The following article was published in the Eugene Register-Guard on January 31, 2012.
The Register-Guard http://www.registerguard.com/
GUEST VIEWPOINT: Lawmakers made PERS a sweet deal
By Daniel Re
Published: Tuesday, Jan 31, 2012 05:00AM
The Eugene School District was forced to reduce its budget for the 2011-12 school year by $22 million due to increased costs and lower revenue. To make up that shortfall, the district was forced to cut back on the education of the district’s children. One spending area not reduced, however, was the amount that will be paid to the Public Employees Retirement System.
For the 2011-12 fiscal year PERS will be paid $20 million. That equals 90 percent of the shortfall and includes a $4.5 million increase over the amount paid to PERS in 2010-11.
This didn’t happen when I graduated from North Eugene High School in 1967, but there is a simple reason why it happens today. It happens because Oregon legislators were allowed to join PERS in 1971.
From 1945, when PERS was established, through 1970, legislators could not join PERS. During that period, the maximum PERS retirement benefit remained relatively constant at 50 percent to 60 percent of final average salary. That retirement benefit came from three sources: an employer funded pension, an employee funded annuity and Social Security.
But after 1970, legislators substantially changed the PERS laws.
In 1971, they increased the employer funded pension by 25 percent.
In 1973, they authorized unused sick leave to increase the employer funded pension, and they increased the employer funded pension by another 20 percent. In 1975 they allowed anyone who had ever been a legislator to retroactively join PERS, and they kept that right open until 1987.
That same year, legislators allowed themselves to be the only elected officials who could earn PERS retirement credit for service after age 65.
Also in 1975, lawmakers passed the “guaranteed minimum rate of return” law, which guaranteed PERS-covered legislators and all other PERS members who started working for the state before 1996 that they would never earn less than a minimum return on their employee accounts. The guaranteed rate was set by the PERS Board, which was dominated by PERS members. If actual earnings were less than the guaranteed rate, the people of Oregon had to make up the difference. The PERS Board increased the guaranteed rate twice in 1975, and today it is 8 percent per year.
By 1979, 55 of Oregon’s 90 legislators were PERS members. They passed the PERS pick-up law, which was to expire two years later. That law allowed PERS members to make the people of Oregon make their 6 percent employee contributions for them. It also created fictional salary levels that increased their employer funded pension. The legislators also passed a law that specifically allowed their own PERS to be picked up.
In 1981 the Legislature made the PERS pick-up permanent, and increased the employer funded pension by 67 percent so that this pension, alone, would pay 50 percent of a retired PERS member’s salary. In addition, retired PERS members would receive an employee annuity and Social Security. In just 10 years, PERS legislators had more than doubled PERS retirement benefits.
By 1983, 84 of the 90 legislators were PERS members. That year they put Oregon’s judges into PERS. A person who became a judge for the first time after 1983 automatically became a PERS member if he or she were younger than 72 years old. PERS judges had a 7 percent employee contribution, but that contribution was required to be picked up for them. Incumbent judges were able to join PERS or stay in their original retirement plan. If they stayed in the original plan, they had to pay 7 percent of their salary to that plan. If they joined PERS, however, their 7 percent contribution would be picked up for them. That gave each judge who joined PERS an immediate 7 percent raise.
In 1989, when 82 of the 90 legislators were PERS members, the Legislature passed a law allowing the state to withhold all money owed to a public employer until that employer’s PERS assessment was fully paid. That law made PERS funding Oregon’s top financial priority.
PERS laws enacted after 1970 have forced all PERS employers, including the Eugene School District, to cannibalize themselves in order to pay PERS. They have no choice. No PERS law can be made or changed without approval of the PERS members who control every branch of Oregon government. While PERS members should have a voice in making PERS laws, they are not entitled to every voice. That, however, is what they have — and that is why the PERS laws are the way that they are today.
This situation did not exist before 1971, the year legislators were first allowed to join PERS.
Daniel Re of Bend is a lawyer who has sued to disqualify judges who are members of the Public Employees Retirement System from hearing cases involving PERS.
Copyright © 2012 — The Register-Guard, Eugene, Oregon, USA