PERS And The 7% Solution

Oregon legislators began joining PERS in 1975, thirty years after PERS was created.  Prior to 1984, however, Oregon’s judges were not PERS members.  They had their own retirement plan, the Judges Retirement Fund.  The JRF required each judge to contribute 7% of his or her salary to the plan. 

In 1983, the Legislature passed a law that made all persons who became judges after 1983 automatic PERS members.  Anyone who became a judge before 1984 was given a choice.  That judge could either join PERS or remain in the JRF.  The legislature provided a substantial financial incentive, however, for the pre-1984 judges to join PERS.  Unlike the JRF, where each the judge had to personally pay the 7% employee contribution, no judge who joined PERS would have to pay his or her 7% employee contribution.  The new law required the people of Oregon to pay the employee contribution for each judge who joined PERS.  That meant that all pre-1984 judges who joined PERS would receive an immediate 7% increase in take-home pay. 

With the judges in PERS, each judge had a financial interest in the outcome of every PERS case.  With regard to the pickup of employee PERS contributions, the judges actually had the greatest amount at stake in any case that tried to eliminate the pickup.  That was because the employee contribution  picked up for judges was 7% of salary, while the amount picked up for all other PERS members was 6% of salary.    

In 1994, Ballot Measure 8 was passed by the people of Oregon and it made three changes to PERS: (1) it eliminated the pickup of employee contributions; (2) it ended the 8% guaranteed minimum annual return on PERS employee accounts; and, (3) it prohibited the use of unused sick leave to compute PERS retirement benefits.   To no one’s surprise, Ballot Measure 8 was challenged by PERS members.  In 1996, the Oregon Supreme Court  ruled in the Oregon State Police Officers Association v. State of Oregon case that Ballot Measure 8 was  unconstitutional.  The vote was 4 to 3.   All seven justices of the Court were PERS members and the pickup of employee PERS contributions was saved. 

The legislature’s 7% solution to PERS changes by the people worked perfectly, just as it was intended to work.  But was it legally effective?  It is today, but the case is not over.  And the next time, it will be decided by judges who are not in PERS.

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About Dan Re

I am an attorney who has lived in Bend and practiced law since 1981. In educating myself about the Oregon Public Employees Retirement System (PERS), I was shocked at how the PERS laws were changed by the legislature, once legislators were allowed to join PERS in 1971, 26 years after PERS was first created. Those changes personally benefitted the legislators who made them at the direct financial expense of the people they were elected to represent. That is wrong and I intend to change it. In 2009, I started a non-profit 501(c)(4) corporation, In RE The People, Inc., for the purpose of informing concerned citizens of what happened regarding PERS and other issues of social and civic importance. I then created this blog to further that objective.
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