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This page contains a single entry from the blog posted on January 17, 2013 1:39 PM. The previous post in this blog was Kicking the can down the road. The next post in this blog is Ring, ring. Many more can be found on the main index page or by looking through the archives.



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Thursday, January 17, 2013

Portland police pension liability jumps $330 million in two years

Just as the national media focuses on the City of Portland's scandalously unfunded police and firefighter pension and disability "system," the latest official estimate of the unfunded pension liability to public safety officers has shown up on the city's website. The city's actuaries peg the unfunded liability at $2.88 billion as of last June 30. That's up from $2.55 billion on the same date in 2010. In other words, the city's unfunded liability grew by $330 million, or 12.96%, during that two-year period -- a compound growth rate of 6.28% a year.

The new report confirms, rather than uncovers, the crippling debt. Police and fire pensions keep moving in the wrong direction, and will continue to do so for at least another decade -- with virtually no money set aside to cover them. It's all coming out of future property taxes.

We've been using a 6.5% growth rate for the pension debt in our City of Portland debt clock (see left sidebar), and so we aren't too far off. But part of the difficulty in pegging that rate is that the actuaries are constantly changing the assumptions they use. Probably the most important factor in present-valuing future amounts is the discount rate, and the city actuaries just cut theirs from 4.0% to 3.5% a year. They also switched from using an "attained age normal" methodology to an "entry age normal" methodology; if anybody out there can explain that, please help us out in the comments.

In any event, no amount of lipstick can make this particular pig look good. It's irresponsible financial stewardship, in the extreme.

Comments (16)

So stop worrying about a bunch of bus drivers.
We are chump change compared to the cops.
And as an extra bonus, we don't shoot people.

That is even more than the $100 million/yr property tax diverted to the PDC and other UR blood suckers.


OK, 6b.

When Leonard gave us that cock-n-bull story about his measure 3 or so years ago. Remember we only needed a prop tax increase for 30 years to pay for his pension.

This guy is going to be expensive long after he's gone. PWB is already sucking $40M a year more out rate payers more than they did 4 years ago.

I'm not sure I would divide $2,880,000,000 by 600,000 residents. Better to divide it by the number of property taxpayers, because it's coming out of their hides. At least until they introduce Portland's new "Public Safety Income Tax".

Praise, honor and a bronze statue on the Eastbank Esplanade go to Vera Katz, who I believe negotiated this pension problem. And Willy Week correctly pointed this out at the time.

Attained Age Normal

Projected Benefit
Level Percentage for normal cost
Separate Past Service Benefit
The past service benefits for all participants, defined as in the Unit Credit method, are lumped and spread evenly over a fixed period of years. The current service cost is expressed as a percentage of payroll as in the aggregate method.
Entry Age Normal

Also called: Individual Level Cost with Supplemental Liability
Projected Benefit
Level Payment
Separate Past Service Benefit
The cost of the full benefit for each participant is first spread as a level amount each year, from year of hire to year of retirement. In the years from the start of the plan until the individual retires, this amount is called the normal cost. The cost from hire to the start of the plan is then reassigned to a fixed period of time, generally 10 to 30 years. This becomes the supplemental cost."

From Cal State LA Accounting 503 course materials

If you want a mathier explanation you could take a look at this: Fundamentals of Pension Funding - Society of Actuaries

I think it will eventually become clear that the politicians that created this mess could've cared less whether or not these commitments could ever possibly be met, they simply got something that they wanted out of it at the time.

State of Oregon = state of no accountability.

Mr. Grumpy:
It's breaking here, but Oregon for sure is not the only state of no accountability, in a nation of no accountability.

It's going to be real ugly in some places when the fit hits the shan.

What is going to happen when those who say 6B push back at paying the bill when it comes due? Not even the well managed states (Indiana, for instance) are 100% immune.

Not looking forward to what happens.

It's Mike

Jack, could you tell me how to stop my page from refreshing automatically every so many seconds? I am using Windows 8 and the latest internet explorer. I like the new Windows 8 operating system over my old XP OS, and especially the multitasking new quad pro intel processor. But for some reason haven't been able to find something to slow the refreshing on your page.

