Once Into PERS, Legislators Increase PERS Benefits

When the PERS law was first enacted in 1945, legislators were not eligible to join.   It was not until 1971 that the Oregon Attorney General withdrew a 1963 opinion and ruled for the first time that Oregon legislators could join PERS.

From 1945 through 1971, the objective of PERS was to provide each retired public employee, after 30 years of general service or 25 years service as a police officer or firefighter, with a retirement benefit equal to approximately 50% of his or her final average salary.   One-half of this target amount was to be funded by employer contributions and the other one-half was to be funded by employee contributions.  The PERS retirement objective was later modified to 50% to 60% of final average salary, but the increase was to come from social security benefits not from increased contributions by either the employer or the employee.

After the legislators were given the green light to join PERS in 1971, however, they decided that the PERS pension funded by the employer contributions should be increased.  So they went to work  implementing the greatest series of increases in PERS benefits that Oregon has ever seen.

From 1971 to 1981, the PERS legislators increased the amount of the employer funded pension by 250% for general service employee and by 217% for police and firefighters.  Before legislators were allowed to join PERS in 1971, the employer funded pension was  intended to make up about 20% to 25% of a retired PERS member’s final average salary.  After the 1971 to 1981 increases the employer funded pension alone paid 50% of the retired public employee’s final average salary.   And the retired public employees would also  receive PERS retirement benefits from their employee contributions and from social security, in addition to the employer funded pension.

The employer funded pension was determined by this formula:  final average salary x specified percentage x years of service = pension from employer contributions.  The PERS legislators increased the employer funded pension by increasing the specified percentage.   On January 1, 1971, the specified percentage for general service employees was 0.0067 and for police and fire fighters it was 0.0092.

Here is the timeline under which the legislators increased the specified percentage:

Year                     General Service Employees                           Police and Firefighters

1971                       17%  increase to 0.0084                                 25% increase to 0.0115

1973                       19%  increase to 0.0010                                 17% increase to 0.0135

1975                     35% to 0.0135, but this increase was for LEGISLATORS only                                 as they gave themselves the same specified percentage  that                                police and firefighters received.

1981                        67% increase to 0.0167                                      48% increase to 0.020

In addition to drastically increasing the amount of the employer funded PERS pension, the PERS legislators also made the following changes to PERS during the 1971 to  1981 period:

1975.  The PERS legislators made three separate PERS changes during this year:

(1)  They gave anyone who had ever served as a LEGISLATOR the right to retroactively join PERS and they kept that option open for the next 12 years.  No one else has ever been given the right to retroactively join PERS.

(2)  They changed the law that prohibited elected officials from getting PERS retirement credits after age 65, to allow LEGISLATORS, but only LEGISLATORS,  to continue getting PERS  retirement credit after age 65.

(3)  They created the “guaranteed minimum rate of return” for all PERS members.  This unique benefit ensured PERS members that their employee contributions were guaranteed by the people of Oregon to grow at a minimum rate each year.  The guaranteed minimum rate was determined by PERS members who controlled the PERS Board.  If the employee account investments earned less than the guaranteed minimum return, the people of Oregon were forced to pay the difference to the PERS members.  But, if the employee account investments earned more than the guaranteed minimum rate, the PERS members got to keep the excess earnings for themselves.

1979.  The PERS legislators created the  PERS pick up.   The PERS pick up gave PERS members the option to make the people of Oregon pay their employee contributions for them.  The PERS pick up was only intended to exist for two years, from July 1, 1979 to June 30, 1981.

1981.  Before the PERS pick up ended on June 30, 1981, the PERS legislators changed the law and made the pick up option permanent.  As a result of the PERS pick up, after 1981 the only contribution that most PERS members made to their total retirement was their social security contribution.  They paid nothing to PERS because they had made the  people of Oregon pay all of the PERS contributions.

Then, in 1983, the PERS legislators took action to protect the changes that they had made to PERS  from 1971 through 1981.  They put the Oregon judges into PERS.  In 1983, 84 of the 90 Oregon legislators were PERS members and they knew that the people of Oregon could change the PERS laws by initiative.  Those PERS legislators also knew that if they took the judges out of their separate, independent retirement plan and put them into PERS, the judges would have to approve any PERS changes the people tried to make.  With the judges’ personal retirement benefits at stake, the PERS legislators were betting that the judges would not let the people change PERS and they were right.  In 1994,  the people of Oregon passed Ballot Measure 8 which eliminated the PERS pick up, eliminated the guaranteed minimum rate of return and eliminated the use of unused sick leave as part of final average salary.  In 1996, the Oregon Supreme Court declared Ballot Measure 8 unconstitutional.

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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.
This entry was posted in Ballot Measure 8, Oregon judges, Oregon legislators, Oregon legislature, Oregon PERS and tagged , , , , . Bookmark the permalink.

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