All I can say is that they need to change their name to Government Accounting Standards Panel (GASP!)

I guess Mark Bunster will be a Wal-Mart greeter in 30 yrs or so.

Go by chapter 9!

It's about time. Shortly after this change, Poorland's credit worthiness should be downgraded by Moody's....and rightfully so.

Hey the Oregonian editorial board can now recycle this.

Oregon suddenly arrives at the edge of the cliff

http://www.oregonlive.com/opinion/index.ssf/2010/05/oregon_suddenly_arrives_at_the.html

This new requirement would reveal the severe fiscal madness called TriMet (or PDC et al) and further demonstrate the complete absence of ANY authentic oversight or due diligence by either their management or Board of directors, over many years.

I have found it an amazing to witness this phenomenon where reckless abandon has been acceptable for so long.

It's been so bad that the participants, affectionately referred to as "stakeholders", wander well past official malfeasance without experiencing any individual or group obligation to take responsibility for anything.

So who's job is it to provide oversight and apply due diligence?

With TriMet, (like PDC), staff and management oversees itself and reports their findings and recommendations to the TriMet board.

The only critiquing comes form the outside who TriMet ignores because it conflicts with what staff is reporting.

The board is not only failing to scrutinize what staff reports, they can't even imagine how or why anything reported would not be thorough, objective and accurate.

Which is so asinine that one has to wonder how an entire board can be so continually duped.

This seems like a pretty reasonable proposal. Governments have been able to hide many things for too long and perhaps this change will finally force a long-overdue downgrading of the credit worthiness of many public entities in Oregon. Sure, future debt will be more expensive, but maybe taxpayers will actually start scrutinizing these projects rather then just rubber-stamping everything that is proposed. Maybe they will start demanding that government employees pay their fair share for their benefits, as those in the private sector must.

Re-educating the public on these issues is going to be a long-term process. I hope we can look back on this seemingly small change in accounting methods as the start of that process.

Let's stay positive here. Sure, the city owes billions, but how many times have you heard that money isn't everything?

Look for this to get shot down faster than a slow-moving blimp in a flak barrage. They bullied FASB into letting banks make up their own numbers when valuing the toxic loans in their portfolios. They'll do the same thing here, with a similar argument--that in this time of economic disruption forcing states and cities to bring extra liabilities onto their balance sheets would make the recession far, far worse.

Look for them to punt the reckoning and accountability another few years down the road and then cross their fingers and hope that the nascent recovery underway will save everyone's butts.

We love you Bill.

It's alright, they'll just add pensions to our sewer bill.

"Randy Leonard requests 5,342% increase to water and sewer rates in October. Fritz is critical, but other Commissioners declare it 'tough but fair'."

Though Mr. Sickinger and the O, who live to demonize PERS, tried to divert attention from the facts, even they had to include a couple of statements indicating that PERS is much less affected by these changes than are many other public pension systems.

Here are a couple of them:

"Matt Larrabee, an actuary with Mercer Human Resources Consulting in Portland, said Oregon PERS may be allowed under the rules to continue using a higher discount rate because it's closer to a fully funded status than many other systems. Using it('s) current rate-setting policy, Oregon can forecast a fully funded system in 20 years. That puts it in marked contrast to other state systems, some of which show a deficit indefinitely."

"Larrabee agrees the rules will likely have some impact on Oregon, but it's too early in the process to say for sure. Oregon PERS starts off better funded than most systems, and it already uses shorter amortization periods for its actuarial shortfall -- 20 years for older employers and 16 years for newer."

However, we can always be sure that, to the PERS haters here, the facts will never be allowed to get in the way of a good rant.

"money isn't everything?"

That reminds me of the recent Fred Hansen
response to Alley calling for the halting of the $1.4 billion Milwaukie Light Rail project because we can't afford it.

Fred Hansen, "We're building a community asset".

See he gets it.
Money isn't everything.

"money isn't everything?"

Not when they play Monopoly.
The game is fun when it isn't your money.

"the facts will never be allowed to get in the way of a good rant."

Why do you think govt never mentions the unfunded liabilities on PERS? Besides, if it is in such good shape why do they have to bump employer (read taxpayer) contributions 25%?

