As reported in Part 1, from the beginning of PERS in 1945 through 1966, the law specifically stated the objective of the PERS retirement system. That objective was to provide Oregon public employees a total retirement benefit of approximately 50% to 60% of their average salary. This 50% to 60% retirement benefit included social security and required the employee to give 25 years of service as a police officer or fire fighter or 30 years of general service. Since the total retirement objective included social security payments, the amount paid by PERS would be around 25% to 30% of the employee’s salary and that amount would be funded by both employee contributions and employer contributions.
In 1967, the legislature changed the PERS law. The stated PERS retirement objective was removed and the law simply provided that the employee’s retirement would be made up of the following components: (1) an annuity payable for life funded with the employee’s contributions to PERS, plus interest; and, (2) a lifetime pension funded by the employer’s contributions. The lifetime pension for a police or fire employee was set at 0.0092% of the employee’s final average salary times the employee’s years of service, up to a maximum of 25 years. For a general service employee, the annuity was 0.0067% of final average salary times the the number of years of service, up to maximum of 30 years.
Based on these amounts, the maximum lifetime pension for a police officer or fire fighter with 25 years of service would be 23% of the person’s salary. For general service employees, the lifetime pension for those with 30 years of service would be 20% of final average salary. In addition to this lifetime pension, the PERS retiree would also have the annuity from employee contributions and social security. It is likely that the total of these three amounts would be slightly higher than the 50% to 60% of final salary that had been the PERS objective for the prior 22 years but it was close to that range. The legislators were not eligible for PERS membership in 1967.
The next significant changes to PERS occurred in 1971. That year, the Oregon Attorney General ruled for the first time on May 7, 1971 that legislators could join PERS. In reaching that decision, the Attorney General withdrew a 1963 opinion that held legislators could not join PERS. During that same year, the legislators increased the lifetime pension percentage for police and fire fighters to 0.0115% and for general service employees to 0.0084%. The lifetime pension would now provide police and fire fighter a maximum 28.75% of salary and general service employees 25% of salary. When combined with the PERS annuity and social security, the PERS retirement allowance now clearly exceeded the original PERS objective. It is not a coincidence that this precedent setting increase occurred the first year legislators were eligible to join PERS.
In 1973, the lifetime pension percentages were again increased. The amount for police and fire fighters went to 0.0135%, for a maximum of 33.75% of salary. The percentage for general service employees went to 0.01, which after 30 years would be 30% of salary. In the first two years after legislators were eligible to join PERS, they increased the lifetime pension for police and fire fighters by 47% and for general service employees by 49%. And the legislators were not finished raising benefits, especially for themselves. They were just getting started.
The next part of this report will discuss the changes made to PERS by the legislature in 1975, 1979 and 1981 and how the non-PERS citizens of Oregon have been paying for those changes ever since.