Portland fourth worst in country for unfunded pensions
It's no news to regular readers of this blog, but the rest of the country is catching on to the time bomb known as public pensions in the City of Portland. A new study by the Pew Charitable Trusts shows that Portland's unfunded pension liability is the fourth worst in the country -- even worse than the State of Illinois's, which is saying a lot.
The real culprit in Portlandia is the insane police and firefighter retirement and disability "system," which has essentially no assets to back it up. This was Fireman Randy's handiwork in the legislature and City Council: a 100% unfunded pension plan, with benefits paid directly out of current property taxes every year. If a private company tried this, its managers would probably go to jail.
Just how bad is the unfunded liability of the city's police and fire pension "system"? It's hard to get a straight answer. The last figures the city is showing in public are from mid-2010 -- two and a half years ago. At that point, the official number was $2.53 billion. But it's hard to have too much confidence in even that outrageously high figure. The actuaries who come up with that number on the city's behalf tend to get switched around -- indeed, the city's just going out for bid for a new actuary now -- and when new ones come in, they are known to change the assumptions on which the estimates are based, so that it's hard to see a real trend. Sometimes we suspect that the actuaries tend to tell the city bureaucrats what they want to hear, up to a point.
Meanwhile, the pensions owing to the city's other employees -- and for public safety officers hired in the last half-dozen years or so -- have some funding behind them. But a lot of it was borrowed money that still has to be paid back to banks and other investors; the latest figures we have show that about $261 million is owed to bondholders. So much for helping the municipal balance sheet. And even counting the borrowed money to the good, the latest figures, now two years old, show the partially secured plan with an unfunded liability of about $127.7 million.
Then there are health care and other benefits promised to retirees beyond their pensions; at last report, these added another $130 million or so to the totals. Depending on the category, those figures are between two and three and a half years old.
Our debt clock (in our left sidebar) has the city's unfunded liability to retirees as pushing $3.3 billion. There's a margin of error in that estimate, but we'd be shocked if the true number, as of today, was less than $3 billion. It could be $3.5 billion or more. The city's population is less than 600,000. It doesn't, as the real estate sharpies would say, "pencil out."
UPDATE, 1:45 p.m.: New estimates of the police and fire pension liability have just been released, and they show a $330 million increase in unfunded liability. Details here.
| Posted at 9:21 AM | Permalink |
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Comments (24)
Because I'm in a Thomas Nast mood, let the master describe what will probably happen. After all, history may not repeat, but it does rhyme.
http://www.vlrc.org/images/quotes.jpg
Posted by Texas Triffid Ranch | January 17, 2013 9:41 AM
This is why I can't bring myself to buy a home in Portland (we are currently renting). There will come a time of reckoning, and I imagine the property owners will take the brunt of it--whether it be sky-high taxes or missing services.
Is there any place on the 'net I can go to easily determine the fiscal responsibility of neighboring communities? I'd hate to move to a smaller town only to find the situation is the same but on a smaller scale.
Posted by Brian | January 17, 2013 9:42 AM
No city or town around here beats Portland for fiscal irresponsibility. But you might want to get out beyond the Tri-Met district boundary. There's going to be real hell to pay on account of that agency, very soon.
Posted by Jack Bog | January 17, 2013 9:44 AM
Jack, I'd like your perspective: Whenever I bring up the unfunded pension issue for police and fire, I am often corrected by some that say, "sure, they're currently unfunded (meaning that there is no cash in the bank to pay for them), but payments for police and fire pensions come from a dedicated property tax line item" - meaning that we should take comfort in the fact that at least future property tax funds are "ear-marked" specifically for this purpose, and that the City can levy more - up to $2.80 / $1,000 of assessed value to fill the gap as needed.
In the City "Financial Plan" you've provided a link to, it's unclear to me whether or not the $2.53 billion is the unfunded portion before or after accounting for future property taxes (up to $2.80 / $1,000) specifically for this purpose.
Either way, this is a lot like someone claiming that their outstanding car loan isn't really a liability because they've ear-marked part of their future paychecks to make the payments.
Posted by PD | January 17, 2013 10:02 AM
It's worse for Portland that Pew reports.
Pew has a tendency to overlook the issuance of pension obligation bonds, which have the effect of shifting liabilities from one set of books (pension obligations) to another (something like "general indebtedness).
Portland issued about $300 million in pension obligation bonds in 1999, which won't be paid off until 2029.
So, whatever Pew reports, you should add another couple hundred million to it.
But, what's another couple hundred million to the City of Portland? We'll just put in more parking meters to pay it all off.
Posted by Eric Fruits | January 17, 2013 10:07 AM
Well, we're taking an extra $1B every biennium out of the state budget for PERS now. So I guess they'll have to throw in some more for PFDR?
No way is a a politician going to touch any public employee pension plan beyond surface manicuring and massaging numbers.
Posted by Steve | January 17, 2013 10:11 AM
Career Politicians!
6B.
6C.
Posted by clinamen | January 17, 2013 10:18 AM
The commercial tenants will pay for this too.
