You Win Again

After several email exchanges with the good people at PERS, I now have an answer to the question posed in my previous post "Hey, That's No Way To Say Goodbye".  Unfortunately for all the people retiring, the answer isn't the one they had hoped for, and I'm afraid that PERS is well-covered for what they do.  I won't bother with the first of the messages since it is largely unnecessary relative to the followup email.  From David Crosley, PERS' Communication Director:

"The IAP retirement application states: "IAP accounts are subject to earnings or losses. Your IAP disbursement is based on the account balance at the time PERS processes the payment, not the date you select to retire."

Tier One/Tier Two statute (Chapter 238) differs from IAP statute (Chapter 238A) regarding crediting.

For Tier One and Tier Two, Oregon Revised Statutes 238.300 states in part that interest is "credited at the time of retirement."

For the IAP, Oregon Revised Statutes 238A.350 states in part that "adjustments...shall continue until the account is distributed to the member or forfeited." "

Thus, the behavior PERS exhibits with regard to the distribution of the IAP account (however and to whom it is distributed) is entirely in conformance with the statute covering the IAP, written by the Legislature in 2003 and modified slightly in 2005.  If people are unhappy with the way PERS does things, it will require legislative action to change.  Like everything involved with the Legislature it is always wise to be careful what you wish for.  Moreover, PERS cannot be charged with failing to tell people as the application itself contains the key sentence (above) that describes exactly what happens at the time the account is distributed.

 

Hey, That's No Way to Say Goodbye

Some recent PERS retirees have discovered another potentially costly inconsistency with the way that PERS treats the IAP account.  I have numerous reports of members taking a December 1, 2011 retirement and wanting to roll their IAP into other tax-advantaged vehicles.  The problem they are encountering is that PERS has 120 days to effect the rollover, and when PERS does the rollover has a significant effect on the interest credited to the IAP at rollover.  For example, we have a member with a transferred IAP as of early January who received the November 30 earnings credit, another with a later January transfer who received the December 31 earnings credit (nearly a full 100 basis points different), while a third won't have the transfer until 2/8 and will presumably receive the estimated 1/31/12 credit.  This inconsistency is quite costly (or can be).  I suppose that the attitude is that "it all comes out in the wash", but some people would prefer you don't do their laundry<g>.

So how about it PERS.  Can't you establish a consistent administrative rule that gives retirees who roll their IAP's over and fixed interest rate that is effective the date of their retirement (assuming they make the request at retirement).  There is no reason that retirees should be subject to the whims and perfidies of how PERS operates to figure their final crediting on the IAP.

We Take Care of our Own

That used to be the motto of the group known as OPRI - the only group in Oregon dedicated exclusively to the welfare of PERS retirees.  I and many others are lifetime members of this organization.  Now about 28,000 retirees are confronting the issue of repaying benefits once thought to have been legally received, but now apparently are subject to the aggressive collection actions of PERS.  Where is OPRI?  We've heard neither hide nor hair of this organization.  The organization has been turned over to the lobbyists Mark Nelson and David Reinhardt (yes, *that* David Reinhardt) and all communications for OPRI go through the lobbyists offices.  How does a member of OPRI communicate with OPRI *without* going through the lobbyists?  We just want OPRI to take some leadership in directing PERS to offer something besides to ludicrous options they given to repay overpayments.  We don't ask for much.  We just want OPRI to get off their collective asses and actually do something.  For all we know, they may be, but communications are exactly ZERO between the organization and its members.  Jay Osborne, the new OPRI president, doesn't seem to respond to email or to outright pings on the PERS Discussion Group.

If this is the organization that I have to put my faith in to represent my interests, God help me.  I want my money back.  I've gotten nothing for my lifetime membership except an organization that doesn't respond, hides under the cover of a lobbyist, and only acts when it appears that someone on the Board's interests might be at stake.  I miss the late Russ Gregory, a Board member of OPRI who died unexpectedly last month.  Russ was always free with information and we had some idea what was going on.  Now that Russ is deceased, OPRI has gone dark.  OPRI no longer appears to care or to take care of its own.

OPRI WAKE UP AND SMELL THE COFFEE.  YOUR DAYS ARE NUMBERED UNLESS YOU COME OUT OF HIDING AND TAKE SOME AGGRESSIVE ACTION TO PREVENT THIS LATEST PERS TRAVESTY FROM COMING TO PASS.  If you need legal money, why don't you ask for it.  We are all getting tired of waiting, and angry that nothing evident is being done.  Earth to OPRI.  Where are you?

 

Things I Don't Need

This should be treated as an open letter to PERS and to OPRI:

Dear All:

I've been spending a lot of time these past few weeks thinking deeply about the upcoming attempt by PERS to collect overpayments from PERS retirees from the period between April 1, 2000 and April 1, 2004.  Since I retired during that window of time, I am one of the people who will be tagged during the collections for about $14,000 in received overpayments.  And I'm really, really, really angry about the methods that PERS has put in place to recover the money.  One way is a hoax and the other way is an income tax nightmare.

During the recovery period that Judge Kantor stopped back in 2008, PERS offered affected retirees two ways -- and only two ways -- to repay money that was given to them THROUGH NO FAULT OF THE RETIREE.  PERS failed to warn any member considering retirement from April 2000 to mid-2003 that there was ANY possibility or likelihood that their benefit might be subject to change because of a (then) little-known and not-very-well publicized case involving the City of Eugene and other employers versus the PERS Board over the earnings crediting for 1999.  PERS provided estimates and benefits that noted NOTHING about this case, and counselors did nothing to warn retirees that benefits might have to be reduced because the 1999 earnings had been challenged and were not yet final.  So, many members retired in complete and total ignorance of this case, and were stunned in 2003 when the Legislature, following Judge Lipscomb's ruling, codified the earnings as 11.33% instead of 20% and provided mechanisms for collecting the amounts overpaid.

PERS, deciding to be generous, came up with a "friendly" (to whom?) way to repay the benefits.  They created the utter hoax called "actuarial recovery".  In this method, retiree overpayments would be divided by the number of months remaining in their actuarial life, and benefits would be reduced by that amount.  Seems simple, fair, and appealing.  They weren't planning to charge interest - kinda hard to do when the mistake is their fault, not ours anyway - and so this looked like one of the most friendly, least punitive ways to repay the amount owed.  UNFORTUNATELY, this description leaves out one of the unsavory aspects of the method that turns this seemingly user-friendly approach into a financial windfall for PERS.  The catch in all of this is that the payments continue for as long as the retiree and a beneficiary (if there is one) live, not when the bill is fully paid.  Thus, anyone who beats the actuarial odds will be paying considerably more than what he/she owes and PERS gets to keep and invest this bonanza along with all the other funds.  PERS' rationale for this is that not everyone would live as long as their actuarial life expectancy and so the ongoing reductions in benefits are needed to subsidize the benefits not repaid from those who die early.

The alternative to this unappealing choice is to repay PERS in a lump sum, which guarantees that you won't pay a nickel more than what you owe, although there are some tax implications that would require a CPA to untangle for you.

And, when you receive the final invoice, you'll have a grand total of 60 days to decide which poison you want to take.

I am deeply offended that PERS thinks I'm that stupid that I don't see the hidden costs of the actuarial recovery method.  It doesn't charge interest, but it charges payments for money you don't owe if you live long enough.  How is that different from charging interest?  Why can't PERS shut off the payments when the balance is paid in full?  Believe me, as a computer programmer, I know that it isn't difficult to do programmatically unless PERS' computer system is written in Sanskrit or Hebrew.  This is a trivial programming task.  What about the losses from people who die young?  Well, there is a simple answer to that question.  What about all the earnings from the people who decide to pay in a lump sum?  All of that money will be turned in within 60 days of billing and PERS has the rest of our actuarial life to invest that money and more than cover the losses from people who don't make it to fully repay their debt.

Furthermore, why aren't there more repayment options? The actuarial reduction method is a punishment to people who simply lack the funds to pay in a lump sum.   They are subjected to a lifetime reduction in benefits solely because they cannot pay all at once.  For the poorer of our brethren, there is NO choice on how they repay PERS.  This is akin to loan sharking because, as usual, the poor will get stuck paying more and for longer than the more affluent who can afford to pay the lump sum and be done.  Talk about economic discrimination.

PERS has methods on the books now to allow individuals to accelerate their repayments but only for the length of time it takes to repay the bill.  For example, ORS 238.715 offers the possibility that PERS can reduce member benefits by as much as 10% per month to repay a debt.  At this rate, most people would have repaid their debt in 3 or 4 years, rather than 20 or 30.  I suspect some people would take this option if it were available.

What about a 5 year payment plan where individuals who can't afford the lump sum could repay the benefit in 5 equal installments over 5 years (or 60 equal installments over 5 years).

There are many options that would lighten the burden on the less affluent, or encourage some of us to consider a shorter time payment plan than the lump sum.  In any of these cases, PERS would get its money back sooner, be able to invest it in securities that would more than indemnify against any losses due to early death and failure to complete repayment.

The bottom line is that PERS must consider some alternative repayment methods to the ones it offered the first group.  It is clear that if PERS continues to collect payments in perpetuity, it must be in violation of the Fair Credit Standards and Practices in a way that would make a loan shark blush, not to mention invite scrutiny from the same agency.

This whole issue needs careful input from legal advisors and those who are not thinking of taking the easy way out.  It would be nice if OPRI would get off its hind end and take an active role in pursuing alternatives to the ones available now.  When the first round of repayments began, OPRI was nowhere to be found except through the actions of the PERS Coalition in the courtroom trying to prevent repayment at all.  That's all noble and good, but now it is crunch time and most of us will be facing the invoice in a few months.  At this point, we need some legal hardball.  What I don't need is someone telling me how generous PERS has been.  That's bullshit and we all know it.

