funds across the country. The OIC has done a remarkable job in keeping the fund in the black and I have confidence that once the current crisis settles down, they will be able to place funds where they can once again return in excess of the assumed rate.

In keeping with the Tom Joad theme, I do think that there will be pressure on PERS to *reduce* the actuarially assumed interest rate (currently at 8%). Right now, this is tough to do because the rate is linked to the construction of the mortality tables, linked to the payouts at retirement, and intimately bound to the rates charged to employers. Any reduction in the assumed rate would not only negatively impact members, it would also raise the employer contribution levels. At a time of shrinking budgets, the employers would protest vigorously any proposal to change the "guarantee". Nevertheless, I think a change is inevitable in the current climate and it would not surprise me to see either next year's legislature or the current actuary (Mercer) propose that PERS do just that.

The second Tom Joad theme is that I rather doubt any proposal constructed by OPRI to give current PERS retirees an ad hoc rate increase will get through the Legislature. While the purchasing power of all PERS retirees has declined, especially that of long-time retirees, the fund simply doesn't have the resources to pay such increases. Moreover, since COLA increases and ad hoc increases come directly from employer contributions or from earnings on the Benefits-in-Force reserve (currently negative), the enthusiasm for digging deeper into budgets isn't there.

Finally, the $13 billion loss in the PERS Fund does *not* include the month of October, which has been the worst in recorded history. If there were any residual belief that any of the above would or wouldn't happen, October should just about erase that.

Trick, no Treat, Mr. Joad.

Gotta Be Somebody

For PERS members and retirees, one of the toughest decisions in the upcoming election will be that for Oregon Treasurer. The two principal candidates are Ben Westlund (D) and Allen Alley (R). For different reasons, each would make a good Treasurer. On the PERS Oregon Discussion Group, I explained why I couldn't make a choice between these two and suggested that my wife and I would be splitting our votes. In the interim, several more informed members of POD persuaded me to look closely at Allen Alley's performance as CEO of PixelWorks, the high tech graphics company that Alley founded. I confess that I hadn't done so before Frank (in particular) made the suggestion. It was eye-opening to look at PixelWorks from the perspective of judging the CEO as a possible Oregon State Treasurer. In effect, the Oregon State Treasurer's job is to insure that all of the various funds under his/her management remain solvent, vibrant, and able to pay out promised benefits to all the various beneficiaries. From that perspective, Alley's tenure at Pixelworks has been dismal. Several years ago, the stock traded at about $10 per share. Since then, the stock has dropped to an eye-popping $0.94 per share (you read that right). It might be up or down depending on today's stock market crisis, but I think you get my drift here. While no one expected stellar performance in the volatile market of today (though look at Apple for a stark contrast), I think that a healthy company would have done better than to drop to one tenth its value in the span of only a few years, if that long.

Alley has been running on his business acumen and experience; Westlund has been running on his own business experience as well as his experience in the Legislature. He has reached across the aisle (when he was a Republican to Democrats, and as a Democrat to Republicans). All things considered now, I am convinced that Ben Westlund would be the best choice for State Treasurer. I endorse him wholeheartedly. I think he will be the best person to safeguard the PERS Fund. While Alley *might* do a good job, his experience at Pixelworks and their stock performance in the recent past do not give me a warm fuzzy feeling about how well he would do with a fund valued at $60 billion. To be sure, the fund is actually managed by the Oregon Investment Council, but the OIC is nominally headed by the Treasurer. I think I'd prefer someone who hasn't had the kind of experience Alley has. And, as for Alley's advisory role with Governor Kulongoski, I believe that was in Ted's first term - a term in which the PERS contract was broken repeatedly by Ted and his henchmen in the Legislature.

So, to reiterate, if you are still undecided in the Treasurer's race, I wholeheartedly endorse Ben Westlund.

White Chalk

Things just keep getting stranger by the day with the White case. According to a post on the OPRI web site, the White trial has been cancelled. The White case is still on, but Judge Kantor has decided to use the submissions to make a ruling on the defendants' (PERS, State, etc) petition to for summary judgement and dismiss the case. Judge Kantor has reportedly told the PERS Coalition that they can wait until he issues his ruling in the summary judgement petition. At that point, if Judge Kantor rules against summary judgement, then the PERS Coalition can files its own petition for summary judgement (something I already thought they did). On the other hand, if the Judge rules in favor of the defendants, then the PERS Coalition can simply appeal the ruling to the Oregon Court of Appeals.

