Does PERS Really Create A Positive Economic Impact On Oregon’s Economy?

PERS claims that it provides significant economic benefits to Oregon.  In its Economic Impact Study, Oregon Public Employees Retirement System (PERS), March 2011 PERS makes the following statements:

  •  PERS benefit payments have a significant, positive impact on Oregon’s economy.
  • $2.6 billion in annual benefit payments to PERS retirees living in Oregon provides $3.2 billion in total value to Oregon’s economy.
  • PERS benefit payments support an estimated 29,124 Oregon jobs.
  • Of the jobs supported, PERS benefit payments add approximately $881 million in wages to Oregon’s economy.  The $881 million in wages is included as a component the $3.2 billion in economic activity.
  •  The state of Oregon collects an estimated $125 million annually in taxes from PERS retiree benefit payments.

To see the entire PERS Economic Impact Study, go to the PERS website at www.oregon.gov/PERS/.  Under the What’s New column, click on Economic Impact Study (4/11/11).

The positive economic impact claimed by PERS is impressive.  The estimated dollars amounts and other figures reported in the study are probably accurate.  But is alleged PERS economic impact something that would not exist in Oregon but for PERS?  Or is it really just a reallocation of an economic benefit that would exist without PERS?  PERS does not create a positive economic impact unless it adds value that would not otherwise exist.

The answers to the above questions are found in the source of money that pays PERS  retirement benefits.  PERS retirement benefits are funded from three sources, employee contributions, employer contributions and earnings on the accumulated contributions.  The preliminary 2010 data indicates that for 2010 employer and employee contributions will equal approximately $1.5 billion, of which employer will pay 90% through employer contributions and picked up employee contributions, and investment earnings will be around $6 billion.   See PERS By The Numbers (2/15/11), page 13, at the same website listed above.  This information establishes that the money PERS is putting into the economy is not coming from some new, independent source that would not exist without PERS.  It is coming directly from the people of Oregon.

PERS does not generate new money for Oregon.  It takes money from the people who earned it, gives that money to an administrative agency to manage and then years later pays the money to retired public employees who spend it.  If PERS did not exist, the money that the retired public employees spend would still be here and it would still be spent.  The differences are that the money would not be managed by a large government agency and  it would be spent by the people who earned it.

It is hard to imagine that running the money through a large government bureaucracy actually increases the amount of money that is ultimately spent.  PERS would create a positive economic impact on Oregon only if it does that and PERS has offered no evidence supporting that conclusion.   If the money that goes to PERS was instead spent by the people who actually earned it, significant bureaucratic inefficiency would be eliminated.  That alone would most likely result in a true positive economic impact on Oregon.

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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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