The Change In Oregon PERS Funding

When the first PERS law was passed in 1945, it specifically provided that the objective of PERS was to provide a retired public employee with a retirement benefit after  30 years of service equal to 50% of that employees average salary during the employee’s last five years of service.  That retirement benefit was to be funded with contributions from each PERS employee and from that PERS employee’s employer.  The employee was expected to contribute 1/2 of the amount required to fund that benefit and the other 1/2 of the funding requirement would be paid by the employer.   Remember, however, that  the term “employer” means the people of Oregon as they pay the employer contribution.

How things have changed since 1945.  Today only 30% of public employees contribute anything to funding their retirement benefits.  The employee contributions for the other 70% are paid for them by the employer.  The total combined employee and employer contributions to PERS in 2010 was estimated at $1,475,000,000.  Of this amount, the 30% of PERS employees who actually contribute to PERS paid in $152,000,000, about 10% of the total.  The remaining 90% of the contributions were paid by the public employers.  In addition, on average the PERS retirement benefit for PERS members with 30 years of service since 1990 has been 80% of the PERS member’s final average salary for the three highest compensation years.

In addition to employee and employer contributions, PERS is also funded by investment earnings.  For 2010, the earnings were projected at almost $6,000,000,000.  If the investment earning actually fall below this projected amount, however, the public employers must make up the shortfall through higher employer contribution rates.

There is another significant  change in PERS since 1945.  It is that change which is largely responsible for the titanic shift in the PERS funding burden from 50/50 between employees and employers to 10% employees and 90% employers.  In 1945, legislators were not PERS members and they had no personal financial interest in PERS.  Since 1975, most of the legislators have been PERS members and their personal financial stake in PERS  caused them to change the laws for their own benefit.

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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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