This is about the strangest turn of events I've seen yet. I'm trying to get confirmation from Greg Hartman and the PERS Coalition that this preposterous (to me anyway) sequence of events has been accurately reported. Stay tuned for more information. In the meantime, you might want to hang tough a bit longer before jettisoning those plans to attend the hearings.

P.S. 1:40 pm. Greg Hartman just got back to me. He explains that Judge Kantor did cancel the hearing. He (Judge Kantor) noted that he believes that he has a sufficient record upon which to base a decision. This means that Judge Kantor doesn't believe that there are factual issues requiring resolution. According to Greg Hartman, Judge Kantor also stated that he had not determined how he would rule and therefore might invite the PERS Coalition to file a cross motion for summary judgment. Hartman noted "while this is unusual I think it reflects the fact that most of the dispute in this case is how to apply the legal principles to facts which are largely not in dispute."

Thanks to Greg Hartman for his quick reply to my query. Let's all hope that Judge Kantor shows some wisdom this time, unlike his ruling in Arken.

I guess those of you who had plans to come to the hearings can safely cancel them now. We'll wait for the chalk outline to appear on the court docket. Hopefully the outline will be of PERS, the State, and the employers, and NOT the Coalition.

White Rabbit

The case known as the "White" case goes before Judge Kantor on October 23. The hearings are scheduled for three days - October 23, 24, and October 27. It is hard to gauge exactly how much time a complex case like this will take. At issue is the "legality" of the settlement agreement the PERS Board entered into to settle the City of Eugene case. For those unaware of the exactly how that agreement affected us, consider that it was finalized in early 2004, before the Supreme Court had heard and ruled on the Strunk case. While the Strunk case concluded that the Legislature could not withhold COLA increases for retirees, and concluded that the Legislature had, in effect, created a new benefit for retirees - the fixed benefit - which could not be said to contain errors, the settlement agreement effectively undermined the principal Strunk ruling. It enshrined what I've called the "nuclear option". It basically said that if the Supreme Court ruled that the COLA freeze option was unconstitutional, PERS would use an alternative and more costly mechanism (to retirees) method for getting back the alleged "overpayments". The settlement agreement also asked PERS to switch sides in the City of Eugene case. It required them to admit to wrongdoing -- something they argued vociferously against in the City of Eugene case - so that the 1999 earnings crediting decision could be classed as an "error" and be subject to ORS 238.715 (the collections statute). There are many other unsubtle elements to the settlement agreement, but any rational analysis leads to the conclusion that the PERS Board, which is charged with primary fiduciary responsibility to its members, retirees, and their money, violated that responsibility and took action directly in conflict with its responsibilities. The White case charges the PERB with exactly that, and more, and seeks to undo the settlement agreement. This is a very important case that will ultimately go all the way to the Oregon Supreme Court.

So that people can plan in advance, I urge every member and retiree to try to find time and means to attend all or part of the hearings. I firmly believe that attaching human faces to the dry proceedings playing out in a courtroom gives all sides a look at who is affected by the litigation before them. The hearings are held in the Multnomah County Courthouse in downtown Portland. I will be posting directions and other information as time goes on. For those who live in the Eugene or Salem areas, carpools typically get formed and this makes it easier and less costly for people from the valley to attend. I will help facilitate organizing these carpools through the PERS_OREGON_DISCUSSION group (POD). You can access the newsgroup by clicking on the link to the left of this post. I hope to see many people there.

Sad Cafe

The plaintiffs in the Arken and Robinson cases have been informed by the PERS Coalition that Judge Kantor has signed the final judgement and it has been entered into the Multnomah County Circuit Court. On Monday, the Coalition prepared for filing the Notice of Appeal to the Oregon Court of Appeals asking that Court to direct and certify the appeals directly to the Oregon Supreme Court. In the Robinson case, Judge Kantor has asked the attorney, Jim Coon, whether it is necessary to certify a class. Coon is reviewing that option. We should know relatively soon whether the Court of Appeals will direct the Arken case to the Supreme Court without the intervening stop. In the meantime, we can hurry up and wait a bit longer. The White case should be coming up for hearing soon.

Slow Down Fast

PERS has released its latest "PERS By The Numbers (September 2008)". You can download a copy here. If you study it closely, you can see some evidence of the recent downturns in the stock market. PERS assures members and retirees in a note today that it has a handle on the current situation even though it is a difficult time.

