After passage of the “Grand Bargain” by the Legislative Assembly on October 2, 2013, Governor Kitzhaber proclaimed “The Public Employees Retirement System is off the table for this governor,” …. “We are done. We are going to move on to other things that are important to Oregonians.” See the October 2, 2013 Oregonian article by Christian Gaston. The “Grand Bargain”, in part, made significant reductions to PERS cost of living adjustments.
While PERS may be off the table politically for Gov. Kitzhaber, it is hardly off the table. Before the “Grand Bargain” PERS reductions can go into effect, PERS members will have the opportunity to challenge those reductions in the Oregon Supreme Court. The Oregon Supreme Court is composed entirely of judges who are PERS members and the cost of living adjustments for those judges will be reduced from what the law currently provides, if the “Grand Bargain” is upheld. To date, the Supreme Court justices have refused to disqualify themselves from deciding PERS case, despite their financial conflict of interest in the outcome of those cases. Currently, however, a challenge to their ability to decide the SB 822 PERS litigation is pending. The court has not yet ruled on that challenge.
It is simply wrong for judges, who are PERS members, to have the final word on whether changes to the PERS laws, whether made by the people of Oregon by initiative or through the Legislative Assembly, are valid. Oregon law allows temporary judges, who do not have a conflict of interest, to be appointed in cases like this to decide such cases and for the first thirty-eight years that PERS existed, Oregon judges were not PERS members. The judges had their own independent retirement plan. They did not have a conflict of interest when they decided PERS cases.
The current system which requires all PERS cases to be decided by judges who are PERS members was created by Oregon legislators, after those legislators were first allowed to join PERS in 1971. From 1971 through 1982, most legislators joined PERS and they substantially increased PERS benefits. The following for a history of PERS benefit enhancements by legislators both before and after they were allowed to join PERS:
PERS BENEFITS BEFORE LEGISLATORS WERE ALLOWED TO JOIN PERS
PERS was created in 1945.
From 1945 through 1970, PERS benefits remained constant. They provided:
(1) A retirement benefit of 50% of final average salary (FAS) after a full career;
– FAS was average of highest annual salary during 5 of last 10 years
– full career was 30 years for general service and 25 years for police and fire
(2) Legislators and Judges could not join PERS;
– AG opinion in 1963 ruled legislators could not join PERS
– Judges had independent retirement plan created in 1943
(3) PERS employers and PERS members were both required to contribute to PERS;
(4) The 50% retirement benefit was funded as follows:
– 20% FAS from Employer;
– 20% FAS from Employee;
– 10% FAS from Social Security, after public employees were allowed to join social security system in 1953.
PERS BENEFIT INCREASES AFTER LEGISLATORS ALLOWED TO JOIN PERS
1971. Attorney General rules legislators can join PERS. Legislators increase Employer benefit to 25% FAS.
1973. Legislators allow unused sick leave to be part of FAS and increased Employer benefit to 30% FAS.
– unused sick leave benefit converted from one-time payment to double benefit with lifetime payment
1975. Legislators passed laws that let legislators join retroactively and guaranteed minimum rate of return:
(1) Allowed any person who ever served in legislature to retroactively join PERS, at the police and fire rate;
(2) Made legislators the only people who could earn PERS retirement credit after 65;
(3) Made the people of Oregon guarantee PERS members that their employee accounts would receive a minimum return each year that would be determined by PERS members.
1979. They passed the PERS pick up law, which was to expire June 30, 1981. 55 of the 90 legislators were PERS members. The PERS pick up law provided a double benefit:
(1) Administrators of a public employer allowed to make the taxpayers who funded the public employer pay the employee contributions for the employees of that employer, including the administrators who made the pick up decision; and,
(2) PERS member who receive pick up also received double benefit of higher employer funded retirement benefit. Legislators passed a law that specifically allowed their employee PERS contributions to be picked up.
– In 2010 PERS estimated that 70% of PERS members had their employee contribution picked up and that the PERS Pick Up during the 2011 – 2013 biennium would cost $750 million in picked up contributions and $124 million increased employer contributions.
1981. Legislators make PERS pick up permanent and increased the Employer benefit to 50% FAS.
Once the legislators had substantially enhanced PERS benefits, they forced Oregon judges to join PERS. That deprived the people of Oregon of their right to have PERS cases decided by impartial judges and ensured that PERS members would have a clear advantage in every PERS lawsuit. The judges were on the same side as the PERS members. And only after judges were PERS members did the judges decide that PERS benefits were a contract and that the people of Oregon could not change that contract without the consent of the PERS members.
If you do not like the current system in which judges who are PERS members must decide every PERS case, tell your legislators. The legislators created this problem and they can change it and it must be changed.