"Instead of assuming systems can pay off their deficits with high investment returns -- most assume investments will earn about 8 percent annually"

Isn't that how we got in trouble in the first place was guaranteeing every PERS recipient an 8% return?

People, PERS payouts are a topline item, the taxpayers will get stuck with it thru employer contibutions.

Don't forget about the "real" value of all those real estate investments that PERS holds also.

It's always amusing to me how vehemently the PERS partisans like rural resident defend their little taxpayer-provided pots of gold. They employ everything from moral indignation to entitled arrogance to lashing out at reporters and bloggers and public officials as "PERS haters" who dare ask critical questions about the stability of the PERS system and whether the Tier 1 8-percenters are being coddled at the expense of both taxpayers and younger public employees. They point to the supposedly solid financials of PERS relative to other state pension plans, when it's all accounting hocus-pocus. They claim PERS is "settled law" and an ironclad "contract", when laws are re-written and contracts are abrogated all the time.

I'm not saying that would be a good thing. I have family members -- including my wife -- who are paying into PERS, the loss of which when they are ready to retire would be devastating. All I ask is that beneficiaries lay off the "I've-got-mine-f**k-you" attitude and call off their union attack dogs that tear at the throats of public officials and citizens who are working in thoughtful ways to preserve benefits while not driving the state into a financial ditch.

Another big way PERS is left off the hook by these new proposals is PERS' real estate and hedge fund holdings are valued at cost, and not the more accurate market value measure.

I think there is plenty of reason to be worried about PERS and city of Portland's pension obligations. It defies logic in the sluggish Oregon economy (the lost decade plus) to have large numbers of government employees retiring with full benefits before the age of 60, when these benefits exceed the average per capita income of most Oregonians. Is Oregon this rich? I highly doubt it. The politicians who deeded these benefits have moved on, and had high discount rates favoring the very short term outcomes of such deeds and very little if any incentive to dispair the long term consequences now approaching.

I hope the state and local governments start funding the development of a direct-deposit system between public coffers and retiree bank accounts that explores the mechanics of depositing IOUs instead of the usual greenbacks.

And of course, making sure that all businesses licensed to operate within Oregon, are obligated to accept IOUs for products and services.

Alas, this won't do much for the retirees residing out-of-state.

In the future, Bill may have to change is remark to "IOUs are everything".

/snark off

Dad gum - socialism doesn't work in Europe. Socialism won't work in America (no matter how hard Obama pushes for it). And socialism isn't working in Portland - obviously we're doing something wrong ... oh, yeah, we're running out of other peoples money.

That's the sound of Neil rounding up one of his minions to be planted on the GASB.
Surprised there isn't one there already...

I seem to recall an article in the New York Times a couple of years back that this was in the works. I would have thought they had plenty of warning. They do read down there, er City Hall, don't they?

Eric and Mike (o.o.t.m.) .... I like your idea about there not being any validity to contracts.

I'll sign a "contract" with a builder to build me a couple of million dollar houses--then I'll pay him $10,000 and keep them homes. Perfectly legal in your world, since the completion of the "contract" by one party doesn't obligate the person on the other side to do anything. (The fact that public employees have completed their part of the bargain with Oregon's citizens obviously does not impact any legal obligation on the state's part, so I'm sure you'll agree that this is perfectly proper.)

Then, I'll sell the houses to people who will pay me in cash. (There are plenty of them around.)

Yes sir, I think I can make some serious money doing business in your world.

"I like your idea about there not being any validity to contracts."

One of the requirements of a contract is that both sides have to have the capacity. When you get a govt with no consideration on what the taxpayer will be obligated to and letting the other party dictate terms (unless you can tell me the last time a pol told a public employee union no) you get a bad deal for one side. The only parallel I can think of is striking a deal with the village idiot and then expecting his father to pay.

What do you do when the father is cleaned out?

Steve ... You cut budgets and/or pay taxes. Not having the capacity to pay and not wanting to pay are two different things. Believe it or not, if it comes to that, there are lots of ways to cut programs, and there's plenty of taxing capacity left in Oregon.

You are comparing state legislators and school administrators to the village idiot. Your call. There are cases where you're not far off the mark, but these people were sane at the time and understood the ramifications. In some cases, they were trying to screw over public employees and their schemes backfired. In others, they may have miscalculated.