Money Changes Everything

At the end of last year (2011), the Oregon Supreme Court ruled in its Robinson v PERS opinion that PERS could collect the overpayments that have been outstanding since as early as 2006 when the Strunk/City of Eugene remediation plan was implemented.  To refresh memories, the overpayments were the result of PERS calculating benefits for people who retired between April 2000 and April 2004 on the basis of the challenged 20% earnings crediting for 1999.  When the 2003 Legislature and the PERS/City of Eugene settlement agreement were finalized, the earnings order was vacated and replaced by one crediting only 11.33% for 1999. The overpayments resulted because PERS used the account balances that included the 20% crediting and then subsequently recalculated benefits using 11.33%.  Thus, from the time an individual retired in the specific window mentioned above to the time the benefits were corrected beginning in 2006, individuals were receiving more than they were legally entitled to receive.  (I'm stating facts here, not my individual opinion about the propriety or ethics of collecting on the overpayments).  For almost 20,000 individuals, they were overpaid anywhere from a high three figure amount to some healthy five figures.  PERS began collecting from some members before Judge Kantor ruled that PERS couldn't collect the money and so they are not affected by what PERS does now.

The most common question I receive is "how is PERS planning to collect the money".  Again, a brief history lesson.  When PERS decided to begin collecting the overpayments, it gave retirees two options to pay.  The first option was to repay the money in a lump sum and be done with it.  The second option was to take the balance due, compute the individual's life expectancy, and reduce the benefit an amount deemed to recover the overpayment by the time the retiree reached his or her actuarial life expectancy.  Because PERS intended to charge no interest on the repayments (it wasn't the individuals' fault that they occurred), the plan was to keep on collecting until the individual and his/her beneficiary died.  Of course, for individuals with long life expectancies, they would be paying significantly more than individuals whose life could be foreshortened by illness, or unexpected events.

It is unlikely that PERS will change the methods by which individuals can repay the benefit overpayment, but the time elapsed since the original collection invoice and now has been significant and many of us have had plenty of time to think about this and to come up with important questions about the process that have not been satisfactorily answered.   Yesterday, I sent a list of four questions to PERS.  Predictibly PERS was not ready to answer these questions, but they remain important and will demand answers before PERS starts collecting from anyone else.  For the benefit of all, I post my questions here.  I don't pretend that these are the only questions, but they are ones that have occurred to me and to others as the day of reckoning draws nearer.  People are not going to have a long period to decide what mechanism to choose, and the answers to these questions may go a long way toward helping people make the correct decision.  Of course, these presume that individuals actually have a choice.  For many people, paying in a lump sum simply isn't an option.

My questions are predicated on a simple fact.  The money owed is money we've already received and have already paid federal and, in most cases, state income taxes.  We are going to be required to repay the gross amount, not the after-tax amount.

Herewith are my questions, with an additional one not posed in my email.

1.  Under the actuarial repayment method (ARM), is the payment computed only once and then remains fixed for the duration?  In other words, are there circumstances under which the ARM payment changes (e.g. after a COLA or a pop-up following the death or divorce of a beneficiary)?

2.  Is the ARM payment taken pre-tax (as it should be), or is it taken post-tax, which means it will be taxed twice.

3.  Under a lump sum repayment, will the 1099R for the tax year in which the payment is made (presumably 2012), reflect the amount in box 10, 11, 12, 13, 14, where such non-taxable credits are typically reported?

4.  If the 1099R does not show the amount of the lump sum payment as an income offset for 2012, then will the invoice we receive be detailed enough that the amount of overpayments will be listed by calendar year of overpayment?  This level of detail would be critical should those of us who have sizable overpayments to make decide to file a "right of claim" (section 1341, IRS Code) on the amount as either an itemized deduction or a tax credit (lump sum greater than $3000) against our 2012 Federal and State income tax returns?  This should be mandatory of PERS.  The IRS isn't likely to take kindly to the typically uninformative bills and statements that we've gotten from PERS up to this point.  It is imperative to have complete documentation of what and why we are repaying so that we can take this to the lawyer or accountant of our choosing and file whatever papers we need with the IRS to facilitate a credit for the amount of taxes we've paid on money we're no longer entitled to.  No one is asking PERS for tax advice and no one is asking PERS to do anything extraordinary.

5.  Would it be permissible to pay the lump sum by taking money from an existing tax-advantaged account - IRA, 401K, 403B, 457, SEP - and negotiating a trustee to trustee transfer, thereby not triggering a taxable event?  In this circumstance I don't believe that there is a "right of claim" to be exercised and this might be the easiest method of all for many.

This is not an ordinary event in one's tax life.  Most people don't have to repay amounts that have already been taxed.  PERS should bend over backwards to provide ordinary, but complete, documentation of the when, how, why, and how much so that individuals can avoid the whammy of repaying a pre-tax amount with post-tax dollars.

The Thrill Is Gone

Yesterday marked the final business day of 2011.  Ever since 2000, PERS retirees and future retirees have been watching and waiting for the courts to unravel, untangle, and to clarify a variety of situations that threatened the hard-earned pensions of public employees in Oregon.  Starting with the City of Eugene case, filed in early April of 2000 up until December 30, 2011 - nearly 11 full years - retirees have lived in a state of perpetual anxiety that some component of their pensions would disappear either before they had a chance to retire, or even afterwards.  The final gavel on all the litigation surrounding the City of Eugene case, the Legislative reforms of 2003, the "infamous" settlement agreement between the City of Eugene plaintiffs and PERS, and PERS' hamfisted attempt to collect "overpayments" from those members who retired between April 2000 and April 2004 ("window retirees") came down yesterday.  The Oregon Supreme Court rejected the review of its own verdict in the "Robinson" case -upholding its own verdict - and it closed the door on all but a small piece of "White" case - that which charged PERS with a breach of its fiduciary responsibility in signing the settlement agreement.  The string has run out; the collection efforts for the remaining "overpayments" from the 1999 "over credit" will be permitted to go forth, and by Spring of 2012, "window retirees" will either need to write PERS a check to clear their accounts, or begin to see their monthly benefit reduced by some small, but unknown, amount in perpetuity.  I haven't decided what I am going to do.  It grates me no end to have to see my benefit reduced for my life and the life of my beneficiary; on the other hand, I'm in no mood to hand over a large sum of money to a bunch of people who simply don't deserve the money.  I did nothing wrong and I submit there was no error in my benefits regardless of what politics and the courts have said.

The only heartening thing about the Supreme Court's ruling in the White case is that the court remanded back to Judge Kantor the matter of PERS' transfer of $61 million from the contingency reserve into the accounts of the 8 employers responsible for the City of Eugene case.  The Supreme Court ruled that this was not a condition of the settlement agreement and that the amount bore no relationship to the amount the employers may have been overcharged as a result of retirements that occurred from the 8 employers during the period in question.  The Supremes ordered that the amount be actually computed, not just estimated, and this will likely result in higher employer rates for the employers who benefited from this arbitrary transfer of money.  This means that, hopefully, the City of Eugene plaintiffs will finally get hoist on their own petards in all of this.  While it was a small victory for members - one that won't make any difference to any individual - it at least punishes PERS and the City of Eugene plaintiffs for what appears to me to be a form of collusion.  Too bad there isn't any worse punishment.  But, I'll take a victory in any form at this point.

The last decade's worth of litigation has been extremely costly to all parties and PERS has played both sides of the street for too long now.  The time has come for this gamesmanship to cease and desist.  PERS must decide NOW whether it is a trust for the benefit of its members, or a slush fund that benefits employers.  We may all be stakeholders in the system, but the legislative mandate for PERS is clear.  It exists solely and exclusively for the benefit of members of the system.  The moment it ceases to exist for that purpose alone, it makes a mockery of trust law, and makes the notion of a fiduciary responsibility to the members a joke.  Finally, it is absolutely clear that PERS has become so heavily influenced by politics that it is impossible to get any sort of a fair hearing in Oregon.

From the very beginning of the decade, starting with the City of Eugene case, it has been clear that politics and economics would take priority over statutory duties.  The courts have been influenced by the ravings of the media, the media has pounced on any small or large PERS story with the gusto of a ravenous coyote.  And the citizens of Oregon, who have eaten up the mainstream media's reports like the starving in Ethiopia, have no interest in the truth of how PERS came into being, what its functions are, and who it is supposed to serve.  The public has swilled up the big lie that "…all money in PERS belongs to them, the taxpayers" and not to the people who actually earned and saved that money.  I hope that the 2012 Legislature will put an end to this bloodlust by passing a bill that declares retiree personal information, including benefits, is completely off limits.  There is no compelling need to know much of anything except the amounts of benefits, not the specifics of who gets them.

This is my last post for 2011.  While I wish I could have ended the year with cheerier news, I guess the "good" news is that 11 years of litigation have finally come to an end.  Now, let's hope the Legislature has the good sense to leave the PERS system alone for awhile and let it recover from these debacles.

I wish for all to have a safe, happy, and prosperous New Years.  I say that without irony.  I hope that the financial markets stabilize and people can get back to enjoying their retirements.  Some of us have wasted nearly 11 years hoping to get some closure on the crap of the past decade.  At last we have it; it is time to enjoy what time we have left.

