PERS was created in 1945. In 1971 the Oregon Attorney General withdrew a 1963 opinion which held that legislators could not join PERS and decided that legislators could join PERS after all. In 1975 PERS legislators really took care of themselves. They used their power to make laws to give themselves extraordinary PERS benefits. And then they gave every PERS legislator and every other PERS member another special benefit. There has never been a year like 1975 for legislators using the people’s time and money to benefit themselves. This is somewhat surprising since 1975 is also the year that the Oregon Ethic Code went into effect. The Ethic Code had been referred to the people of Oregon by the legislature in 1974. It applied to legislators and it specifically prohibited a public official from using his or her office for that public official’s financial benefit.
The 1975 law that applied just to legislators contained three separate benefits:
First, it allowed anyone who had served in the Oregon legislature before January 1, 1976 to retroactively join PERS. (The date for legislators to retroactively joining PERS was later extended to anyone serving in the legislature before January 11, 1987.) This retroactive PERS membership right had never been given to anyone before and it has not been given to anyone since. The retroactively joining legislators were required to pay the total amount of employee contributions that they would have paid for the retroactive period. Once that payment was made, they were entitled to full benefits for the retroactive period, despite the fact that the employee contributions they paid did not fund the full benefits. As a result, that funding deficit was shifted to the people of Oregon.
Second, the law gave the PERS legislators the same pension formula that was used for police and firefighters. That formula provided a pension based on higher percentage of salary (1.35% rather than 1%) and a shorter time to reach the maximum pension benefit (25 years rather than 30 years) than the formula that applied to all other PERS members.
Third, the law gave legislators the the right to receive retirement credit for service after the age of sixty-five.
This special law for the benefit of legislators was passed with an emergency clause. That clause stated that the law was necessary for the immediate preservation of public peace, health and safety. As a result, the law became effective July 1, 1975 and was not subject to the people’s right of referendum. Apparently, the legislators believed that if they did not give themselves the right to retroactively join PERS, to receive the highest pension formula and the right to retirement credit for service after age sixty-five the people of Oregon were going to riot, get sick or maybe both.
The second 1975 PERS benefit enhancement law applied to all PERS members. It gave the PERS Board, a group controlled by PERS members, the authority to establish a guaranteed minimum rate of return on all employee PERS contributions. If the actual earings on those employee contributions were less than the guaranteed minimum rate, the people of Oregon would have to make up the difference. The PERS Board then increased the guaranteed minimum rate of return twice before the end of 1975.
1975 was not a good year for the people of Oregon when it came to their PERS funding obligation but it was a great year for the PERS legislators. And it was only the beginning of the transformation the PERS legislators would make to PER over the next fifteen years.