The following news story was published in the Oregonian on December 1, 2012. It refers to my lawsuit which challenges the ability of PERS judges to decide PERS cases. The statement at the end of the story that the court has denied my right to independent judges occurred in a preliminary motion. The Court of Appeals has not yet issued a final decision on that issue.
Oregon’s judges play unique role in PERS
By Mike Francis, The OregonianThe Oregonian
on December 01, 2012 at 3:01 PM, updated December 01, 2012 at 3:03 PM
If any group of people stands at the heart of Oregon’s complex and underfunded Public Employees Retirement System, it is the state’s judges.
Not only do they enjoy some of the state’s most generous formulas for calculating their public retirement benefits, but judges are uniquely empowered to protect or enhance them. That’s because they decide legal questions raised by anybody with a grievance about the way PERS works. Under this system, judges have settled PERS cases even as they acknowledged their own conflicts of interest.
Further, it’s likely that any reforms to the PERS system, from reducing cost-of-living adjustments and employer “pickups,” as Gov. John Kitzhaber has proposed, will almost certainly be challenged in court by employee unions. The outcome of those cases will affect the judges who decide them.
Start with the formula. Under “Plan A,” a judge accrues a pension at a rate of 2.8125 percent of his or her annual salary — 68 percent higher than for general service employees. That means he or she can earn a pension worth half his salary in less than 18 years. It takes a general service employee 30 years to do the same.
Under Plan B, a judge’s pension is richer still. It is calculated at a rate of 3.75 percent of the final average annual salary, meaning he’ll earn a pension of half his salary in a little more than 13 years. To get the Plan B formula, judges must agree to serve as pro tem judges without compensation for at least 35 days a year for five years.
And while judges are required to contribute 7 percent of their salaries toward their retirements, it doesn’t come out of their own pockets. It is picked up by the employer — that is, taxpayers.
However, any discussion about the relative generosity of judges’ retirement benefits must note that Oregon’s judges, who are elected in nonpartisan races, are paid less than their counterparts elsewhere. The most recent survey of judicial salaries by the National Center for State Courts shows salaries for Oregon’s Supreme Court justices rank 45th among the states. An Oregon Supreme Court justice earned a little more than $125,000 as of Jan. 1, 2011, while his counterparts in California and Washington earned about $218,000 and $164,000 respectively, according to the survey. Appellate and circuit judges also earn below-average salaries.
Their benefits under PERS help to offset that.
Judges’ vested interest in PERS cases
The conflict of interest was created in 1983, when the Legislature mandated that judges be members of PERS.
In three prominent PERS cases since, judges have noted that they would personally be affected by their rulings, but said they have no choice but to rule anyway under the “rule of necessity.” In two of the cases, the court’s ruling solidly favored PERS members, including judges.
The rule of necessity faces a new challenge in the Oregon Court of Appeals, where Bend lawyer Daniel Re argues it has been misused. The rule of necessity, he has written, “requires a case to be decided unfairly.”
“It flunks the smell test,” he said.
Re says the courts can apply a fairer standard by appointing independent, temporary judges — judges pro-tem — to hear PERS cases.
It’s by no means clear that Re’s suit will change anything about the role of judges in PERS cases. A lawsuit filed 15 years after the original judgment “does go against the rules of repose,” noted Arthur Hellman, the Sally Ann Semenko chair and professor of law at the University of Pittsburgh. He referred to the doctrine of settled law, which requires a compelling reason to reopen a judgment.
But Hellman also noted that “it’s probably not a very common combination” to have judges participating in the same pension system as all other public employees, and to deal with a state constitutional amendment that reduces the pension expectations of current employees.
Why it matters
Judges are a sliver of the PERS universe. Of the 118,000 public retirees who receive benefits, 193 were retired judges as of Dec. 31 last year, says PERS spokesman David Crosley. As of this summer, he said, another 189 judges were active, and 11 inactive, meaning they will be entitled to judges’ benefits when they retire. But their influence on PERS’ payouts is outsized.
The actuarial shortfall in the PERS budget is about $16 billion — meaning taxpayers are on the hook for an additional, unbudgeted $16 billion to pay promised benefits to retired public workers. That obligation already has caused school districts to lay off teachers and cut the length of the school year, and for Gov. John Kitzhaber to call for pension reforms to help stabilize education funding. In September, the PERS board approved a 45 percent raise in rates paid by public employers — again, taxpayers — in an effort to narrow the gap. Public agencies say the higher costs will require more layoffs and service cuts.
Some of this pain is due to such legal decisions as the Oregon Supreme Court’s 1996 ruling in Oregon State Police Officers Association vs. the State of Oregon. That case was triggered by the passage of 1994’s Ballot Measure 8, a PERS modification package advanced by tax activist Bill Sizemore that narrowly passed. The measure required public employees to contribute 6 percent of their pay into their pension, struck down the ability of public agencies to guarantee an interest rate on employees’ pensions, prohibited members from counting unused sick leave to their pensions.
The Oregon Supreme Court took the case on appeal and decided that Measure 8 was unconstitutional. Then-Supreme Court Justice George Van Hoomissen wrote the majority opinion, which was cheered by public employees.
“Once offered and accepted, a pension promise made by the state is not a mirage (something seen in the distance that disappears before the employee reaches retirement),” the opinion reads, in part. “A contrary holding would serve notice on any person who might consider embarking on a career in public service that the state’s promises could well prove to be worthless.”
While Van Hoomissen wrote for the majority, the court was sharply divided. In a stinging dissent joined by two other justices, then-Justice W. Michael Gillette described the majority opinion as “novel” and said it amounted to “an inappropriate use of the judicial power.”
Wrote Gillette: “The lead opinion suffers, not from any want of good will or of diligence, but from a temporary loss of perspective, apparently due to the subject matter — pensions — that we are addressing. I cannot join it.”
Nevertheless, he and other retired Oregon judges benefited from the Oregon State Police Officers ruling.
Van Hoomissen retired Jan. 1, 2001 with a final year salary of $109,647. According to PERS records, he collects $6,824.78 a month — about $82,000 a year — in benefit payments earned during his 27 years as a judge and 13 previous years as a legislator and district attorney.
Re’s case in the Court of Appeals directly tackles the matter of judges’ conflict of interest. But here’s the kicker: It’s going to be decided by judges who are PERS members. Re sought to disqualify such judges from hearing the case, arguing “the judges of this Court are directly interested in this proceeding because Petitioner’s prevailing will necessarily reduce the judges’ retirement benefits.”
In a two-sentence order, the Court of Appeals rejected Re’s argument.
Writing for the court, presiding judge Robert Wollheim said, “The court has considered the petitioner’s motion and orders that it is denied.”