 

 

 

Fruitcakes

OK. A bit of an inside joke for those who know Jimmy Buffett music.  Mea culpa, mea culpa mea maxima culpa.  In my last blog post, "Dark Side of the Moon", I made an error that Ted Sickinger of the Oregonian took the time to point out.  In the case of the "true up" of Mike Bellotti's final PERS benefit, the mismatch between his account balance plus the employer match is made up by the Employers' Rate Reserve fund, which is charged to all employers in the rate class, not just the University of Oregon. This means that, in Bellotti's case, the way the University of Oregon computed his salary (including all the top ups from outside sources) ended up strongly underestimating what his final pension benefit would be.  Thus, when Bellotti retired the bill for that underestimate is shared amongst all the employers in the State pool regardless of the source of the money.  This leads to a whole series of interesting questions about how things like taxes were handled on this income when it was being earned and how the University of Oregon and PERS could have been so off the mark in funding his benefits.  After all, if Bellotti's endorsement income and Nike income all passed through the University and some of it on to Bellotti, wouldn't the University have paid PERS premiums on the money at the time it was earned.  Or does this count as income and Bellotti is expected to pay his own taxes on it, but at the end the University of Oregon saddles other employers with part of the bill?

I stand by the rest of my piece, but the "true up" was most definitely wrong.  Because the University of Oregon only bore a small part of the bill for Bellotti's retirement, there is a scandal there.  But the scandal belongs at the feet of the University of Oregon, not PERS.  PERS just administers the system it is given and has to pass through the rules as they are applied.  I don't know when individual employers were let off the hook for these types of errors and omissions, but it had to be after 2002.

One thing I find quite curious in this whole matter.  The IRS limitation on pension income passed in 1994.  It applied to all working people regardless of when they were hired.  I know this personally because my wife, who was hired in the same year as Mike Bellotti by a private employer, was hit by this and continues to be affected by it until she retires.  There was a limit in existence prior to 1994, but at the time it exceeded my wife's salary.  The change in 1994 set the limit back to $150,000 and increased by $10,000 chunks until it was at $200,000.  At that point, the limit went up in $5000 chunks where it rests at $245,000 today and will be $250,000 next year.  What I don't understand is how anyone who retired after 1994 could have escaped that limit, as Bellotti and all PERS retirees hired prior to 1994 seem to have been.  Call it envy or call it curiosity.  What IRS ruling did PERS get that permitted Bellotti to draw a pension of $500,000 on salaries that weren't eligible beyond $245,000.

I leave that for the investigative reporters in the group to figure out.

Dark Side of the Moon

Apologies to Floyd.  As we predicted, the folks at the Whoregonian could not wait to start their muckraking about individual PERS recipients within weeks of the first data release.  While the object of their rectal examination is former University of Oregon coach and Athletic Director Mike Bellotti, the reporters have not been satisfied to wait until the second data release (March 9, 2012) to start pursuing their charges of some sort of fiscal shenanigans with Bellotti's outside benefit.  You'll get no argument from me that Bellotti's benefit needs some scrutiny, but many of the answers could have been obtained with the second release of data.  Moreover, it proves the point that the analysis could have been done without exposing the names of any individuals since the reportwhores were bound to make information requests anyway.  If I had seen a $41,000 per month benefit showing up at the top of the list, more than $10,000 higher than the number 2 on the list, I'd probably start asking some specific questions about who that individual was.  And so they would have found out anyway with a special information request.  And in my world, a special information request for a name would have been a far better solution than the shotgun, throw every name against the wall to see what sticks, approach.

So what have we learned.  Well, we've learned that there are lots of unusual benefits that got to be counted as salary for PERS benefits than any of us could have imagined or any of us have access to.  It is nice to know that the use of a car, a country club membership, and certain kinds of endorsements can be run through the University and then be valued for salary purposes and included in final salary calculations.  What we don't know is exactly who paid for those benefits during Bellotti's career.  Duck boosters (no tax money), Phil Knight (no tax money), Duck Athletic fund (ticket sales and sales of merchandise, no tax money).  So, to the best of our knowledge, only a small amount of public money was used to pay Bellotti's salary while he was working.

To get to the final retirement benefit we run into another problem.  There is no question that Bellotti's actual salary did not generate the kinds of income to PERS to have covered a combination of a $2.5 million account balance and a $2.5 million employer match to fund the Full Formula benefit.  According to PERS, the money needed to fund Bellotti's stream of retirement payments amounts to $5 million dollars throwing off 8% interest for Bellotti's life.  Any mismatch between Bellotti's actual account balance (maybe $600,000 at retirement) and the employer match (another $600,000 give or take), would have to be made up by the employer at retirement so that Bellotti's working balance would make it to the initial $5,000,000.  This raises another question:  WHO actually paid the the "true up" to PERS?  We know it was the University of Oregon, but we don't know where the money came from.  I can guarantee that it DIDN'T come from taxpayer dollars.  I'm willing to bet that a donor (Phil Knight? again) or the Duck Athletic Fund (more donors) ponied up additional contributions to the DAF so that Phil's true-up payment could be made.  Thus, we have it likely the bulk of the money used as the corpus for Bellotti's pension DID NOT come from taxpayer money.  We don't know this for certain because the folks at the local rag didn't bother to ask where the money came from.  A straightforward question:  did any of the money required for the Bellotti "true up" payment come directly from taxpayer sources?  would have answered the question.

The only question I have is the curious and slightly unsavory appearance of the ex-Mrs Bellotti picking up nearly $50,000 per year as the result of a divorce degree with Mr. Bellotti, and then continuing to draw that money even after she and Mr. Bellotti remarried sometime later.  It does have a slightly funny smell to it.

But the thrust of the O's article is that the whole matter of Bellotti's pension smells funny and, by implication, there must be a bunch of other smelly cases too.  I'd hazard a guess that Mr. Bellotti's case is unique as all the other coaches and AD in the system were hired after the IRS salary limitation came into play.

So I say to the Oregonian.  Hope you enjoyed your trip to the dark side of the moon.  You probably won't find too many other cases like Bellotti's, if you find any at all.  When you scramble back into the light, I expect that you'll be left with only this story to tell.  The rest of us don't have tricks like these employed.  So, you've left 105,362 of us exposed just so you could tell the (non) story of Mike Bellotti.  And I am willing to bet that the Mike Bellotti story will result in a bunch of unnecessary sturm und drang at the next Legislature that will end up hurting a bunch of innocent people unnecessarily.  Virtually none of us have guardian angels like Uncle Phil.

One of Us Cannot Be Wrong

OPB is going for a second helping from the PERS trough on Tuesday December 13, 2011.  It is a follow on show to the December 5 episode featuring Dennis Thompson of the Salem-Statesman Journal.  Paul Cleary, Executive Director of PERS, yours truly, and one other former PERS member will be "guests".  Cleary will be in the studio, while the two of us commentors will be in the peanut gallery from the phone lines.  I won't have to call in.  They will call me and give me my 15 seconds of fame (or not).  Paul will, no doubt, be talking about the facts of PERS; hopefully those illuminated by the semi-annual publication called "PERS By The Numbers", which the Statesman Journal editor, Dick Hughes, seems to have just discovered although this publication has appeared twice annually since 2005.  It is really worrisome when the MSM cannot discover a document that would have answered virtually ALL questions since it first came into existence.  No wonder most of us have little or no respect for the MSM.

This follow on show on OPB and "Think Out Loud" is the result, I'd like to think, of the loud protests evident on the OPB web site about having Thompson on before any facts were presented about the PERS system.  While I am optimistic that Cleary and I can present facts that will allow the public to understand better how benefits come into existence in the PERS system, I am pessimistic because my experience has shown that most people who have an ax to grind with the PERS system don't understand a whit about it and are, to steal words from my wife, "invincibly ignorant".

My counterpart on the show will be someone who can't understand why his friends or neighbors, teachers, can possibly get or deserve their $72,000 annual benefit.  I make considerably more as the nosy among you have probably figured out, but my benefit can be explained away easily.  My "opponent" on the show is wrong and I hope to be able to show him why.  Of course, "history is obdurate" so I may not be successful in convincing him or anyone else who simply refuses to know.  A friend from a past life used to say "people would rather believe than know".  I think truer words have not been spoken.

Tune in for yourself on OPB radio to Think Out Loud Tuesday December 13, 2011 at 9:00 a.m.  The PERS segment is scheduled to be at the top of the hour.

 

 

Don't Think Twice, It's All Right

The usually reliable radio show, "Think Out Loud" carried on Oregon Public Broadcasting will air a show tomorrow (December 5) to discuss the outing of PERS retirees and their benefits.  The ONLY guest on the show to the best of my knowledge will be Dennis Thompson, the flack for the Salem Statesman-Journal, who has written about PERS issues for the paper for the past several years.  Thompson is a comparatively fair guy who tries to print the truth occasionally, but mostly he gets caught up in the rhetoric about PERS where facts take a back seat to opinions.

I am a Cornerstone member of OPB.  That means I donate more than $1000 per year to public radio.  Part of my expectation for such a donation is that OPB present fair, unbiased, and objective journalism in their programming.  The "Think Out Loud" show tomorrow fails on ALL those accounts.  Thompson has already demonstrated his bias and lack of objectivity, and only barely meets the standards of fairness whenever he's been backed to the wall and has had to correct something he's published.  There are many people in Oregon, myself included, who could easily provide OPB with an effective counterpoint to much of what Thompson has tried to argue about the shortcomings of PERS.

As a public service, I'm going to offer some FACTS about PERS that Mr. Thompson surely won't present because they would contradict his opinion about the system.

• The MEDIAN PERS benefit is $1902.66 (less than $24,000 per year).  The median is used here because it is a robust statistic and a clearer indicator of the true state of PERS than the average or mean, which is something above $2300 per month.  The average is strongly affected by the outlier benefits of people like Mike Bellotti.  If you averaged my salary, my middle daughter's salary, and Bill Gates' salary, you'd come up with a figure of over a billion dollars per year.  Is that an accurate description of the average salary?  Of course not.  You'd argue that Bill Gates' salary exerts such a strong influence that it produces a misleading average.  Well, the same is true with the PERS statistics.  Out of 105,363 currently listed retirees, slightly more than 800 receive benefits in excess of $100,000 per year (less than 1% of the whole population), while there are about 13 members whose benefits exceed $200,000 per year.  Even averaging among the 13 members with $200,000+ per year pensions would be heavily weighted by Bellotti's outsized benefit.  So, there is no reliable way to estimate a measure of the "average" PERS benefit without encountering the effect of less than 1% of the population that leverage the average up by nearly $5000 per year.

