“Perhaps the sentiments contained in the following pages, are not YET sufficiently fashionable to procure them general favour; a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT, and raises at first a formidable outcry in defense of custom.”
I believe that the PERS benefits created since 1971 were not the product of a fair system and that unfairness raises questions as to the legitimacy of those benefits. My position on this issue is not yet held in general favor in Oregon and any suggestion that the PERS benefits may be invalid is met with a formidable outcry in defense of those benefits. But
a close look at the circumstances under which those benefits came into existence casts a doubt on their legitimacy that is not removed by the passage of time.
The original 1945 PERS law stated that its objective was to provide retired public employees who worked for 30 years in general service or 25 years of service as police and firefighters, with a retirement allowance of approximately 50% of their final average salary. That retirement objective was funded by contributions from both the public employees and the public employers and it remained in place for the next 26 years. At the
beginning of 1971, the benefit funded by employer contributions provided 20% of
final average salary after 30 years of service. Their own personal contributions and social security combined to fund the balance of the retirement objective. The original PERS law excluded legislators from membership and, since judges had their own retirement plan, they were also excluded.
Starting in 1971, after the Oregon Attorney General ruled that legislators could join PERS as general service employees, PERS benefits began to fundamentally change. After
the Attorney General’s ruling, most legislators joined PERS. From 1971 through 1989, those PERS legislators made the following changes to PERS:
1971. Increased the maximum annuity funded by the employer contribution by 17% for general service members and by 25% for police and firefighters.
1973. Increased the maximum annuity funded by the employer contribution by 19% for general service members and by 17% for police and firefighters.
1975. (1) Allowed any person who ever served in legislature to retroactively join PERS. This retroactive right is kept open until 1987.
(2) Created the “guaranteed minimum rate of return” for all employee PERS accounts, including their own.
(3) Increased, for legislators only, the retirement annuity funded by employer contributions by another 35%.
1979. Passed the PERS pick up law, which was to last from July 1, 1979 to June 30, 1981. The PERS pick up allows PERS members to make the people of Oregon pay their
employee PERS contributions for them.
1981. (1) Eliminated the June 30, 1981 sunset date for the PERS pick up.
(2) Increased the retirement annuity funded by employer contributions by 67% for general service employees and by 48% for police, firefighters and legislators.
1983. Put the judges into PERS:
(1) Anyone who became a judge for the first time after 1983 automatically
became a PERS member, if under 72 years old. PERS judges were given a 7% employee PERS contribution but that contribution was picked up for them by the State.
(2) Existing judges were given the option to join PERS or stay their
existing retirement plan. If they stayed in the existing plan, they had to pay 7% of their salary to that plan. If they joined PERS, their 7% contribution would be picked up for them, giving them a 7% salary increase.
(3) Judges became the only elected officials who were required to join PERS.
1989. Allowed the State to withhold all money owed to a public employer who has not paid its PERS assessment in full. This law established PERS funding as Oregon’s
highest financial priority.
In 1994, the people of Oregon passed Ballot Measure 8, which made the following
changes to PERS benefits:
(1) eliminated the PERS pick up;
(2) eliminated the guaranteed minimum rate of return; and,
(3) prohibited the use of unused sick leave to compute the retirement nnuity.
PERS members filed a lawsuit, challenging the constitutionality of Ballot Measure 8. That case was argued to the Oregon Supreme Court on October 25, 1995. The plaintiffs who wanted Ballot Measure 8 to be declared unconstitutional were PERS members. The Oregon Attorney General and the attorneys of the Department of justice who were defending Ballot Measure 8 were PERS members. The seven justices of the Oregon Supreme Court were PERS members. If Ballot Measure 8 was upheld, all PERS members
would lose the ability to have their employee contributions picked up, they would not receive a guaranteed minimum return on their employee accounts and their unused sick leave would not be used to compute their PERS retirement benefit.
In 1996, the Oregon Supreme Court ruled that Ballot Measure 8 was unconstitutional. That case established the fact that no PERS benefit can be changed in Oregon without approval of PERS legislators or PERS judges. The non-PERS Oregonians who are obligated to pay for PERS benefits have been excluded from the process that decides what
they will pay for. That is wrong and nothing can make it right.
The quotation at the beginning of this article is from Thomas Paine’s Introduction to his Third Edition of Common Sense. He wrote it in February, 1776.