The PERS Budget approved by the Oregon legislature for the 2011 – 2013 biennium is $7,500,000,000. That comes to over $10,000,000 a day, for every day of that two-year period. The $7.5 billion comes from three sources, employee contributions, investment earnings and employer contributions.
Employee contributions are fixed at 6% of salary for all PERS employees other than judges. Judges have a 7% employee contribution. The employee contribution designation is deceptive, however, since most “employee contributions”, including all employee contributions for judges, are not paid by the PERS employees. They are paid for the PERS employees by the people of Oregon. Not more than 30% of PERS employees actually pay their own employee contributions. It is my understanding that the employee contributions for the 2011 – 2013 bienniun are projected at around $1 billion.
Investment earnings on the PERS assets depend on what the PERS assets earn in the market place. Currently the PERS assets total almost $57 billion and the earnings during the 2011 – 2013 biennium are hoped to be at least $3.5 billion.
Employer contributions are expected to be around $3 billion. If the above targets are reached, PERS would receive its budgeted amount of $7.5 billion. If the projected PERS contributions and earning fall below the budgeted number, though, there will be a deficit. That deficit, under laws made by PERS legislators, will then have to be made up by increasing the employer contributions during the 2013 – 2015 biennium. There is no other place to get the money required to pay the PERS obligations and the PERS legislators have insured that the PERS obligations cannot be reduced.
Employer contributions rates are set every two years by the PERS Board, based on an actuarial computation of the total PERS retirement obligations and the value of the PERS assets. For this purpose, PERS obligations and assets are valued at the end of every odd-numbered year. That means the next computation and valuation will be as of December 31, 2011. Those determinations will establish what the new employer rates will be starting July 1, 2013.
If the value of the PERS assets go down, it is guaranteed that PERS employer contributions will go up in order to pay the public employee retirement benefit. And if the employer contributions go up, the services that public employers provide to the people of Oregon will go down. This fact clearly establishes that in the hearts and minds of Oregon’s PERS legislators and the PERS Governor the payment of public employee retirement benefits is Oregon’s undisputed number one financial priority. Nothing, not the education of our children, the ensuring of adequate public safety nor the providing care for the elderly and the infirm, are more important than paying PERS retirement benefits.
The current PERS system exists only because PERS members took 100% control over PERS after the Oregon Attorney General ruled that legislators coud join PERS in 1971. Today, no PERS law can be made or changed without the express approval of PERS members. The current PERS system is corrupt and it must be changed but that will only happen when the people of Oregon demand that it be changed.