I invested in some tech stocks back in the 1990s. Should I claim that I "didn't have the capacity to understand," and ask for my money back? I made a couple of bad deals. I lived with it. So will the people of Oregon.

As I said, living in Eric and Steve world could be interesting and challenging.

"these people were sane at the time and understood the ramifications."

Puh-leeze, guaranteeing an 8% return paid for with other people's money - means they understood the ramifications? I mean if I understand how an idiot does things does that mean I have to repeat his actions?

"there are lots of ways to cut programs, and there's plenty of taxing capacity left in Oregon."

You might want to reconsider the latter half of that statement.

"I lived with it. So will the people of Oregon."

That's the problem, if the school year becomes 3 days long, we are still on the hook for benefits at full cost.

In Steve-land, people cooperate on a solution to problems that are mutually satiisfactory. In your world, public employees NEVER do a give back unlike the private sector.

In Steve-land, people cooperate on a solution to problems that are mutually satisfactory. In your world, public employees NEVER do a give back unlike the private sector.

No, in Steve-land, public employees are viewed as worthless parasites and the "give and take" involves continuous givebacks by public employees (who would work for low wages without medical benefits or pensions). People who think as you do aren't interested in exploring mutually beneficial solutions--you want all 100% on the anti-public employee side. (Incidentally, there have been four changes in the benefit calculations that have resulted in reductions for PERS Tier 1 future retirees--and one for current retirees--in the last seven years, so it isn't like they haven't surrendered something already.) I've said before, and I'll say again, that there's no sense in talking about this with conservatives. If PERS recipients agreed to cut their pensions to $1.97 a month, you'd be complaining that their benefits are still at least $1.96 a month too high.

Puh-leeze, guaranteeing an 8% return paid for with other people's money - means they understood the ramifications?

I know facts aren't especially important in Steve-world, but from the late 1960s to 2009, with all the ups and downs in the economy, the PERS Tier 1 regular benefit trust fund earned an annual return of about 11% per year. That's not a small sample. That's the information decision makers were operating on. Yes, based on input from successful investment managers, they clearly understand the ramifications.

As the excerpts from Sickinger's article show, PERS is doing relatively well considering the state of the economy. Some districts didn't make required payments to PERS at times, and, when some of them tried to bond future liabilities to cut their rate, the stock market took a dramatic turn down. It will recover. It isn't likely that there will be a need for new taxes, but, yes, if it comes to that, people will have to decide whether they want to pay more or cut services. Those are the two choices. PERS members won't--nor should they--make unilateral concessions just to keep conservative Republicans happy. Once they start backpedaling, they'll never stop. It isn't that they're not concerned about others. They're just fed up with being vilified and badgered. Nothing is ever enough with people who see the public sector as you do.

"involves continuous givebacks by public employees"

You going to give an example or is this puffery? THht's about as fatuous as the upside in taxing capactiy.

I find this really hard - When Intel has trouble, employees get a 10% pay cut to keep the company going. Give me a similar example for public employees to keep Oregon going.

Again, every state service will get cut before employee beenfits get touched.

"the PERS Tier 1 regular benefit trust fund earned an annual return of about 11% per year."

This I would really like to see - Proof?

Again, if PERS is doing so well, why do they need to bump contributions 25%?

"public employees are viewed as worthless parasites"

BTW - Thanks for being open-minded enough to make up stuff for me to say that I never said. Nice way to avoid adressing what I really said.

You going to give an example or is this puffery? THht's (That's?) about as fatuous as the upside in taxing capacity.

I'm saying that this would be the case if Oregon were like Steve-world. And, yes, there is taxing capacity. Whether people want to pay them is another story, but if push comes to shove, they'll have to decide whether to increase taxes or cut benefits. As a future PERS recipient, I have no interest in having retirees (or public employees in general) be solely responsible for making up for service cuts.

I find this really hard - When Intel has trouble, employees get a 10% pay cut to keep the company going. Give me a similar example for public employees to keep Oregon going.

