On November 5, 1974, the people of Oregon voted to adopt the Oregon Ethics Code, which had been referred to them by the legislature. The measure passed with Yes votes from over 73% of the voters. The first provision of that Code declared that a public office is a public trust. Legislators hold a public office and are, therefore, public trustees.
Trustees are fiduciaries and are generally prohibited from engaging in conduct that is in conflict with the interests of the persons they represent. An exception to this rule exists, however, if the fiduciary receives prior consent from the persons being represented, after a full disclosure of all relevant facts.
In 1975, when the legislators voted to allow themselves to retroactively join PERS, they had a conflict of interest with most of the people they represented. Only about five percent of Oregonians at that time were PERS members. The legislators did not inform the people of this conflict and they did not seek the the people’s consent before passing the 1975 law. They could have done so by using the very same method they used in presenting the Oregon Ethics Code to the voters for approval. They could have referred that matter to the people and that would have been the proper procedure to follow. They clearly knew how to do that, as they had done it less than one year earlier.
In fact, the PERS legislators can still do that. The first step would be to fully disclose all of the facts surrounding their PERS membership, including how much the people will pay to fund their PERS retirement benefits, how much they will receive in PERS retirement benefits, all of the other benefits they will qualify for as a result of being PERS members and how much they receive in campaign contributions from PERS members and public employee organizations.
After that disclosure, the legislators can refer a law to the people of Oregon that will allow legislators to join PERS. They can even ask the people to consent to their prior PERS membership. That would be no different from when they allowed themselves to retroactively join PERS in 1975. If that law passes, they are in the clear. If the law does not pass or if the legislators do not refer such a law to the people, they could have a serious problem. One remedy for dealing with an improper conflict of interest is to require the fiduciary to disgorge all gains received as a result of the conflict, together with the costs and fees incurred by the beneficiaries in securing that disgorgement.
The PERS legislators have violated their public trust but they can correct that misdeed. Lets hope they do the right thing. If they don’t, however, the people can do it for them.