As I've noted before, PERS has been salting away reserves since 2003 and was about 112% funded at the end of last year. Of course, the current downturn (uptick?) on the stock market, the collapse of the subprime mortgage market, the scandals involving credit swap derivatives, etc, will almost assuredly have a negative effect on the PERS Fund. This has led to some testy debate between the two candidates running for the State Treasurer's office. I haven't decided who to support, although the more I hear from each candidate, the less impressed I am with them. They both know that the PERS Fund is the largest chunk of cash the state manages. And the State Treasurer is responsible for managing those funds. You get your choice between Ben Westlund, a Republican in 2003, an independent in 2005, and a Democrat now, and Allen Alley, a Republican to the core, who worked as an economic adviser to Ted Kulongoski during his first term. Kulongoski has endorsed Westlund. This *should* be a difficult choice for PERS members/retirees. I encourage you all to study their positions carefully and take the opportunity to ask them questions if you meet them. It may help you decide.

Time The Conqueror

For those of you wondering what the Oregon Investment Council is doing to shore up the PERS Fund against the current Wall Street meltdown, the answer is pretty much the same as before. Ron Schmitz, from the Treasury, told the Oregonian that the investment mix they have is solid and that their losses this year are manageable without going into "risk managment." When the OIC met yesterday, it didn't discuss the meltdown at all in its morning meeting. But in the afternoon, they brought in a economic expert who talked about the causes of the current crisis. He attributed the crisis to "excess leverage" and equated it to "pouring lead into the stream that everyone drinks from". He supports the bailout plan before congress, but with some measures to protect homeowners from losing their homes in foreclosure.

Time will tell whether the OIC's decisions bear fruit, but the OIC's track record is certainly admirable up to this point. I don't think this year is going to be good for any accounts without a guarantee, and those with a guarantee will chew up enough of the reserve that the PERS Board will have a ready-made excuse to not pay anyone over the guarantee for another long stretch of time. I think they were considering a possible payment over 8% in this current year had Wall Street performed like it had since 2003. But alas, the sticky terms of HB 2001, passed in 2003 make this year's result dial the clock back again to the beginning so that PERS will have to replenish the reserves again when the market goes up, and hold the reserves stable for 3 consecutive years. As I've predicted before, HB 2001 has always been diabolical and pretty much guarantees nothing more than the guaranteed rate, whatever it is, for the rest of the Tier 1 members' life expectancies. Time conquers all.

The Beat Goes On

I am trying something different today -- live blogging. I am sitting outside Kantor's courtroom chatting with Robinson attorney Jim Coon. Everyone is shaking hands and passing around swine flu germs. Kantor is, as usual, running behind. Coon seems to be outnumbered four to one. It is he against 4 wideboys.

Unbelievably PERS is arguing how difficult it would be to undo the changes already implemented. Kantor is expressing disbelief at PERS argument. Malkin is arguing that they just don't have the money or staff and claiming it would take more than a year. The poverty argument is heart-tugging. Did you know that no PERS retiree has suffered.

Kantor just chewed out Malkin for submitting proposed orders in an inappropriate format.

Coon is up. Kantor is questioning where the money would come from?

Kantor ultimately rules in favor of the stay on the grounds that the are too many balls in the air and too much going on to bind PERS to refunding money now.

[Posted with iBlogger from my iPhone]

Life Sentence

In a fit of symmetry and anticlimax, the US 9th Circuit Court of Appeals upheld HB 2004 (actuarial tables) as not violating the terms of the Henderson case of 1978. For those around in 1978, the 9th Circuit held that PERS could not use separate actuarial tables for men and for women, despite the different actuarial life expectancies of the two sexes. From that point forward, PERS developed "blended" actuarial tables that combined life expectancies of men and women. There was also a stipulation that PERS would not be able to change the actuarial tables back in the future. On that basis, the PERS Coalition challenged the 2003 Legislative effort to force PERS to change the actuarial tables to reflect more modern mortality data. In HB 2004, the Legislature put into statute rules that require PERS to examine actuarial tables every two years and update them, if needed, on January 1 of odd-numbered years (legislative years coincidentally). The PERS Coalition first challenged this in Strunk, but also filed in Federal Court on the grounds that the newly enacted statute violated the terms of the Henderson case of 1978. This case was first heard by a single Appeals Court Judge, then a panel of three Appeals Court judges, and finally by a larger group of 9th Circuit Judges. A few days ago, the 9th Circuit handed down its opinion that gives the Legislature and, through it, PERS the right to change actuarial tables as spelled out in HB 2004 so long as they preserve the blended nature of the tables. As this has been happening, this is really no news at all. Nevertheless, those of you hanging by a thread hoping that somehow, some way, those nasty actuarial tables enacted in 2003 would go away. Sorry. Your life sentence was not commuted.