 

• Concerning the 6% pickup.  Yes, this benefit was negotiated in 1979 in lieu of a pay raise that would have been in excess of 10% due to 16% inflation.  While pay raises resumed some years later, two things seem to have been forgotten.  The pickup in lieu of a pay raise was just that.  Nobody got a pay raise when that happened.  Salaries lagged behind and when pay raises resumed they were always less than the current rate of inflation and never restored the 16% lost to inflation in the year of pickup.  To suggest that the pay raises that resumed somehow negated the need for the pickup is to fail at basic economics.  The only way that the pickup could have been eliminated would have been to give the pay raise that the pickup obviated.  Since that never happened, the lost purchasing power of public employees still getting the pickup has never recovered.
• Employer rates are going to bankrupt Oregon.  This has been one of pet peeves since at least 1994.  During the go-go 1980's and 1990's the employers were banking as much as the employees were on their PERS accounts.  Because high earnings tend to lower employer rates, the employers failed to plan for the day when the gravy train would stop.  They took the low rates, failed to bank the savings, and then had to beg PERS for an installment plan to amortize rate increases over a longer period of time.  When even the installment plan didn't work, many employers went for Pension Obligation Bonds essentially betting on the same forces that got them into hot water in the first place.  The rates the employers are paying now are the result of employer greediness and spending patterns, the PERS Board's feeling sorry for the employers, and sheer stupidity borrowing to pay off what amounted to another loan.  The employer rates can be blamed almost exclusively on the employers.  Nothing PERS members did or could do caused the predicament the employers are in today.
• Taxpayers are entitled to know PERS benefits because they pay the salaries.  Yes, this is partly true, but not entirely true.  Let's take Higher Education as an example.  Higher Education's general fund budget comes to less than 10% of the operating costs of each institution.  Therefore, taxpayers are responsible for 10% of the salary budget.  At best, they are entitled to know approximately 10% of my salary.  When the issue comes to PERS benefits, the people receiving them are no longer receiving taxpayer money.  Roughly 25% of the money coming in to PERS comes from general fund sources.  The remaining money is from investment earnings.  So, my retirement benefit derives from 10% of my salary and a fourth of that to PERS, and the remainder from non-taxpayer sources.  I'd gladly reveal the 2.5% of my PERS benefits that can be traced back to taxpayer sources.  My academic salary came from grants, contracts, tuition, fees, indirect costs on grants and contracts, and only a small fraction from the taxpayers.  Thus, my retirement benefits began from those same sources, and then investment income funded the rest.  This argument holds true for many agencies that have a source of income other than the state.
• Whose money is the 6% pickup.  It is mine.  PERS and my employer always treated it as part of my salary and when my PERS benefits were calculated, my final salary always included an additional 6% as the pickup.  If there was ever any doubt about whose money that was/is, this is the needed confirmation.  If Thompson, or anyone else, wants to propose eliminating the 6% pickup, just remember that it would be a 6% pay DECREASE, plain and simple.  It isn't a matter of saying "well, we eventually gave you raises didn't we"?  Nope, not at all.  We never recovered any of the purchasing power lost to that tradeoff.  Taking it away now, or making employees pay it instead (the same thing, in effect) is a salary decrease plain and simple.

 

So, I challenge my friends at OPB who've happily taken my Cornerstone gift every year for the past four or five years to honor my expectation of "fair, impartial, unbiased".  Failure to deliver on this basic promise will cost you my cornerstone membership, and possibly more.  I wouldn't spend too much time thinking about it.  The show airs tomorrow.  If you have to think about it a second time, you're done from this household.  I'll continue to listen, but you won't get those membership dollars from me.

 

 

 

When The Whip Comes Down

When will they ever learn?  The PERS Coalition has had a dreadful record of inserting themselves in legal proceedings at exactly the wrong time.  I have no idea which genius decided to *not* intervene in the original legal proceedings between PERS and the Oregonian and the Statesman-Journal.  By taking the "high road" in that case, the parties reached a settlement (does that sound achingly familiar?) that permitted the newspapers to have somewhat free reign over the lives of PERS retirees.  So, at the last minute (relative to the length of this case), the PERS Coalition pulls a goal-line stand to enjoin PERS from releasing the information (today) to the newspapers.  And the legal response?  Too late.  You don't have any standing.  You could have had standing, but you sat on your hands while the real action was taking place.  Too bad, so sad, way too late.

Argh is all I am capable of saying at this point.  The Coalition has been defeated again by its own poor sense of timing.  Rhetorical question:  does PERS ever switch sides in litigation?  Does it rain in Oregon?  Does this "lack of standing" have a familiar ring?  It does to me.

So, when you wake up one of these mornings with your name plastered across one of the newspapers or find your name in some whipped up database, you can blame both the PERS Coalition and Attorney General John Kroger, and for good behavior, you can add PERS itself to the list of people selling us out right, left, and center.  The whip has come down again, and we are again the whipping people.  How fun.

God Willin' and the Creek Don't Rise

Nothing like taking things down to the wire.  The PERS Coalition's lawsuit against PERS to prevent the release of retiree names with the data dump on November 21, has been scheduled for a hearing at 1:30 on - you guessed it - November 21.  Judge Vaughn Day of the Marion County Circuit Court has been assigned the case.  Day, a recent Kitzhaber appointee, was previously a plaintiff's attorney and also the state chairman of the Oregon Republican Party from 2005 - 2009.  I have exactly zero information on the few rulings Judge Day has made since his appointment in August 2011.

There are some legitimate concerns about the timing of this hearing.  While I can believe that Judge Day's calendar prevents him from hearing the case until THE day, one has to wonder about how this will play out.  For the sake of argument, let's assume that Judge Day holds with the plaintiffs and enjoins PERS from releasing the names along with the current benefit.  How does this work if PERS has already given the newspapers the information and they've already done something, albeit small, with it.  Suppose the Oregonian jumps in immediately and publishes the names and benefits of all who have retiree benefits in excess of $100,000, which was their request.  Since there are less than a thousand of these people, the data could be extracted quickly and easily and this could be published almost immediately, even before the Judge's ruling comes down.  What if PERS turns over the data earlier than November 21 so that we wake up on the morning of November 21 and find something far greater on the front page of both the Salem and Portland papers?  How would Judge Day handle that, particularly if he is inclined to support the plaintiffs' case?  Would the Oregonian and the Statesman-Journal be that ballsy knowing they would be at a hearing on the same day?  Are bullfrogs waterproof?  Does it rain in Oregon?

The logical and rational thing to do would be for PERS to hold back turning over the data until Judge Day rules on the 21st.  Since his decision must be issued in a timely matter, an injunction or not will almost assuredly come down nearly immediately after or during the hearing.  PERS should prepare two sets of data - one containing names and benefits of all 110,000 retirees or their beneficiaries, and a second containing only the benefits.  This way, they could meet the terms of the settlement agreement one way or the other by providing the mandated (by Judge Day, not by the settlement agreement) data no later than November 21st.

It is hard for me to imagine that PERS would let loose of any data until this legal obstacle is overcome.  At least that is the point of the title of this post.  I don't have any faith in the integrity of either newspaper, but I still hope that PERS has at least an ounce of integrity remaining in its rapidly depleting bank.

Somewhere There Is A Someone

Who waits eagerly to get his/her hands on the names and benefit amounts of PERS retirees.  It may be an identity thief who, with a few keystrokes, could easily access the rest of the information needed to pull off a rather simple theft of identity.  It may be someone who hates PERS retirees and their benefits who simply wants to do harm to someone doing better than he/she.  Same ease of gathering the needed information.  Or perhaps an ex-spouse or a child would just love to know how much the "old man" is bringing home in retirement.  Maybe we could just confuse him and get him to sign over some of that "unneeded" money to a worthy (not) cause.

 

These are just a few of the scenarios both the Oregonian and the Statesman Journal will face if they release the information that PERS seems to be obligated to turn over to them in two installments.  If nothing changes between now and November 21, the first wave of information will hit the desks at both newspapers.  It will include the full name of the retiree and the amount of the current benefit, uncorrected for any court rulings that have recently taken place.  In short, for 38,000 of the retirees who retired between 2000 and 2004, their information will be overstated.  On March 8, 2012, the remainder of the information will be turned over.  This will include FAS, method of retirement (Money Match, Full Formula, Formula plus Annuity), initial benefit.  It won't include any additional "personal" information as if this weren't enough.

 

Fortunately, the PERS Coalition is taking this matter quite seriously.  Earlier this month the members of the Coalition voted to seek a temporary restraining order to prevent the initial release of the information on privacy grounds relating to some (and more) of the issues raised in my first paragraph.  The Coalition is collecting names of potential plaintiffs and a filing will take place in sufficient time for a court to rule on the restraining order before November 21.  I think the objective is to prevent any release of this information until the Legislature, which convenes before the next data dump would be scheduled to clarify its legal intent of the current records law.

 

As I get more information, I will post it forthwith.  I suspect that the Coalition might seek some contributions from retirees.  I'm all in with whatever I can afford to contribute.  This is a really, really, really important issue.  Whether you believe in open government or not, I have NO problem with the release of benefits individually provided no names are attached to the particular benefits.  It provides nothing significant and furthers only one agenda - harassment of retirees - which is not the intent of the open records law. There is no public "need to know" any of our names.  They are welcome to my benefit amount so long as they don't know whose specific benefit it is.

