GUEST VIEWPOINT: Legislators shouldn’t govern PERS and benefit from it, too
By Daniel Re
Published: Thursday, Feb 10, 2011 05:00AM
The year 1975 was a turning point. It was the year that the Oregon Ethics Code became effective. It was also the year that the Oregon Legislature, despite the ethics code, passed a law allowing them to join retroactively the Public Employees Retirement System. With most legislators in PERS, control over PERS shifted in 1975 from the people to PERS-covered legislators.
The ethics code had been referred to the people by the Legislature, and it was approved by voters in the 1974 general election. The code declared that a public office was a public trust and that public officials were prohibited from using their official position to obtain personal financial gain, other than salary, honoraria or expense reimbursements.
All the legislators who joined PERS would have the opportunity to use their positions to obtain financial gain each time PERS legislation came up. During the next 20 years, numerous PERS laws were enacted that substantially benefited PERS members and drastically increased the cost of funding PERS benefits.
In 1979, legislators passed the PERS employee contribution pickup law. Before 1979, all public employees were required to make contributions to their retirement plan. After the pickup law, every public employer was allowed to make the people of Oregon, rather than the employee, pay each employee’s PERS contribution — and most public employers did just that. The people were even required to pay the employee contribution for each PERS legislator.
In 1983, legislators forced almost all Oregon judges to become PERS members. That created a conflict of interest that prevented PERS cases from being decided by independent judges.
In 1989, legislators passed a law that made PERS funding Oregon’s highest financial priority. Under that law, public employers were required to pay their PERS assessments before providing the services they were created to provide.
That is why a school district facing a budget shortfall cuts back teaching children rather than reducing its PERS payments.
By the mid-1990s, the changes had created PERS retirement benefits so generous that public employees were able to retire in their mid-50s with a retirement benefit equal to their full salary. That was not only unreasonable, it was unsustainable.
Many bills were introduced in the 1995 Legislature to address this problem. House Bill 2476 proposed lower retirement benefits for public employees hired after 1995. House Bill 2477 provided that legislators and statewide elected officials would be prohibited from joining PERS after their current terms expired.
Both bills were intended to address specific PERS problems. Unfortunately, the bills met different fates.
HB 2476, which benefited the PERS legislators, passed easily by a vote of 16-11 in the Senate and 45-15 vote in the House. The new law became effective Jan. 1, 1996, and it reduced PERS benefits for employees hired after 1995. It ensured that the PERS legislators who passed the law would receive the highest PERS benefits, unless they also passed HB 2477.
HB 2477, which would have made legislators ineligible for PERS, did not pass. In fact, it didn’t even get a vote. It died quietly in committee when the Legislature adjourned.
The Legislature’s failure to pass HB 2477 was unfortunate. The law would have eliminated the conflict of interest that was the root cause of the PERS funding problem, a conflict that still exists today.
PERS legislators’ conflict of interest has clouded their vision. For the last 36 years, they have put their personal interest above the interests of the people of Oregon.
Today, Oregon is projecting a $3.5 billion shortfall for the 2011-13 biennium. During that same two-year period, $2.5 billion will be paid to PERS through employer contributions and picked-up employee contributions.
Laws passed by the PERS legislators require that the $2.5 billion be paid to PERS ahead of all other state expenses. Budget cuts must be made, but no cuts will be made to PERS.
Only PERS legislators could have come up with such a law.
As public trustees, our legislators are required to represent the interests of the people of Oregon. Generally, a trustee with a conflict of interest cannot act unless the beneficiaries of the trust consent to the conflict in advance and after full disclosure.
Legislators know how to get the approval of the people if they want it — they did that with the Oregon Ethics Code.
If the legislators want to be PERS members, they must get approval from the people of Oregon. Until they get that approval, they are in breach of their trust.
That puts the validity of all PERS laws made since 1975 into question, and it subjects every PERS legislator to disgorgement of all PERS benefits received in violation of their trust.
Daniel Re of Bend is an attorney who has filed a lawsuit challenging the authority of judges enrolled in the Public Employees Retirement System to rule in cases involving PERS.
PERS legislators’ conflict of interest has clouded their vision. For the last 36 years, they have put their personal interest above the interests of the people of Oregon