Shelter From The Storm

In a followup to the post of several days ago, Ley Garnett of the Oregon Treasury, emailed to correct an error he made in providing me with information about PERS' holdings in Freddie/Fannie. As it turns out, Ley reports (consistent with State Treasurer Randal Edwards) that the PERS fund only holds 0.2% in Freddie/Fannie stock - an almost trivial amount in a $60+ billion portfolio. And it is also the case that the PERS fund has weathered the latest round of slashing and gashing on Wall Street better than most. The reports I am reading (not from Treasury) suggest that the PERF is only *down* about 6% for the year so far with 3+ months to go. I can say that the Oregon Investment Council has done far better than I have. They have a lot more money to diversify with. [Help this poor soul out. Buy Apple stock. :-) ]

I Threw It All Away

The meltdown of Fannie Mae and Freddie Mac have given me pause. I'm in the process of trying to determine how much exposure the PERS Fund has to these two dismal giants and how their government takeover will affect the value of the Fund. As soon as Treasury lets me know, you'll be the first to know it here. These two housing funds are so large that any meltdown there is likely to have some significant ramifications in the value of any fund that holds them in sizeable quantities. Should know soon and will post when I get the answer.

P.S. Ley Garnett responded with a very helpful, if concerning answer. The total amount of the PERS portfolio invested in Fannie/Freddie is about $2.7 billion, mostly all in fixed income portfolios. As of the close of business today, that represents about 4% of the fund. I guess the question of the day should be, should we be worried?

It's Money That I Love

Well, not really. But it is always nice to get a raise. I noted that my bank listed my September 1 PERS benefit as already in my account. As I expected, my benefit check did, indeed, go up by 2% and my net benefit was noticeably higher than either my August 1 check or my July 1 check. This should convince the "doubting Thomases" out there that the legal fees really were a one-time reduction.

Please be safe out there this weekend. I've already had to be about several times and the old saying "it's a jungle out there" wouldn't be sufficient to describe how bad the traffic really is. Stay home and enjoy our most excellent (just kidding) Labor Day weather. This reminds me more of July 4th than Labor Day. Here's hoping for a long, pleasant fall. I don't want the rains to return anytime soon.

Foolish Mind Games

It has been said that foolish consistency is the hobgoblin of small minds. The Oregonian has once again demonstrated its miniscule mindedness. In yesterday's (Friday August 29) editorial, they displayed foolish consistency insisting that, although it would be painful, the Portland Police and Fire retirees who have benefitted from the erroneous calculations of benefits since 1995 (because of the Legislature's bill resolving the income tax gridlock coming out of Hughes v Oregon and Davis v. Michigan , should have to repay the overpayments. The PPFRS did not calculate the adjustment correctly and retirees have been receiving approximately 2.58% higher benefits since retirement. So, as in the case of PERS retirees, the Whoregonian insists that beneficiaries should repay their overpayments. My oh my, haven't we heard this line before. I hope that the coalition supporting PPFRS retirees is as agressive with their litigation as the PERS Coalition has been for PERS retirees. These are not errors for which the victims should be blamed. And there ought to be a statute of limitations on how long the funds have to recover the errors. Three years ought to be sufficient for auditing of payments and for finding mistakes. We are talking about errors that began as many as 13 years ago. Just because the administrators of these funds are totally incompetent, it doesn't mean that the beneficiaries should have to pay for their mistakes.

Tumbling Dice

My neighborhood fishwrapper (the Boregonian) reports that the Portland Police and Fire pension fund has been (surprise!) paying out about $3 million too much to retirees and their beneficiaries since about 1995. The Board will meet next Tuesday (August 26?) to discuss how to remedy the mistake, whether to recover the "overpayments" or to "eat the extra costs". This affects about half the current retiree cohort.

You can bet that the Portland Police and Fire pension fund Board will be taking cues from the PERS Board and will, if one were betting, follow PERB in collecting the overpayments. What makes this case somewhat different is that the Board is clueless about who is responsible for the mistake or how it was even made. This group didn't bother to keep minutes or notes during the period and so there is no way to actually figure out the inspiration for this error. The overpayments range from about $50 per month to slightly over $100 per month. The birdcage liner also reports that Portland Mayor Tom Potter and Portland City Commissioner Randy Leonard are among those currently being overpaid pension benefits.