No Banker Left Behind

The Oregon Supreme Court delivered its final body blow to any semblance of contract law in Oregon today.  It ruled in favor of PERS and the employers in the Arken case, and it ruled in favor of PERS in the Robinson case, overturning the lower court's ruling in the latter.  Basically the court gave window retirees the middle finger when it wrote that, in effect, we were stupid if we believed our Notices of Entitlement since the City of Eugene case was so public, so prominent that we couldn't possibly have not known that the 1999 earnings were not final.  While this might have been true for anyone retiring after the early part of 2003, those who retired prior to the City of Eugene case ruling coming (i.e. before October 8, 2002) wouldn't have had any reason to expect that the 20% earnings crediting in 2000, for 1999, was in jeopardy.  Based on my lengthy experience with PERS retirees, very few people paid (or pay) attention to the minutiae of PERS court cases or the minor changes that affect people in a myriad of different ways.  If nothing else, the rulings in these cases should tell people that their PERS benefits are subject to the whims of the legislature and the courts.

People may wonder about the ruling in the White case - the PERS Coalition challenge to the settlement agreement between PERS and the 8 employers in the City of Eugene case.  The arguments in the White case took place some time after the arguments in Arken/Robinson, and the ruling will probably be handed down next month if the spread holds.  However, anyone holding out the slimmest of hopes for an affirmative ruling in White need only read today's decisions to realize that there is no possible way that this court will overturn the settlement agreement.  Today's decisions relied almost entirely on the fact of that agreement.

I am not going to bother to summarize the rulings today.  They are 71 pages long, and the ruling in Robinson is so infuriating that my blood boils just thinking about it.  The court essentially agrees with the plaintiffs legal arguments, but dismisses them in favor of an argument that wasn't actually made, and uses that reasoning to overturn the trial court's ruling (Kantor).  Both cases have been remanded back to Kantor for final implementation.

What does this all mean.  Arken was a long shot.  Losing it doesn't do anything to change the status quo.  Robinson, on the other hand, is the case that argued PERS had no authority to try to collect the "overpayments" we received before the Strunk decision was finally implemented in 2006.  If you can scrape your memory banks and go back to 2006, you will recall that you received a bill from PERS telling you that you owed them money - in my case, about $14,000 -which could be paid in either a lump sum or via a method called actuarial reduction at zero interest.  Assuming that offer remains, anyone who received one of those bills will now be obligated upon notification by PERS to begin the repayment process, either by writing PERS a check, or by accepting a small reduction in your monthly benefit.  Of course, we are all about 6 years older since those bills came out so that the actuarial reduction payments will be larger than they would have been had they started in 2006.

It is clear that the days of the PERS Coalition's success in fighting against changes in the PERS system are over.  It is clear that the Court is no longer persuaded by the stunning logic of the legal argument, but instead seems to bend over backwards further and further to rule in favor of PERS and the employers.  The more you read the Court's arguments, the more convoluted they appear, and the hidden forces behind them all are politics and economics.  Contracts aren't worth the paper they are printed on.  To me, this says that PERS and the employers are no different today than are the bankers and Wall Street firms who have skated by.  The new motto is "No PERS retiree gets ahead", or "No Banker Left Behind".

 

P.S.  If I weren't feeling crappy enough about the erosion of contract rights in these rulings, Steve Jobs' death hasn't left me in a better frame of mind.

 

We Get To Feel It All

Tomorrow morning (October 6), the Oregon Supreme Court will release its written opinion in the Arken case (and perhaps the Robinson case as well).  I have no further information (such as the decision).  The decision will be posted on the OSC's web site at around 8 a.m. or close thereto.  Perhaps some of the agony of waiting will finally be over.  At this point, any opinion is likely to be melodramatic.

Midnight in the City of Destruction

Just sitting around contemplating the potential end of summer.  I've received a number of thoughtful emails about the impending release of retirees' names and monthly benefit amounts.  These emails provoke some interesting notions.  I thought I'd run a few up the flagpole and see what holds.  Bear in mind that these aren't all my thoughts, but are the thoughts of some others that I've shamelessly borrowed because they deserve an airing.

• There are three cases awaiting final rulings before the Oregon Supreme Court.  These are Arken, Robinson, and White.  Decisions should be forthcoming in all these cases sometime before the end of the year, and there is no reason to expect that they might not come down in the next few weeks.  [This is a statement of fact.  Implications and questions follow]
• Assuming the decisions come down before November, will PERS be able to adjust the benefit levels to reflect the court's judgements and orders?  If the court holds for Arken, Robinson, and White, the benefit levels of retirees affected by those cases would rise.  On the contrary, if the court rules against Arken and White, but upholds Robinson, the current figures are accurate.  If the court rules against Arken, White, and Robinson, all Window retiree benefits will be reduced by the amount necessary for the "overpayment" of benefits based on the 1999 earnings.  Has PERS anticipated how to factor in these variables?
• The Robinson case holds that the amount still owed by Window retirees can't be collected.  If we lose the Robinson case, will PERS adjust our benefits downward BEFORE reporting to the Oregonian and Statesman Journal.  If not, will they inform both papers that all Window retirees have a significant debt to repay?
• Similarly, if the decisions don't come down before the first release of information, but come down before the second release, will PERS update the first set of information and inform the papers that they (they papers) are using incorrect information?  Similarly, will they adjust the benefits upward if we win the lottery between the first and second information dumps?
• Are the newspapers getting only the information on individuals receiving a monthly benefit, or will the information on single and double lump-sum also be released.
• Which benefit amount will be released?  The Option 1 benefit, or the actual benefit, which includes survivor options (in most cases)?

 

These are just a few of the questions that wander through my mailbox and through the corridors of my brain.  There are so many wildcards out there that I am completely baffled how PERS and the newspapers can expect the information to be completely accurate and up-to-date.  I expect the whole release process to be a cluster f**k for retirees as no matter what PERS releases, it is likely to be partially or totally inaccurate.  I don't understand why the parties couldn't wait for the court cases now pending before the OSC to be finally decided and the rulings implemented.

I Can't Take It No More

I've put together a brief survey to give OUR organization some idea about what we think of the new release of data.  Please take a few minutes to read and take the survey located at:http://www.surveymonkey.com/s/P9WMVN5 .  It will be your chance to provide valuable information.

Thanks.

The Garden of Gethsemane

Both the Oregonian and the Register-Guard are whooping it up that they finally "won" a victory over PERS.  Their victory includes the release of names and amounts of PERS pensions paid out by November 2011.  Later in March 2012, the same newspapers will receive additional information on those same retirees (ALL OF THEM) including employer, final salary before retirement, method of retirement calculation (like we had a choice), and years of service.  The argument used by the newspapers to get this information is that PERS is a public agency, bound by open records, and that PERS recipients are being paid with taxpayer dollars and their information is not private.  Let's examine these claims:

• All retirees are paid with taxpayer money.  FALSE.  There are 900 agencies contributing to PERS.  Some of these agencies are small, some are huge.  Many agencies - Higher Education and SAIF, for example - receive relatively little money from the state and its taxpayers.  The money to fund those agencies largely comes from fees, tuition, grants, contracts, foundations.  In Higher Education, the agency I'm most familiar with, tuition money alone covers virtually all of the costs of faculty and staff.  All salary and benefits are paid from the tuition and fees the students voluntarily pay to receive services from the University faculty.  The same is true of the Community Colleges.  The state money that comes to these agencies is used largely for upkeep and maintenance.  So, the money that passes through the hands of the students (perhaps from their parents, perhaps not), ends up in the hands of the faculty and staff.  We are public employees only in the sense that the agency we work for is a "public agency", but our salary and benefits do NOT come from public funds.  There are many, many agencies whose funding comes entirely or nearly entirely from user fees, not taxpayer money.  None of these employees should have their records exposed.
• The Oregonian and Register Guard "won" a victory.  FALSE again.  The newspapers bludgeoned a settlement out of PERS.  There is no legal jurisdiction that has ruled on the legality of this release.  The judge who received the consolidated cases merely signed off on the settlement because that was the only way the cases could be dismissed.  A true "victory" would have required that a court registered a legal decision on this release of information and told PERS (or the newspapers) exactly what the law requires.  PERS decided to cave in because they were going to lose a PR war, having already spent $140,000 in legal fees to fight the order to release the information.  Although that amounts to about $1.20 per retiree, the Statesman Journal was already on their case over the money spent on outside counsel.  PERS was placed in a no-win situation in the public relations battle.
• Finally, what started as a request for retirees making more than $100,000 per year in retirement, has now turned into a witch hunt for all retirees.  The retirees making more than $100,000 per year could be predicted quite easily.  There are probably 500-600 public employees in positions that pay salaries higher than this.  Most of them who have been career employees probably receive retirement benefits over the 6 figure amount.  Big deal.  The way PERS was set up, this was inevitable and I'd be shocked to find that there are more than 70 or 80 retirees earning more than $100,000 per year who weren't making that amount in their working days.  They receive those pensions because they took considerable risk with their PERS portfolios during their working days and happened to benefit from the OIC's fantastic investment success.  They could have lost most of their pension as well, but they didn't.
• Finally, the concern for public employees, especially those elderly members who get victimized by family, investment counselors, and other not nice people, is especially insensitive.  Retired members are generally pretty conservative with their money.  They don't advertise their benefits because older people generally don't do this.  It has nothing to do with their status as retired public employees.  I don't want people bugging me about my benefits and how I earned them or getting advice about how I can double my money in 30 days or less.  Moreover, the older we are, the more susceptible we are to financial fraud.  I fear for my older colleagues who do not have the energy, wherewithal, or endurance to withstand the kind of potential financial abuse to which they will assuredly be subjected.  My financial business is between my banker, my broker, my wife, and me.  No one else needs to know.  I will reveal this much.  I retired in 2002 and received about 90% of my final average salary.  When I started receiving Social Security, my total benefit exceeds 6 figures.  I never earned 6 figures in my career and I still don't except if you include Social Security.  Including Social Security, my total benefit is about 105% of my final average salary.