It's interesting that you wrote this on Friday, June 18--a furlough day for most state workers. Teachers have seen days cut from school years, with commensurate cuts in pay. (Conservatives should applaud this, since they claim that teachers don't teach anybody anything on the days schools are in session, so they can't claim any lost "production.")

Comparing public and private industry is sometimes difficult. Don't those same Intel workers receive large bonuses when times are good? (I know several, and I know they do.) Even when the economy is white hot, people such as yourself would never advocate for additional pay. (I once spoke with one of our state legislators and asked him, “If PERS pensions were lower than what you claim is “fair,” would you propose increasing them?” His responses was, “No, because they would be getting the pension they bargained for.”)

This I would really like to see - Proof? Again, if PERS is doing so well, why do they need to bump contributions 25%?

It's here on the PERS web site:

http://oregon.gov/PERS/section/financial_reports/regular_and_variable.shtml

Actually, I underestimated the effects of the 2008 downturn. From 1970 to 2009, the actual Tier 1 fund earnings averaged only 10.47%. I'm confident that they'll return to their long-term average as the market recovers.

They don't need to bump employer contributions to 25% of pay. That's a familiar conservative exaggeration. This year, I think it's something like 11-13%. There are several reasons that employer rates are more than employee contributions. The biggest is that, for money match purposes, they need to keep up with the returns earned by the fund's professional managers. There was also a problem with taxing jurisdictions that tried to bond their future liabilities just as the investment markets collapsed, and they have to compensate for some of that.

BTW - Thanks for being open-minded enough to make up stuff for me to say that I never said. Nice way to avoid adressing what I really said.

You're welcome. I'm inferring based on other comments you've made. My guess is that I'm not far off. I believe I have addressed every major point you've tried (in vain) to make.

“I have no interest in having retirees (or public employees in general) be solely responsible for making up for service cuts.”

Again, employee benefits are a top-line expense. We scale schools back to one month a year, fire half the police and let bridges and roads collapse because, as you noted, we have a contract and the public employee unions will not do an adjustment. So I wouldn’t worry about your benefits getting cut.

“Don't those same Intel workers receive large bonuses when times are good?”

Sure, just like Ted gave all the managers good raises when the 2007 revenues came in - Only to back himself into a corner when the 2009 numbers came in. Of course, those managers will never have to do a giveback on the raises. Then again, maybe there is a mass exodus of public employees to private sector jobs because they have better benefits – I’d love to hear about it.

“From 1970 to 2009, the actual Tier 1 fund earnings averaged only 10.47%. I'm confident that they'll return to their long-term average as the market recovers.”

If you look at that table, it is entitled:
“Financials - Distribution of Earnings”

From what I can read (and I’ll give PERS an A+ in the obfuscation dept), this is the % share of earnings given to Tier 1 and Tier 2. A negative would imply they had to take money out of the account.

This is NOT the actual return.

If I look at Tier 1 return locked at 8% for the past few years, since they are guaranteed 8% or better, I’d assume the actual return is less (and prob way less) than 8%.

If you want to look at this:
http://www.ost.state.or.us/FactsAndFigures/PERS/Monthly/2010/OPERF_0410.pdf

It is the return based as of Apr 2010 (latest), I could find. For the past five years, the annual return looks like 1.56% (TOTAL OPERF Variable account) which is worse than T-bills.

“This year, I think it's something like 11-13%.”

You misunderstood, I meant the increase in contributions – re-read it (bump is argot for % of increase). It is pretty troubling though, go to the Oregonian:

“That means payroll rates to fund pensions will go from an average of 4.7 percent of payroll to 13.1 percent.”

http://www.oregonlive.com/business/index.ssf/2009/09/oregon_governments_schools_fac.html

So, I’ll correct myself – This is a 13.1/4.7 increase = 278% increase in employer contributions. Not a real great augur for the future.

“I'm inferring based on other comments you've made.”

Try to stick to facts instead of inference. I respect Mr Fearless 47 even though I disagree with him on the future outcomes, but at least he can stick to facts instead of name-calling.

My main point is that to make the PERS recipients whole, based on the above, there are going to have to be some big increases in employer contributions. If tax revenues don’t go up (and I don’t see a lot of taxpayers with room to pay more or new businesses coming into the state), it’ll come straight out of services to the taxpayers.