I wish the Portland Police and Fire Bureau the best of luck in working through this uncertainty. In my fantasy world, the retirees are left untouched and this becomes a legal precedent that can be used to benefit PERS retirees afflicted by this latest case of "no good deed ever goes unpunished."

Skandalouz

A recent post on the PERS Oregon Discussion group raises an interesting question about the behavior of PERS towards active members in collecting from them for Attorney Fees this past April. Recall that the Oregon Supreme Court ruled that the PERS Coalition was entitled to Attorney Fees under the "common fund" provision. This provision allows that attorney fees be collected from the winners of a civil suit in some proportion to the gains they made by the ruling. In the case of active Tier 1 PERS members - who are entitled to the 8% rate guarantee - PERB ruled that 0.03% of the guaranteed earnings for 2007 be withheld one time only at the time the earnings were payable. This is to compensate attorney fees for the nearly $400,000,000 returned to Tier 1 members by virtue of the Strunk ruling that the guarantee is in fact the minimum rate that can be paid to Tier 1 members under any circumstances. For most Tier 1 members, the 0.03% "hit" represented a relatively small sum of money - about $60 or so for the typical member. What no one really worked out was how much this really will cost Tier 1 members over the long haul. Using some simple math, we can figure that the average member is losing not only $60, but the compounding effect of the loss of that money for the rest of his/her career. In a matter of 9 years, the $60 "hit" has doubled to $120 at 8% interest. The attorneys got paid in fixed 2008 dollars in one lump sum. PERS appears to have taken enough money from active members to cover their assessment towards the attorney bill. But what becomes of the money that PERS no longer has to pay towards retirees' retirement - the money that is no longer earning 8%? By my back of the envelope calculations, there is a considerable amount of money at stake here - probably much more than the attorney fees themselves. Who gets *that* money? No provision is made for that to go back into employee accounts. It seems to me that PERS deduction takes out far more than it needs to cover the one time attorney fees.

In the larger scheme of things, PERS probably had no alternative to deducting the money. Billing active members would have met with mixed results and driven up collection costs. But it seems to me that PERS could have discounted the attorney fee assessment so that over a period of say 5 years, the compounded amount would have covered the attorney fees. In short, I think some accounts must have been padded as a result of this one time fee. By any criterion I can think of, this is hardly a one-time hit for active members? Perhaps PERS will tell me where I'm wrong, but I don't see how any alternative explanation can obtain here.

P.S. I'll be off the grid for a few days as I recover from minor surgery on Friday. Regular programming should return next week.

What Are Their Names?

The witnesses, the various people covered by the plaintiffs' (PERS Coalition in White) motion for discovery. The ubiquity of technology is on display as the attorneys go for broke in trying to gain access to all the various ways the lawyers, the PERB, and the employers communicated in the run-up to the settlement agreement culminating in the White case now. The web site for the Coalition Attorneys (here), is ripe with every document produced so far for this trial. Of course, we won't get to see all the good stuff uncovered in discovery until the trial. But you can bet that the defendants are scrambling right now to either ditch crucial technology (at some risk, I might add), or are madly trying to assemble it in an order that won't reveal their true motives in rushing the settlement agreement out of the door. Stay tuned. This is bound to get a lot more interesting and exciting as time rolls on. It will be "fright night" on display in Judge Kantor's court just before Halloween. I'll be there complete with costume.

Limbo No More

The Bennett Hartman law firm has posted documents related to the White case and the recent hearing on August 7, 2008. You can read them here and here. These documents make it clear that the discovery phase of the trial is going to get very interesting as the PERS Coalition attorneys are seeking virtually every document in electronic form ever produced in the City of Eugene case and successors/ These documents include emails, voicemails, faxes, instant messages, Blackberry messages, text messages and virtually anything else involving communications between the attorneys and plaintiffs. As a tech geek, I was fascinated by the completeness of the request and the detailed form in which the request was made. It will be really interesting to see how the wide boys escape, dodge, and elude this request. Discovery is such a nasty weapon and it can be used so effectively in cases like this. For the first time in awhile my blood is quickening at the possibility of seeing what those sleazebuckets were up to in drawing up the "poison pills" in the "settlement agreement". The "settlement agreement" has always seemed to me to be such a brazen act of collusion between a group of employers, lawyers, and PERB.

The main act of this case begins October 23 and runs through October 27th in Judge Kantor's Courtroom.

Unbelievable

Tim does it again. Last week I noted that the blog was about to cross the 600,000 visitor threshold. In an offhand remark, I asked my predictive expert, Tim, to predict when this event would occur. Tim privately emailed me that the blog would crossover at 8:08 p.m. last night. While I don't know precisely when last night it occurred, but we have crossed over and Tim guessed it right again. I don't know how you do it Tim, but perhaps you want to predict the vote in the next presidential election?