I truly do not know what the public expects to learn from a data dump of the retirement benefits of roughly 110,000 individuals.   They are going to learn that there are a small number, probably less than 4% of the total, who receive significantly large benefits and their stories will vary all over the map.  As far as I'm concerned, if any news media calls you and asks you to comment on your benefits and how they were earned, answer with a firm "NO COMMENT". Do NOT assist the media in any way to figure out how your benefits were earned.  They started this fight, but we don't have to help them with their own job.  Without information from you, all they can do is guess how you got to your benefit level.  I would tell them nothing.  In the meantime, if you suffer any form of financial harassment AFTER this information is published, by all means seek legal counsel.  You have a legal right not to be abused, and the newspapers might as well be forewarned that you reap what you sow.

Right now I feel like I am waiting in the garden of gethsemane praying for tomorrow not to come.

 

 

Scream, Aim, Fire

This probably describes the way many PERS retirees feel today after learning that PERS caved in on the various public record requests to release a fair amount of information to the media about current retirees.  While PERS got some concessions of what would be released and won a reprieve to allow notification of retirees about what information will be released, we basically got sold down the river.

This coming November, the local media (Whoregonian, Stateless Journal, Eugene Register Hard) will be getting a list of all current retirees along with their current retirement benefit amount.  What the media does with this information is anyone's guess, but it is hard to imagine anything useful coming from it.  I expect to be harassed unmercifully by those people who think public employees are worth "shit" and all are overpaid at work and in retirement.  I'm not looking forward to this information being released.  On the other hand, perhaps all of those idiots out there who are convinced we are bringing home at least 6 figures will be shocked to discover that few of our fellow retirees actually get 6 figures and, moreover, those that do could have been predicted by my pet roach.

Things get uglier next March (2012) when PERS will be compelled to release year of retirement, final average salary, agency, and job classification at retirement.  PERS has been able to limit the damage to this information and will not have to compile all of the other information requested, and this information alone will not be enough to generate identify theft ---- at least that's what everyone thinks.  The reality is that there is enough information that will be released that any intelligent identity thief could put together a credible dossier of information and financially rape almost any of us.  The good news /sarcasm on/ is that PERS will notify us before they release this information /sarcasm off/.  I'm so relieved that I can prepare to be screwed just knowing it is going to happen.  Perhaps it will be time to file a name change with the courts.  Maybe I'll call myself Prince.

For what it is worth, the PERS Coalition is examining the settlement to see whether there is any way to seek an injunction or file litigation to stop the release of any of this information.  I personally don't think there is any way to stop this crass invasion of privacy.  They are not releasing addresses, phone numbers, beneficiaries, social security numbers, employee ID numbers, or historical work data.  It doesn't look terribly likely that the Coalition will be able to do much about this, and I can't imagine the public employee unions spending the money to stop this.

All I can say is that you've been notified and warned.  The next time you see your name somewhere in print, it just might be in the Metro section of the Whoregonian.  Maybe Steve Duin will bake a column just for us.  Or maybe Elizabeth Hovde will write one of her classically snarky, unfriendly, and public-employee bashing columns about all of us piggies (and now she'll have names) slopping at the public trough.  The next sound you may hear from public employees may be the scream, followed by aim and fire.

Northern Exit

Considerable confusion still exists about the newly enacted HB 2456.  This bill, just recently signed by Governor Kitzhaber, removes the state income tax subsidy to PERS members who (a) retire on or after 1/1/2012 *and* (b) who had creditable service prior to October 29, 1991.  The confusion stems from a rumor -- absolutely untrue -- that anyone who moves out of state after 1/1/2012 will lose the tax subsidy.  There is no truth to this rumor.  If you retire on 12/1/2011, you will still be able to live out of state without loss of the income tax subsidy no matter when you choose or need to move.  Those of you who are concerned about this can rest assured that a move to Washington or other parts provided you are fully retired before 1/1/2012.

I hope that clarifies.

Hard Bargain

As most people know, the PERS Board voted yesterday (July 29) to keep the assumed rate at 8%.  The local media seemed surprised by this decision and focused on a random comment made by one of the Board members that he didn't think the 8% was sustainable, but that he respected the wisdom and judgement of the Mercer actuaries.

Most reports didn't discuss some of the issues raised in the actuary report.  One issue is that the mean, median, and modal assumed rate across the public employee pension plans typically surveyed (about 120) sat right at 8%.  A few of the higher assumptions (8.5%) had been dropped to 8%, but over all public plans surveyed, 8% remains the prevailing assumption.  Mercer also makes its own analysis and its capital markets survey forecast that over the next 20 years, the likely rate of return using the asset mix similar to the PERS portfolio is 7.88%, while another actuarial firm, SIS, using the same data predicts returns of 8.16%.  As you can see, the central value between these two highly respected firms is about 8%.

The Board discussed other rates including 7.50% and 7.75%, but were confronted with the conundrum that by lowering the assumed rate, the employers (and hence the taxpayers) would be on the hook for even higher contributions.  The Board attempted to balance the need for long-term stability in rates against the short-term shock that lowering rates would result in.  In the end, the Board voted 4-1 to retain the 8% rate.

Many argue that the Board is foolish, is a tool of the unions, and a variety of other things.  In fact, 4 of the 5 Board members are from outside the system and work for large or small private companies with their own pension plans.  The public would have you believe that the last 5 years have been harsh and that returns are well below 8%.  This is true but misleading.  Only 2008 had the strongly negative returns of -27% that skew results significantly lower.  Leaving out 2008, PERS returns have been well above 8%, and the 7 year average return - the closest to the actuarial prediction range is 7.6%.  So, while 8% might seem high against the average, the average includes -27%, surrounded by years of 13% and 20%, and 15%.  The long-term PERS average continues to bump close to the 8% mark.  I suspect if I were on the Board, I might have pushed for an assumption of 7.75%, but that would have been reevaluated in two years anyway.  I know most people would have been unhappy with me for doing so, but I think it would have struck a fine balance between the need to have stability and the need to keep employer rates stable.

On the whole, I think the PERS Board did the only rational thing it could do given the information available.  Each PERS member owes the Board a thank you and I would encourage each of you to write to a Board member (or two or five) and thank them for their vote to retain the 8%.  It was a hard bargain and the Board made a sensible decision, deciding not to throw members to the wolves of the public and the media.

 

 

Back To Black

While I was gone the Oregon Supreme Court issued an order joining the Arken and Robinson cases for the purposes of issuing a final opinion.  While the cases are different, they cover enough similar ground that the Court apparently feels it can issue a "one size fits all" decision.  Greg Hartman doesn't know whether this is good news or bad news, but he opines that it probably means that they are closer to a final decision than he would have expected at this point.

This coming Friday, the PERS Board holds its bi-monthly meeting.  The agenda is long and there are many issues to be discussed.  For members approaching retirement in 2011 or 2012, the most significant item will be the Mercer presentation and recommendation of demographic and actuarial assumptions for the 2010 and 2011 system valuations.  For members, the critical assumption will be the assumed earnings rate going forward.  While Mercer's previous studies have shown that the current 8% is within the range of variation in their simulation studies, there is considerable pressure being brought to bear by many sources to lower the assumed rate to around 7.5%.  If this action were taken, it would take effect on January 1, 2012 and would affect future Tier 1 regular earnings (the "rate guarantee"), and, more significantly, will change the mortality factors used to calculate benefits in retirement.  The impact will be negative to members and post 1/1/2012 retirees alike.  However, the wild card in this discussion is that the assumed rate also affects the expectation of contributions from employers.  There is an inverse relationship between the assumed rate and employer contribution rate.  If PERS lowers the assumed rate by 50 basis points, employer rates would be expected to rise to offset the loss of revenue from a lower assumption.  Whether PERS will try to "decouple" the employer assumed rate and the Tier 1 assumed rate is an unknown right now.  If they don't, the employers will try to fight the reduction just as hard as the Tier 1 members.  The meeting packet is posted on the PERS website right now, but there is no hint of which way Mercer is likely to go.  They hinted at a slightly lower assumption in May, but it wasn't transparent.  This time around they will have to go out on the limb and make a recommendation.  They will be damned if they lower the rate and damned if they don't lower the rate.  Expect some lively discussion.

So, there is lots of black clouds still looming over the PERS horizon.  One of those clouds will either be lifted on Friday (no change in the assumed rate), or the deluge will begin (it gets lowered).  The other cloud awaits us at the Oregon Supreme Court, where a decision in the Arken and Robinson cases will probably come before summer's end.

Miles To Go

On Thursday, the Oregon Legislature bid sine die and all went home for the remainder of the year.  PERS members and retirees escaped from any significant harm, although HB 2546B did finally pass and so our fellow members who retire on or after January 1, 2012 and who live out of Oregon and who accumulated PERS credit for work performed before October 1, 1991 will see that the income tax subsidy they were entitled to disappear.  The Legislature wisely avoided the potential legal pitfalls associated with trying to take this subsidy away from those members already retired.  In all, this was the sum and substance of the Legislative "tinkering" with PERS for this session.  Beware, however, that a lot of people are still unhappy with the Legislature and, more especially, with Public Employee Unions.  Now that we have annual sessions of the Legislature, it is possible that more harmful bills will be researched and proposed during the shorter Legislative session beginning next February.

