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Saturday, December 6, 2008

One of these days, Portland

Here's an interesting piece on the time bomb known as city employee pensions.

Comments (6)

"No one would knowingly create a pension plan like that"

They haven't met Randy Leonard yet have they?

I think PERS is different than other plans that have run into problems. PERS requires that empoloyers fund the accrued liability, either by paying cash or through borrowing. Of course there is the Portland Police and Fire Disability and Pension Fund (a creation of Randy Leonard), which is a whole 'nother story.

The PERS unfunded liability was $17 billion in 2003. After considerable pain, including state and local governments having to pay a much higher PERS contribution which drained money from government programs, PERS was back in the black at the end of last year. However, the OIC has ridden the market back down; the unfunded liability is back up to $17 billion.

What frank said.


You make an incomplete argument when you assert:

"PERS requires that empoloyers fund the accrued liability"

Here are three comments lifted from various parts of my 2004 brief . . . .

1999 PERS Modifications:
June 23, 1999, by Or Laws 1999, Chapter 317

SECTION 9. ORS 238.600 is amended to read:
[. . .]
(2) If the Public Employees Retirement System is terminated, or if contributions may no longer be made to the system, each member of the system has a nonforfeitable right to the benefits that the member has accrued as of the date of the termination, or as of the date that contributions may no longer be made to the system, to the extent that those benefits are funded. (emphasis added)

An unanswered question:

Does the 1999 PERS reform legislation imposing a blanket limit on liability exclusively to the trust fund assets require this court to mandate a resolution of Zero liability even though the government has retroactively chosen to give many billions of unearned dollars to PERS beneficiaries based solely upon the speculative and unwarranted assumption that this court would rule that such payment was mandatory?

Termination was and is certainly one possible outcome:

At all times there was an absolute liability limit expressly pegged to the fund itself. The trigger event of termination or the ending of future contributions remained perpetually invocable throughout the entirety of the time from June 23, 1999 forward, and seemingly exists even after the 2003 PERS Reforms. That is, a future legislature still retains the authority to terminate the entire pension plan and limit liability to the fund itself. The payment or non-payment of UAL payments (independent of the 2003 PERS Reforms, or any conceivable prior reforms or future reforms) is wholly free from legal compulsion.

I believe that the state should not operate a savings bank, here characterized as a investment trust for which non-public-employees are excluded, which is not open to all on the same terms so as to comply with the equal privileges and immunities clause of the Oregon constitution. It should be self evident to all that the violation of this clause is itself the catalyst for animosity.

The focus is on the fund itself. If the entire fund were confined to investment in US Treasuries then the assumed rate of return would (at least today) be far below 8 per cent and require a much larger fund (and much larger calculated underfunding than at present) and a much larger contribution directly from each and every public employee's pay check.

No one seems to take me seriously (it is the politically unthinkable unspeakable suicide position) when I insist that any calculation of underfunding must be pegged to the event of "termination," which is the most legally significant event and which is certainly the most informative were the legislature to actually contemplate such action.

The question I posed above remains unanswered (by the court), as to PERS' continued demand of "employer" contributions as opposed to "employee" contributions.

Each and every member of PERS has the option to demand, in court, that they have the liberty interest to select a trustee other than the state of Oregon for the management of their own savings. If such a demand were presented to a court it would be coupled with a calculation of that employee's present claim to the present "fund" just as if the legislature choose to terminate the plan in its entirety for all. Perhaps you should demand that such a calculation be performed and delivered to each member so that they can make their own informed individual choice as to whether to continue to participate.

Should your options be limited in like manner to an Enron employee to buying Enron stock? Today you can only hope for continued government largess (as a feudal serf to "government," without control of your own private retirement savings apart from government, in return for political loyalty).

I contend, now as before, that PERS does not have statutory authority to legally compel any "employer contributions" -- and most certainly not, if PERS is terminated.

It is good that there is a provision for termination of the system, I just cannot see that happening. You're talking about pulling the plug on a pension plan that pays (mostly) benefits to cops, firemen and teachers. Stiffing them on their pensions will not be a very popular thing to do. I think they'll just keep cutting services in order to keep the ship afloat, and also will continue to create successive tiers of less generous benefit plans for new employees.

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