On the PERS front, most window retirees have gotten their August 1st check showing the deduction for Attorney Fees in the Strunk case. As expected, the August take home benefit increased by a small amount, or it decreased by an equally small amount. The amount by which your benefit changed on August 1 over July 1 should indicate how much your benefit take home will *increase* on September 1. Add the amount of the attorney fee back to your take home and you'll have your future take home resulting from the August 1, 2008 COLA. PERS sent out the stubs for the August check yesterday and most members should start to see them today or in the next few days.

For What It's Worth

A few days back David Crosley (of PERS) and I had an email exchange about some questions relating to the implementation of the Attorney Fee deductions that will appear in tomorrow's check/deposit. I put together some questions and PERS has now posted the answers to these questions on their website. You can find the FAQ here. I thank David and the team at PERS for their quick responses to my questions.

Shock and Awe

I'm shocked and I'm awed by the popularity of this blog. It will be less than a week before we turn 600,000 on the old viewer odometer. Who'd a thunk that we'd still be getting about 2500 to 3000 hits per week after all these years. Given the speed at which PERS reform and PERS litigation is taking place, I expect I'll still be here three or four years from now. At the current rate, it will take about three more years before we record number 1,000,000, but there is only a small likelihood that the problem will have been permanently resolved before then.

(So Tim, you still reading? If so, when does your crystal ball say we'll hit 600K?)

Big Yellow Tax[i]

There still exists some confusion in various quarters about the tax status of the attorney fee reduction in benefits on August 1, 2008. PERS has communicated with me that these reductions will be taken POST-TAX. To put this another way, your gross benefit (before taxes) on August 1, 2008 will reflect the 2% COLA. After all taxes are calculated and deducted, the attorney fee will come out once from the net benefit (after taxes). So, it is quite likely that the cost of the attorney fee reduction will be about what your COLA is after taxes. I expect few peoples' net benefit to change significantly from June to July. After this month (August 1), the net benefit should be higher by the exact amount of the attorney fee reduction.

Your Luck Won't Last

As I had suspected, the Bell case won't have any impact on the proceedings in Arken or Robinson. I finally heard from Greg Hartman yesterday. He tells me that Bennett, Hartman, Morris and Kaplan is pleased with the verdict in the Bell case and believe that it is the first step towards securing and protecting the rights of members in relying on figures given to them by PERS. Hartman also agrees that the Bell case probably has little bearing on the rights of PERS members who are already retired.

So, although there is some similarity between Kay Bell's claims and the verdict in her case to the promissory estoppel claim in Arken, the differences in facts and circumstances and approach to litigation are such that it will not bear on the outcome of cases currently in litigation and on retirees affected by Arken/Robinson. For that, we simply have to wait for the higher courts to rule. And, we also have White - a case of profound importance to all of us. If the courts rule that PERB breached its fiduciary duty to members, and the court invalidates the settlement agreement, almost everything done so far will have to be undone. I'd be placing my money on White to dig us out of this hole.

What's Been Going On?

My friend PEG just contacted Judge Henry Kantor's office and confirmed that the White Case (concerning the "settlement agreement") has been postponed to October 23, 24, and 27. It was originally scheduled for August 3 and 4. It looks like I will now be able to attend the hearings after all. There is also a motions hearing scheduled in White for August 7.

White is a very significant case. At its core is the assertion that the PERS Board breached its fiduciary responsibility to PERS members and retirees by entering into a "settlement agreement" with employers in the City of Eugene case. The settlement agreement produced some very detrimental consequences to PERS members and retirees - consequences that would not have happened otherwise because the Supreme Court had issued rulings in the Strunk case that would have prevented them. The problem is that retirees and members were stake holders in the outcome of the "settlement", yet they were not only not consulted about the settlement, they were completely excluded and kept in the dark until the agreement was announced. All the actions taken in the Strunk/Eugene "remediation" (the benefit adjustment) arise out that settlement agreement. Thus, if the Courts invalidate the settlement, PERS will be busy undoing pretty much everything it has done to us over the past few years - except for the attorney fee reductions.

I would encourage those of you within short driving distance of Portland to mark those days - October 23, 24, 27 - on you calendars. I'm a firm believer in the power of the people to impress upon the legal system that their rulings have human consequences. Seeing lots of expectant faces in a courtroom could have some influence.