Now that the Legislature has been removed from the current equation, the next hill to climb is with the PERS Board.  On July 28, 2011, the Board will consider whether to change the assumed earnings rate from its current 8% to a lower amount.  The most likely lower amount will be either 7.5% or 7.75%, although neither is a certainty.  Mercer, the actuarial firm in charge of PERS' mortality tables, has to decide whether to formally recommend lowering the rate.  To do so has profound consequences for all active and inactive members as well as employers.  While all earnings under the 8% rate are protected, a lowering of the rate for future earnings would mean two things for members.  First, all subsequent earnings will be reported at the lower guaranteed rate.  In the short run, this has little immediate effect on members; in the longer term it does.  Because the mortality tables are built from a set of assumptions, chief among them is the assumed rate of return on investments, lowering the assumed rate will mean that the actuarial tables will change and the benefits paid out will be lower because the expectation is for lower earnings.  On the employer side, interest rate assumptions are inversely related to employer contribution rates.  If PERS lowers the assumed rate of return, the employers will be expected to contribute more to insure that the "true-up" when a person retires is as small as possible.  With all the various "accomodations" employers have been given to pay for their increasing rates, the short-term effect on the employers would be to raise their contribution rate.  In this particular instance, employer and employee interests are aligned, at least for the first few years.  I'm sure that the PERS Board will find some way to lessen the burden on the employers, but all this means is that the "unfunded" portion of the PERS fund will grow.  So, if you are interested in commenting on this possible change, having input on not changing the rates, you would be extremely wise to plan on attending the PERS Board Meeting on July 28, 2011 at the PERS HQ in Tigard.

Finally, as the icing on the cake, the benefit payments that retirees receive on the first of every month got a bit FUBARed on Friday July 1, 2011.  As reported on the PERS Web Site, there was some sort of coding error that resulted in one of several possible things happening with the July 1 check.  First, as many of us discovered, the check got deposited in our savings account rather than our checking account.  This is a known problem at OnPoint, Advantis, and several other credit unions here and elsewhere, including out of state banks.  The second thing is that some deposits were simply rejected because there was no savings account to put the deposit in.  The people in this situation are the worst off because of the holiday weekend.  It will be mid-week next week before all this can be straightened out.  Finally, some of you may have noticed your check went to the same old place.  You were lucky.   If you have any issue with this, you are asked to call PERS on Tuesday morning July 5 so they can help get this sorted out for you.  PERS assures us that this programming issue will be resolved before we receive our August 1, 2011 checks.

I hope you all are planning to be involved in safe activities over this long weekend.  Don't get too much sun, drink plenty of fluids, practice safe fireworks, do not drink and boat or drive.  In other words, behave normally.  If you are crossworder, practice safe lex.  Above all, be thankful we live here and not in some of the other less friendly places on the planet.

Dimming of the Day

Sine die will probably be pronounced sometime tomorrow towards the end of the day. At this moment, only two PERS bills survived the grueling process that is the Legislature. HB 2113 was a PERS housekeeping measure that reconciled some inconsistencies in the language of the OPSRP and the rest of the Chapter 238a. The other bill to pass was HB 2456B. This was (and remains) a very controversial bill. In its original form, it would have taken away the income tax subsidy received by every Tier 1 retiree who served in some capacity prior to October 1991, provided they lived outside of Oregon now. Under the threat of legal action, the Legislature chose to accept the amended bill proposed by OPRI that would affect only those individuals who retire on or after 1/1/2012. While this is a vast improvement over the punitive original version, HB 2456B doesn't reason save any money and will be used simply to illustrate to constituents that the Legislature, faced with 20+ bills to scale back PERS benefits, acted responsibly to only pass those bills that had a reasonable chance of surviving a court challenge.

So, what does HB 2456B do. First, it applies ONLY to members who have worked for a PERS employer longer than 22 years. It has no impact on members who began their PERS employment after October 1991. Those members were no eligible for the income tax subsidy anyway. Members who have 22 years or more of service, or who served in a PERS position prior to October 1991, will be affected by this bill ONLY if they plan to live outside Oregon. If you have more than 22 years of service, live in Oregon, and have no plans to move, the bill doesn't affect you at all.

Out of the 70,000 or so members eligible to retire now or before January 1, 2012 there are probably only a few thousand that meet the requirements to be hit by the bill. Most, will have short stints prior to October 1991 and most will lost, at most, 2% or slightly more, of their final benefit.

The calculus of this bill is bizarre. PERS estimates that it will cost approximately $600,000 to reprogram all their systems to pick out retirees ineligible for the income tax subsidy, while the Department of Revenue estimates another $100,000 to provide the information PERS needs to verify its information. PERS estimates that they will recover approximately $10,000 to $15,000 per month of unpaid income tax subsidies. This means that during the first biennium the cost of implementing HB 2456B will be approximately $700,000, which will be offset by approximately $300,000 in revenue from not paying the benefit to ineligible retirees. Thus, after two years, the state will be in the hole $400,000. In subsequent years, the state will continue to recover approximately $300,000 per biennium; this leaves 2013-15 at minus $100,000 net. So four years after this bill has been in force, the state will not have even broken even. Finally sometime in 2015-17, the state will reach the crossover point and savings will exceed costs.

This is one of those bills that leaves you scratching your head and saying: "...and this benefits the state and taxpayers, how?".

Although I am not optimistic, I continue to hope that Dr. No will apply his veto pen to this ridiculous bill. This bill offers no benefits to anyone, and simply ends up being a mean-spirited attempt to punish "someone" for the supposed (but non-existent) PERS "fiasco". Note to taxpayers: there is no PERS fiasco. Oregon PERS is one of the best run public employee pension systems in the US. End of story. If left alone, it will right itself as it has done in the past 8 years. Leave it alone.

Hold On, Hold On

The Oregon Legislature is approaching sine die with considerable dispatch. For PERS members, this is good news so long as the Legislature doesn't make any wrong turns along the way. To date, not a single PERS bill has passed and has been sent on to the Governor. There are a number of bills that could take flight almost any day, but the majority of bills have already died a death by a thousand ignores. Those that remain in one form or another are the two bills pertaining to revoking the tax subsidy for out of state retirees - HB 2456 and SB 656 576. The former would remove the subsidy from future retirees; the latter from all retirees living out of state. Odds are that neither has the votes for passage. There are several PERS-originated bills that are designated as "housekeeping" - HB 2113 and HB 2114 - that should have passed easily, but remain tied up in the Ways and Means Committee. Finally, there is a single bill that could make the 6% employee contribution and associated pick up strictly voluntary. So far, Republican attempts to bring the bill to the floor without a Committee recommendation have failed. This bill is also likely to die without further issue. Despite the repeated, relentless, and strident calls from the media to do something about PERS, the Legislature has steadfastly resisted efforts to inflict further "reform". As the leaders of both parties stated at the beginning of the session, they did not want to pass out any legislation that wouldn't stand up to critical review by the Oregon Supreme Court. So, despite all the pressure, we have finally found a group of Legislative Leaders who possess a spine and a willingness to buck the media, the Portland City Club, and Phil Keisling, to resist measures that have little chance of surviving a Supreme Court challenge. Although it may be premature, I want to offer kudos to the leadership in the Legislature for showing, um......., leadership.

Goodnight Old World

If ever there has been a crazy week, this must be it.  I won't bother with the screwy things going on in my life just before Memorial Day, but for people who follow PERS news, the week borders on bizarre.  Of course, we have the news reported on Monday about the Ways and Means Committee possibly abandoning the revised HB 2456 and reverting consideration to the grossly illegal version original proposed.  By now that's old news, but it hasn't happened yet and there is still time to write members of the Ways and Means to object to any action except passing the REVISED bill.

Everyone who has been sentient for the past week or so is aware that the Portland City Club put out their long-overdue report on PERS, in which it concludes that the sky is falling again and trots out a whole bunch of bogus reasons why the stock market isn't going to recover the unfunded actuarial liability, ever.  They then propose a package of novel - to them - changes that will save $2 billion nearly instanteously.  As you can imagine, none of these savings will come by charging employers more or making employers pay their bills when they are due.  No, this must always come from the members of PERS to reduce benefits measurably.  There are lots of useless bits of detritus in this bill - noise akin to earwax and toejam - but my personal favorite recommendation is to end the IAP account for Tier 1 (and Tier 2?) members and redirect the employee contribution into lowering the UAL.  In effect, this is tantamount to shutting down Money Match except for a small number of Tier 1 members whose balances are high enough when the accounts were closed in 2003 that they would continue to get a pension benefit large enough from the Tier 1 account balance.  For everyone else, this would mean that they would take a 6% pay cut to cover the UAL and get no benefits whatsoever from the money.  They would retire under Full Formula.  Oh, and there is that small matter of cutting the Full Formula factors from 1.5% per year to something around 1%.  The objective is to produce a benefit of about 45% at retirement that, coupled with Social Security, would be about 80% of pre-retirement salary.  From my quick survey of PERS retirees on Social Security, I haven't met a single one whose Social Security Benefit approaches the 35% that the City Club assumes.  My Social Security benefit is about 16% of my PERS pension.  Even if I had waited until I was 65, my Social Security wouldn't ever be more than 20% of my pension.  I guess the genuises at the Portland City Club just picked a number out of the air, assumed no one would check it, and came up with an average social security amount.  And for this, we waited nearly a year to get the report.   I hope this report dies a slow and painful death, as the research is sloppy, the facts barely supported by evidence, and the questions asked led to the conclusions they wanted.

