For the last two years I have been waging a campaign to inform the people of Oregon about fundamental changes that were made to the Oregon Public Employee’s Retirement System between 1975 and 1996. My efforts have been characterized as a fight against PERS but I think of it more as a fight against the fundamentally unfair changes that were made to the PERS decision making process. Those changes were made by public officials who held positions of public trust. Those public officials were legally obligated to represent the interests of all Oregonians but instead they used the power given to them by the people to promote their own personal financial interests. The unethical actions taken by those public officials during that 22 year period of abuse have had a devastating impact on Oregon and its citizens. That impact is still being felt today.
PERS retirement benefits consist primarily of a lifetime pension and a retirement annuity. The pension is funded by employer contributions. Since the employer is a public agency, the pension is really funded by the people of Oregon. The annuity is funded by employee contributions, which up until 1979, were required to be paid by the public employee. Prior to 1971, legislators were not eligible to join PERS but in 1971 the Oregon Attorney General ruled that legislators could join. In making that ruling, the attorney general withdrew a 1963 opinion which held that legislators could not join PERS. Base on that 1971 AG opinion, the PERS pension formula for legislators was the same as the pension formula for all general service public employees, which in 1971 was 1% of average salary times years of service. The maximum years of service were capped at 30 and service after age 65 did not count. The retirement annuity was based on the amount actually paid by the PERS employee.
In 1975, however, the legislators decided they were entitled to a better deal so they sweetened the plan, but they sweetened it only for themselves. That year the legislature passed a law that allowed anyone who had ever served in the legislature to retroactively join PERS. Legislators who joined PERS would receive PERS retirement benefits as though they had been PERS members the entire time they had served in the legislature. Under this new, improved legislator PERS plan, the percentage of average salary used to compute their lifetime pensions increased from the general service employee rate of 1% to 1.35%, the rate used to compute the pension for police and fire fighters. Additionally, the rule which prohibited using years of service after age 65 was eliminated for legislators. To join the legislators PERS plan, all the legislator had to do was to pay the employee PERS contributions for all prior years of service as a legislator. But the employee PERS contributions only funded one part of the PERS benefits the legislator would receive, the retirement annuity. The obligation to pay for the other part of the PERS benefits, the lifetime pension for each legislator who joined PERS under this law, was passed on to the people of Oregon.
Once the legislators had tasted PERS benefits for themselves, they developed an insatiable appetite for them. That craving lead to a rampage of PERS changes that gave PERS members exclusive control over all PERS decisions and more than doubled the retirement benefits PERS members could expect to receive.
Part 2 of this report will discuss the specific actions taken by the PERS legislators and the Oregon Supreme Court from 1975 through 1996 to improve their personal financial interests in PERS.