Wouldn't a better approach to have placed Portland fire and police into the PERS system, as this puts it out of the hands of the especially financially irresponsible Portland City Hall? At least the PERS system is under some significant review for change.

Am I the only one that doesn't know what this 6B and 6C code is all about? Is that the nonprofit tax break code or something?

I certainly bow to experts, but from the days I used to work with actuaries and accountants on these type issues, my recollection is that anything which was referenced as normal cost did a decent job at synching with liabilities as they are incurred. The supplemental liability cost part referenced by k2, if it underlies the Portland numbers, suggests there may be some catch up for insufficient past accounting of accrued retirement liabilities amortized over a future period of time, judgmentally determined.

In a nutshell:

6B.= Stop your whining, you voted for them, . . .
6C.= No I didn't vote for them . . .

The only way to fix this pension system is to take it out of the hides of those already retired. The probability that this city council will ever do that is really close to zero. Time for another on-side kick.

This is what happens when the people who negotiate the contract have no skin in the game. The politicians who negotiate with the unions are not personally responsible for what they promise. The worst that could happen to them is to not be re-elected; their pockets aren't affected at all.

If we could go back to the elected and non-elected officials who negotiated these contracts, and the boards or mayors or whatever who approved them contracts, and make them personally responsible for the benefits they approved, that would satisfy my sense of justice just fine.

If this is the work of multiple politicians, there is one primary architect. Randy Leonard. While serving in the State Legislature in the 90's he made some stealthy tweaks to the state collective bargaining laws as well as the workers compensation laws with respect to police and fire. For example, certain illnesses were by state law deemed automatically "work related" for fire fighters thereby folding all manner of additional maladies under the Police and Fire Disability Fund (same as the pension fund) regardless of whether they were, in actuality, caused by their work. A classic example is one former President of the Portland Firefighters Association (PFFA) developed lung cancer. He was a lifelong smoker, but his illness was paid for by Portland's uber rich disability fund owing to the state law Randy had crafted while in the Oregon Legislature.

Knowing how he had tweaked the state law in so many small corners of the ORS, once he became a member of City Council he then went about "suggesting" changes to City policies or certain provisions to the Police and Fire labor contracts to dovetail with his legislative work.

He was a master. Randy spent two and half decades screwing Portland taxpayers. He was so good at it, it will take five decades to dig out from under Randy's stealthy largess.


As a lawyer/blogger, I get
to be a member of:

