This story was published in the Bend Bulletin on May 30, 2011.
Bend attorney examines PERS
Dan Re says conflict of interest nullifies Supreme Court ruling on Measure 8
Published: May 30. 2011 4:00AM PST
–>Bend attorney Dan Re readily admits it’ll be a “big mess” if he manages to prevail in his lawsuit taking on the Oregon Public Employees Retirement System.
Re, 62, spends most of his working week providing legal advice on estate planning and tax law. But in recent years, puzzled by the annual ritual of state legislators pledging to reform PERS but largely failing to do so, Re began digging into the history behind the program.
The problem, he concluded, may be relatively simple — the legislators who could change the system, and the judges who would rule on the legality of any changes, are themselves PERS members.
“It’s the classic case of the fox guarding the henhouse,” he said. “It’s not as though these are bad people, but when it’s your financial interest, your family is going to be impacted, your decision-making is going to be affected.”
Introduced in 1946, PERS was opened to state legislators in 1975, then to state judges in 1983. Over time, promised benefits for retirees have grown faster than PERS investment funds, forcing the state and local governments to divert a larger and larger share of revenues to keeping the program afloat.
Central to Re’s legal efforts is ballot Measure 8, approved by Oregon voters in 1994. The first statewide initiative backed anti-tax activistt and two-time gubernatorial candidate Bill Sizemore, Measure 8 was challenged by the Oregon State Police Officers Association and overturned by the state Supreme Court in 1996.
The measure sought a number of changes to PERS, including the elimination of the minimum 8 percent annual return, the use of unused sick leave to pad a public employee’s compensation in their final year before retirement, and the “pickup” — the practice of public employers paying both theirs and the employee’s contribution to the retirement system.
Under any other circumstances, Re (pronounced Ray) believes the judges who overturned Measure 8 would have recognized the conflict of interest and removed themselves from the case. Their failure to do so effectively nullifies the action, he said, meaning Measure 8 was not legitimately overturned, and is still in effect today.
Last year, Re went to the state Tax Court to seek a property tax refund on this assumption, claiming he was due a refund equal to the pickup — six percent of salary for most public employees, seven percent of salary for judges. The case was rejected, and Re has since dropped it to pursue a new suit.
The new suit, filed in the Oregon Court of Appeals earlier this month, argues for the reinstatement of all three planks of Measure 8, again pointing to the conflict of interest of the judges that overturned the ballot measure.
In the next few weeks, Re expects to file for the case to be heard not by the Court of Appeals judges — who are PERS beneficiaries — but by a panel of private attorneys who do not have a financial stake in the outcome.
Re concedes he will probably have to take his case to federal court to prevail, and even if he does, he’s not sure what should happen then.
In theory, the reinstatement of Measure 8 would obligate public employees to refund hundreds of millions of dollars to their employers, Re said, something he doesn’t consider realistic.
As called for under Measure 8, the guaranteed 8 percent annual return has been eliminated for all but the most senior public employees, but further changes would not be without pain. Eliminating the pickup could save government employers up to $750 million every two years, but the savings would come out of the take-home pay of public employees.
Re said bringing back Measure 8 may not be the right approach. The judges who overturned it weren’t necessarily faulty in their legal reasoning, he said, or wrongly using their positions to enrich themselves. They’re just the wrong people to be making such a decision.
“In order to have fair bargaining, both sides have to be represented. Since 1975, the people of Oregon have been excluded from the lawmaking part and since 1983, they’ve been excluded from everything,” Re said. “All of the decisions are made by PERS members.”