Another nail in the coffin for Portland businesses.
Posted by Portland Native | January 17, 2013 10:19 AM
So, whatever Pew reports, you should add another couple hundred million to it.
As this blog post notes, the current balance on the bonds was, at last report a few months ago, $261 million.
Posted by Jack Bog | January 17, 2013 10:27 AM
Lots of nails in the coffin for Portland businesses. Water rate increases added a few huge nails. We cannot afford a corporate designed system. If this council doesn't stop that PWB path and instead choose to maintain our current sustainable Bull Run water system and reservoirs, it may very well be the final nail needed hoisting a big red flag to anyone considering moving into our city.
Posted by clinamen | January 17, 2013 10:34 AM
I've always had a feeling of civic superiority when I read stories about cities and counties around the country and how they went bankrupt. I guess I had a built-in snob factor that we could never be as irresponsible as Jefferson County in Alabama or Harrisburg, Pennsylvania. Now I see that was wrong.
We're #4 in the country for unfunded pensions? In the entire country!??!! That's a level of incompetence I never thought we'd have here. I just assumed - even through all the spending scams, etc... - that there was an underlying love for Portland that would keep these politicians from sending the Rose City into a financial free fall.
If anyone has been wondering why Jack is grumpy about what's happened to Portland - now you know. Of course, Portland Polite diminishes it and tries to turn it into his problem, when it's our problem.
No wonder Sam and Randy chose this moment to get out.
Posted by Bill McDonald | January 17, 2013 10:49 AM
Once again, Bojack scooped the "journalists" and (this time) the public policy institutes.
Posted by Mister Tee | January 17, 2013 11:43 AM
When's the Oregonian going to report this? You'd think it would be a page one headline. Will any of our local politicians who read this blog care to comment? Or it heads in the sand time.
Posted by Stuart | January 17, 2013 12:37 PM
My best guess is, the hand in the pot is a close relative of the hand that owns the 'news' media.
Posted by Mr. Grumpy | January 17, 2013 1:01 PM
I have always thought our political class has been trying to make Portland as corrupt and tyrannical as Chicago.
It looks like they are well on their way.
Posted by Tim | January 17, 2013 1:06 PM
Jack is seems to me that your analysis is accurate enought ( give or take a few hundred million $) But let's move on to what course of action should we follow now? I mean, what's done is done...how do we pay this down without totally breaking the local economy? Anybody?
Posted by geneb | January 17, 2013 1:41 PM
The government has been rogue for some time now.
the people that run the government at all levels haven't cared about the effects their actions would have in the future for years.
Not much different from the banksters when they made shady deals profited immediately and just left the mess to be sorted out by others.
Government the exact same thing.
Posted by al m | January 17, 2013 2:16 PM
Tim, my sister lives in Chicago. Her garbage is picked up weekly and they even have days where they take old furniture and other large items. It's paid by property taxes. The trees on city property abutting their property are maintaind by the city. My two dying 100 year old trees on Portland city property abutting my property will cost me $5000 to remove. She was able to appeal her property taxes last year based on taxes levied on similar properties in her area and her taxes have been lowered. Try that here. And their neighborhood library is at least twice the size of our Hollywood branch. Not saying Chicago's not corrupt- but at least the people living their get something for their tax dollars. And I doubt Chicago politicians are anywhere near as sanctimonious as our's are.
Posted by mike | January 17, 2013 2:23 PM
Portland is actually a Sim City game being played by amateurs.
Unfortunately, this game has real consequences that last long after the they stop playing.
Posted by Mike (one of the many) | January 17, 2013 4:53 PM
In Sim City you can cheat by holding SHIFT and typing FUND. It gives you a big influx of cash. You can do it at as many times as you want.
Sound familiar?
Posted by Jo | January 17, 2013 6:20 PM
Hey Brian. I really liked Estacada and Newberg. I even know a home builder in Newberg, a real pro, if you are interested. [Shameless plug!]
Posted by Jo | January 17, 2013 6:22 PM
It used to be that people chose to take public jobs for the security, not for benefits and salaries that were better than what they could expect in the public sector.
I have relatives who are living quite comfortably on PERS and feel entitled. My problem with that, is that I - and plenty of others - worked as hard or harder than they did and when we retire most of us have to rely upon what we were able to put away on our own steam. The gravy train stops when the job does.
I really resent having not only struggling to save any money for my own retirement with rising costs for everything, but to pay to support those who just happened to retire from public jobs, some having worked a fraction of the years I have. No matter how much was withheld from their paychecks over the years, it has to be nowhere near enough to cover the benefits they are now receiving.
Posted by NW Portlander | January 17, 2013 7:39 PM
Every word that NW Portlander said.
Posted by sally | January 17, 2013 8:00 PM
clinamen wrote: Lots of nails in the coffin for Portland businesses.
Related -- Standard Insurance is laying off again, this time 100: http://www.oregonlive.com/business/index.ssf/2013/01/standard_insurance_eliminating.html
They are (were?) the largest private-sector employer downtown.
Posted by Downtown Denizen | January 20, 2013 8:06 PM