In Vino Veritas

King Estate, Pinot Gris, Backbone 2014
Oberon, Napa Cabernet 2013
Apaltagua, Envero Carmenere Gran Reserva 2013
Chateau des Arnauds, Cuvee des Capucins 2012
Nine Hats, Red 2013
Benziger, Cabernet, Sonoma 2012
Roxy Ann, Claret 2012
Januik, Merlot 2012
Conundrum, White 2013
St. Francis, Sonoma Cabernet 2012
Villa Antinori, Toscana 2012
Decoy, Cabernet, Sonoma 2013
Marqués de Murrieta, Reserva Rioja 2010
Kendall-Jackson, Grand Reserve Cabernet 2009
Seven Hills, Merlot 2013
Los Vascos, Grande Reserve Cabernet 2011
Abbot's Table, Columbia Valley 2014
Forlorn Hope, St. Laurent, Ost-Intrigen 2013
Upper Five, Tempranillo 2010 and 2012
The Four Graces, Pinot Gris 2015
Topsail, Syrah 2013
Jim Barry, The Lodge Hill Shiraz 2013
Robert Mondavi, Cabernet, Napa Valley 2012
Adelsheim, Pinot Gris 2014
Boomtown, Cabernet 2013
Boulay, Sauvignon Blanc 2014
Domaine de Durban Muscat 2011
Patricia Green, Estate Pinot Noir 2012
Crios, Cabernet, Mendoza 2011
WillaKenzie, Pinot Gris 2014
Dehesa la Granja, Tempranillo 2008
Abacela, Vintner's Blend #15
Selvapiana, Chianti Ruffina 2012
Joseph Carr, Cabernet 2012
Prendo, Pinot Grigio, Vigneti Delle Dolomiti 2014
Joel Gott, Oregon Pinot Gris 2014
Otazu, Red 2010
Chehalem, Pinot Gris, Three Vineyards 2013
Wente, Merlot, Sandstone 2011
Abacela, Fiesta Tempranillo 2012
Monmousseau, Vouvray 2014
Duriguttti, Malbec 2013
Ruby, Pinot Noir 2012
Castellare, Chianti 2013
Lugana, San Benedetto 2013
Canoe Ridge, Cabernet, Horse Heaven Hills 2011
Arcangelo, Negroamaro Rosato
Vale do Bomfim, Douro 2012
Portuga, Branco 2013
Taylor Fladgate, Late Bottled Vintage Porto 2009
Pete's Mountain, Pinot Noir, Kristina's Reserve 2010
Rodney Strong, Cabernet, Sonoma 2012
Bookwalter, Subplot No. 28, 2012
Coppola, Sofia, Rose 2014
Kirkland, Napa Cabernet 2012
Trader Joe's Grand Reserve, Napa Meritage 2011
Kramer, Chardonnay Estate 2012
Forlorn Hope, Que Saudade 2013
Ramos, Premium Tinto, Alentejano 2012
Trader Joe's Grand Reserve, Rutherford Cabernet 2012
Bottego Vinaia, Pinot Grigio Trentino 2013
Villa Antinori, Toscana 2011
Pete's Mountain, Elijah's Reserve Cabernet, 2007
Beaulieu, George Latour Cabernet 1998
Januik, Merlot 2011
Torricino, Campania Falanghina 2013
Edmunds St. John, Heart of Gold 2012
Chloe, Pinot Grigio, Valdadige 2013
Edmunds St. John, Bone-Jolly Gamay Noir 2013
Kirkland, Pinot Grigio, Friuli 2013
St. Francis, Red Splash 2011
Rodney Strong, Canernet, Alexander Valley 2011
Erath, Pinot Blanc 2013
Taylor Fladgate, Porto 2007
Portuga, Rose 2013
Domaine Digioia-Royer, Chambolle-Musigny, Vielles Vignes Les Premieres 2008
Locations, F Red Blend
El Perro Verde, Rueda 2013
Chateau Ste. Michelle, Indian Wells Red 2010
Chloe, Pinot Grigio, Valdadige 2013
Edmunds St. John, Bone-Jolly Gamay Noir 2013
Kirkland, Pinot Grigio, Friuli 2013
St. Francis, Red Splash 2011
Rodney Strong, Canernet, Alexander Valley 2011
Erath, Pinot Blanc 2013
Taylor Fladgate, Porto 2007
Portuga, Rose 2013
Domaine Digioia-Royer, Chambolle-Musigny, Vielles Vignes Les Premieres 2008
Locations, F Red Blend
El Perro Verde, Rueda 2013
Chateau Ste. Michelle, Indian Wells Red 2
If You See Kay, Red 2011
Turnbull, Old Bull Red 2010
Cherry Tart, Cherry Pie Pinot Noir 2012
Trader Joe's Grand Reserve Cabernet, Oakville 2012
Benton Lane, Pinot Gris 2012
Campo Viejo, Rioja, Reserva 2008
Haden Fig, Pinot Noir 2012
Pendulum Red 2011
Vina Real, Plata, Crianza Rioja 2009
Edmunds St. John, Bone/Jolly, Gamay Noir Rose 2013
Bookwalter, Subplot No. 26
Ayna, Tempranillo 2011
Pete's Mountain, Pinot Noir, Haley's Block 2010
Apaltagua, Reserva Camenere 2012
Lugana, San Benedetto 2012
Argyle Brut 2007
Wildewood Pinot Gris 2012
Anciano, Tempranillo Reserva 2007
Santa Rita, Reserva Cabernet 2009
Casone, Toscana 2008
Fonseca Porto, Bin No. 27
Louis Jadot, Pouilly-Fuissé 2011
Trader Joe's, Grower's Reserve Pinot Noir 2012
Zenato, Lugana San Benedetto 2012
Vintjs, Cabernet 2010
14 Hands, Hot to Trot White 2012
Rainstorm, Oregon Pinot Gris 2012
Silver Palm, North Coast Cabernet 2011
Andrew Rich, Gewurtztraminer 2008
Rodney Strong, Charlotte's Home Sauvignon Blanc 2012
Canoe Ridge, Pinot Gris, Expedition 2012
Edmunds St. John, Bone-Jolly Gamay Noir Rose 2012
Dark Horse, Big Red Blend No. 01A
Elk Cove, Pinot Noir Rose 2012
Fletcher, Shiraz 2010
Picollo, Gavi 2011
Domaine Eugene Carrel, Jongieux 2012
Eyrie, Pinot Blanc 2010
Atticus, Pinot Noir 2010