Instead of action now when it’d be less painful, we’re going to get “kick the can down the road.”

"TOTAL OPERF Variable account"

Sorry, I guess I should've looked at:
TOTAL OPERF Regular account
Since it has most of the funds.

Return is better - 5.4% annually over the past 5 years, but that is nowhere near to 10% or meeting the Tier 1 8% and only marginally better than the Russell 3000.

Try to stick to facts instead of inference. I respect Mr Fearless 47 even though I disagree with him on the future outcomes, but at least he can stick to facts instead of name-calling.

At no point did I call you any names. This is a familiar conservative tactic. Anyone they disagree with is a "hater" and a "name caller." People are allowed to make inferences about your views based on what you say, primarily that you place little value on public employees and seem to believe that they should shoulder the burden of making up for revenue declines. I notice that you never bothered to refute any of this.

Again, my position is that public employees should help in these situations in the same way that every other taxpayer does: through their required tax payments. No more and no less.

This is NOT the actual return. If I look at Tier 1 return locked at 8% for the past few years, since they are guaranteed 8% or better, I’d assume the actual return is less (and prob way less) than 8%.

Now you're the one who is assuming, and incorrectly so. The 8% guaranteed distribution is not factored into the Tier 1 trust fund's return in any way.

You asked for proof, and I showed you where it is. Believe it or don't. I don't care. It is what it is. The actual average return on the fund for the 40-year period ending 12/31/2009 is 10.47%. It's in the third column of the spreadsheet to which I referred you. If you want to go find a bunch of phony numbers as an argument against it, so be it. And I'm not interested in looking at the last five years. Too short a period for meaningful analysis, especially considering the upheavals in the economy over the last two years. If we're going to assume that five-year periods are normal, I'll take 1995 to 1999. It makes as much sense.

So, I’ll correct myself – This is a 13.1/4.7 increase = 278% increase in employer contributions. Not a real great augur for the future.

The employee contribution is 6% and the Tier 1 minimum distribution is 8%. And you're complaining that they were paying 4.7%? If we're assuming (incorrectly, but still assuming) that employers were regularly paying 4.7%, which would be necessary for your statement to mean anything of importance, then I'd say the employing jurisdictions were getting one heck of a free ride. Since they should have been paying a minimum of 8% under any reasonable scenario, I'd say they should have acted more responsibly. This isn't a problem with PERS. It's a problem with how employing jurisdictions handled their financial responsibilities.

However, all this aside, I suspect that you're going to continue believing what you want to believe. There's no reason for me to continue presenting you with alternative viewpoints. As I said before, Steve-world is not a place in which I would want to live.

"If you want to go find a bunch of phony numbers as an argument against it, so be it."

The returns are not phony numbers they are from the PERS website and are 5 year returns from Apr 2010. Follow the weblink.

"The employee contribution is 6% and the Tier 1 minimum distribution is 8%. And you're complaining that they were paying 4.7%?"

OK, I'll go slowly. The returns are independent of the employer contributions. Tier 1 are guaranteed an 8% return on their funds. The weblink shows a lot lower than 8%, so the diff is with employer contributions. The weblink is from the PERS site, just check it, you are mis-interpreting that one link you keep pushing.

THe problem with your assumptions is that we weren't paying out much until lately. When PERS started, there weren't many retirees being paid. Now there are a lot more and the fund returns aren't generating enough to cover them, so bow we have to increase the employer contributions by almost 300%.

You are going to have to believe me, it will get worse with a growing number of retirees and we really need a better solution than just increasing employer contributions.

Anytime PERS recipents can answer that, I'd be all ears, otherwise let's keep kicking that can down the road.

If you want to concoct your own facts otherwise, then I guess it is really no use to continue the discussion.

"seem to believe that they should shoulder the burden of making up for revenue declines."

You mean like everyone else with a pension plan?

That's not the only off-account debt that governments are putting in the footnotes.
http://theoregonpolitico.com/blog/2010/04/27/looming-liabilities-oregonians-owe-3-billion-in-post-employment-benefits/

OPEB is accounted in the same manner as PERS. Disclosure but not inclusion. In Oregon there is at least $3 billion of this debt that is not only off-account but almost completely unfunded.