And, if that weren't enough, I discovered another Legislative "game" that can be played late in the session.  It used to be that "gut and stuff" was the game of choice of legislators.  They would wait until late in the session after a bill had gotten a hearing but was heading no where, and they would gut the contents of the bill and stuff in new language remotely related (in principle only) to the original topic and present the bill as "not" a new bill.  People have gotten wise to that trick and so a new trick was used this year (I'm sure it has been done before, but I never paid much attention).  Representative Jason Conger (R, Bend) apparently "reserved" his right to introduce one bill late in the session.  This appears to be a courtesy extended to a few people every year.  So, on Monday, while all eyes here were diverted to the possible calamity in the Ways and Means Committee over HB 2456, and the editors of major newspapers were chin-wagging over the City Club Report, Conger introduced an 8 point "School Survival Act" (don't quote me on the name of the act).  The first two elements of the act would (a) kill the 6% pickup in its present form and make employees choose between keeping it or using it to prevent layoffs and furloughs or to lower cost of health care premiums; and (2) brings back the limitation on the retiree COLA to no more than the average of PERS benefits, $2000 per month.  So, active employees would get to choose which poison they'd like to use on themselves, and retirees would get no COLA on amounts above the average PERS benefit.

Then, we have the delicious news that the Mercer Experience Study presented today at the PERS Board Meeting (I won't be there, doctor's appointment, see paragraph 1 for other craziness), is leaning towards a reduction in the assumed interest rate to 7.5% from 8.0%.  This isn't a done deal and Mercer itself recommends more time to study and get input from stakeholders, but this decision will be made at the July meeting.  If PERS adopts the change, it would take effect on January 1, 2012 and would affect all actives then and anyone who retires on or after that date.

Without any of this going on, with no changes actually approved, PERS is on track for another record year of retirements.  They estimate 11,000 for 2011, but this is before any of these things described above could possibly happen.  If any or all of the things described above were to take place, it is important to remember that there are, according to the latest numbers from PERS (Monday May 23, Board Meeting Packet), 70,000 members currently eligible to retire today by age or service or both.  I'm guessing that if the Board reduces the assumed rate from 8.0% to 7.5%, the retirement numbers will swell to well over 20,000 by 12/1/11.  I can tell you that if it were me, and I had put in my time, I'd be gone in a microsecond if that were the case.

Finally, there must be a special hell reserved for my colleagues in the Oregon University System who decided way back in 1996 to accept the OUS' one-time offer to withdraw from PERS and join the OUS' "Optional Retirement System".  Money deposited into PERS remained in PERS but future money went into a variety of accounts managed by the system.  The system has always been part of the Oregon State Government and paychecks have always come from the State of Oregon.  But this doesn't seem to matter at retirement, as some at PERS have decided that the period between 1996 and retirement, IF YOU ARE IN THE ORP, do not count as state service for the purpose of eligibility for the RHIPA pre-retirement health care subsidy, which is only available to "state" employees based on years of service.  For reasons totally opaque to anyone, they are fighting counting the period post-1996 as service to the state.  All I can say is that for those of you in that system, watch out for this diamond back.  It will hit you at the worst possible time, and it seems to be the result of an bureaucratic and arbitrary decision by someone in that Department at PERS.  Hopefully, as I write, this will be straightened out.  Retired people shouldn't have to fight these kinds of battles over healthcare.

As you can see, it is only Thursday and the week is jam-packed with fun news to contemplate and to cogitate.  And here you thought your retirement days were going to be like swinging in the hammock in the backyard.  Who knew you'd have to train for ultimate fighter just to retain what you earned.

Have a nice Memorial Day Weekend.  Use it to remember the old days, because the new days are looking different everyday.

 

Caught By The Light

A firestorm is brewing in the Legislature and elsewhere over HB 2456.  The story goes like this:  the originally proposed bill would have removed the income tax subsidy from PERS current and future retirees who live in states other than Oregon and who pay no Oregon Income Tax.  Before the bill came up for review in the House Business and Labor Committee, OPRI decided that the original bill was unacceptable, and quite probably illegal.  Nevertheless, the bill original bill seemed to be getting traction, and OPRI decided to introduce an amended bill that would make the punitive and illegal parts of the original HB 2456 go away.  Their changes, encapsulated in what was known as the dash 7 amendments,  made the bill prospective only and would apply to those PERS members who retired on or after 12/31/11 and who did not reside in Oregon when they received monthly benefits.  After reading the Legislative Counsel's thoughts on the legality of the original HB 2456, the House Business and Labor Committee voted HB 2456-7 (the OPRI version) out unanimously.  The bill then went to the Ways and Means Committee (since it involves money), where it has sat for some time now as more pressing bills were considered.  Since the dash-7 bill has arrived at the Ways and Means Committee, several things have happened.   The most significant change was the Portland City Club's long-gestating report on the state of PERS.  This was followed today by the Oregonian's scathing editorial calling out the Legislature and the Governor to do something about PERS before the session ended.  Given where everything is in the Legislature and with less than a month before the Legislature calls sine die, the pressure is ratcheting up to do something to get a handle on PERS.

I will have a separate post identifying all the factual errors, distortions, and faulty assumptions in the belated City Club Report, but I want to focus on one element that is suddenly regaining traction.  The City Club report (and this was repeated in the Oregonian) still cites the $72 million savings that would occur if the income tax subsidy were eliminated for all PERS retirees, not just those retiring after 12/31/11.  Notwithstanding the legal analyses that show the post facto application to existing retirees to be a breach of contract, the more significant point is that the bill in its original form will not save anything close to $72 million.  That figure was from PERS who simply estimated the savings from not paying the subsidy to anyone living out of state as of a date certain.  That figure did not include implementation costs, enforcement costs, administrative overhead, and the difficulties of turning the subsidy on and off again for members who pass back and forth through Oregon residence.  If we are lucky, the net savings on a heavily reprogrammed HB2456 will be about 25% of the amount estimated by PERS - about $18 million - before taking into account the legal expenses involved to defend the breach of contract.  While this might be viewed as being better than a "hit in the head", it is far cry from the amount reported by the City Club and repeated by the Oregonian.  It is really disturbing when numbers get repeated uncritically from one source to another all because researchers and writers fail to ask the right questions.

The real problem with the original HB 2456 is a legal one.  Given the tests typically applied by the Oregon Supreme Court to whether a change is permissible or not, the set of guidelines used comes from none other than the Hughes case, which involved the income tax subsidy in the first place. It would be ironic, to say the least, that PERS and the Legislature find itself back in court trying to undermine part of the agreement put into place following the Hughes decision regarding the income tax subsidy.  The Legislative Counsel has already weighed in on this and concluded that HB 2456, as originally written, would be a retroactive change to a PERS agreement and would, therefore, be considered a breach of contract.  The reason the revised bill was introduced in the first place was to avoid that very trap of passing a sweeping bill that would be overturned by the Oregon Supreme Court as a breach of a retiree's contract.  Once a retiree starts to receive the tax subsidy, which is backed up by a piece of paper called a Notice of Entitlement, PERS is on the hook to continue to pay the subsidy.  Nothing in existing law gives PERS or the Legislature the right to turn off the subsidy in the future.

The dash 7 version of HB 2456 is before the Ways and Means Committee.  The belated City Club Report and the bashing by the Oregonian have gotten members of the Ways and Means Committee stirred up and, according to rumor, members want to revise the bill again back to what it was before the Dash 7 amendment was passed unanimously.  While the dash 7 amendment doesn't save a lot of money in the near term, there is probably a considerably windfall over time.  More importantly, the dash 7 amendment doesn't have the critical legal flaws that the original HB 2456 bill had.

Most people don't ask my advice (OK, some do), but I'm going to offer the Legislature some advice here.  Stay far away from the original HB 2456 or any revisions of the dash 7 version that try to put back provisions that were taken out.  It has been almost 10 years since mistakes from the 2003 Legislature are finally being sorted out because of all the litigation spawned.  The Legislative Leadership promised that the 2011 Legislature would not pass out any bills that would lead to the kind of legal limbo that a great deal of the 2003 Legislation ended up with.  An original version of HB 2456 would flat out contradict that promise and would lead back to the legal chaos that has dominated the last decade.  If you must pass a bill, the dash 7 version of HB 2456 is legally the safest way to go and, while it won't save much in the short run, the long run savings may be more than you think.  On the other hand, passage of the unrevised HB 2456 would lead immediately to legal stasis and would continue to mess with retirees'  heads and tie up the courts for years.  The original HB 2456 is bad and probably illegal public policy.

 

 

 

Hard Times

Google has been a bit problematic the past several weeks and so I've had to hold back some comments I had intended to post.  Two posts went astray and I've yet to see them appear here.  So, I'll try to reconstruct one of the two, and will have a new one tomorrow.

It has been awhile since we chatted about HB 2456.  As you recall, this bill was heavily amended to affect only members retiring after 12/31/11.  It will remove the income tax subsidy that some of those retirees are entitled to.  The bill passed out of the House Business and Labor Committee unanimously without the required Fiscal Impact Statement. Apparently, the committee didn't feel it needed to know whether this bill would save any money or not.  Those of us with knowledge of the system and how the tax subsidy works knew that it couldn't possibly save much money.  Now, the Fiscal Impact Statement is out and has received virtually no coverage.  It is hysterical to read as it demonstrates the silliness and meanness of HB 2456.  In the 2011-13 biennium, the bill will cost almost $200,000 more to administer than the system will recover.  A new Legislative miracle - negative savings.  Even after 2011-13 when most of the sinking costs are over with, the estimates of savings are virtually nominal.  The estimates indicate net savings of about $100,000 per biennium - a true genius measure that barely recovers any money at all.

The bill sits before the House/Senate Ways and Means Committee where it will be considered any day now.  I know that members of the Legislature read this site.  Here's hoping that this bill - as badly botched a bill as can possibly be put together and that ends up being simply mean-spirited and nothing else - will be dispatched with the same haste as Osama bin Laden.  Man and woman guys of the Ways and Means Committee.  Pretend you are Seal Team 6 out to save the State of Oregon from stupidity.  I know times are hard, but surely not so hard that you would pass a bill to spend more than you save.  As a policeman on a snowy mountain pass once said to an idiot driver trying to pass a line of traffic going uphill - "get some intelligence".