The Occasional Book

Claire Vaye Watkins - Gold Fame Citrus
Markus Zusak - I am the Messenger
Anthony Doerr - All the Light We Cannot See
James Joyce - Dubliners
Cheryl Strayed - Torch
William Golding - Lord of the Flies
Saul Bellow - Mister Sammler's Planet
Phil Stanford - White House Call Girl
John Kaplan & Jon R. Waltz - The Trial of Jack Ruby
Kent Haruf - Eventide
David Halberstam - Summer of '49
Norman Mailer - The Naked and the Dead
Maria Dermoȗt - The Ten Thousand Things
William Faulkner - As I Lay Dying
Markus Zusak - The Book Thief
Christopher Buckley - Thank You for Smoking
William Shakespeare - Othello
Joseph Conrad - Heart of Darkness
Bill Bryson - A Short History of Nearly Everything
Cheryl Strayed - Tiny Beautiful Things
Sara Varon - Bake Sale
Stephen King - 11/22/63
Paul Goldstein - Errors and Omissions
Mark Twain - A Connecticut Yankee in King Arthur's Court
Steve Martin - Born Standing Up: A Comic's Life
Beverly Cleary - A Girl from Yamhill, a Memoir
Kent Haruf - Plainsong
Hope Larson - A Wrinkle in Time, the Graphic Novel
Rudyard Kipling - Kim
Peter Ames Carlin - Bruce
Fran Cannon Slayton - When the Whistle Blows
Neil Young - Waging Heavy Peace
Mark Bego - Aretha Franklin, the Queen of Soul (2012 ed.)
Jenny Lawson - Let's Pretend This Never Happened
J.D. Salinger - Franny and Zooey
Charles Dickens - A Christmas Carol
Timothy Egan - The Big Burn
Deborah Eisenberg - Transactions in a Foreign Currency
Kurt Vonnegut Jr. - Slaughterhouse Five
Kathryn Lance - Pandora's Genes
Cheryl Strayed - Wild
Fyodor Dostoyevsky - The Brothers Karamazov
Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
Brian Selznick - The Invention of Hugo Cabret
Sharon Creech - Walk Two Moons
Keith Richards - Life
F. Sionil Jose - Dusk
Natalie Babbitt - Tuck Everlasting
Justin Halpern - S#*t My Dad Says
Mark Herrmann - The Curmudgeon's Guide to Practicing Law
Barry Glassner - The Gospel of Food
Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
Evelyn Waugh - Brideshead Revisited
J.K. Rowling - Harry Potter and the Sorcerer's Stone
David Sedaris - Holidays on Ice
Donald Miller - A Million Miles in a Thousand Years
Mitch Albom - Have a Little Faith
C.S. Lewis - The Magician's Nephew
F. Scott Fitzgerald - The Great Gatsby
William Shakespeare - A Midsummer Night's Dream
Ivan Doig - Bucking the Sun
Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
Madeline L'Engle - A Wrinkle in Time
Steven Hart - The Last Three Miles
David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 61
At this date last year: 97
Total run in 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269

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