OREGON PERS:BURDENED BY THE PAST,POISED FOR THE FUTURE
City Club of Portland Bulletin, Vol. 93, No. 49, May 27, 2011
City Club members will vote on this report on Friday, June 3, 2011. Until the membership votes, City Clubof Portland does not have an ocial position on this report. The outcome of the vote will be reported inthe City Club of Portland Bulletin dated June 17, 2011 and online atwww.pdxcityclub.org.
The mission of City Club is to inform its members and the community in public mattersand to arouse in them a realization of the obligations of citizenship.
This report is part of a coordinated series of 2011 City Club program oerings: “From Crisis to Opportunity: Exploring Solu-tions to Oregon’s Fiscal Challenges.”Support for this research study was provided in part from City Club’s Research Endowment.Copies of this report are available online atwww.pdxcityclub.org.Report design by Susan K. ShepperdCity Club of Portland901 S.W. Washington St.Portland, OR 97205503-228-7231 • 503-228-8840 faxinfo@pdxcityclub.org•www.pdxcityclub.org
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Oregon PERS: Burdened by the Past, Poised for the Future
TABLE OF CONTENTS
EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ivINTRODUCTION .........................................................................................1
STUDY PROCESS ..................................................................................................1
BACKGROUND ...........................................................................................3
PUBLIC EMPLOYEE PENSION PLANS IN CRISIS .......................................................................3PERS MULTI-BILLON DOLLAR FUNDING SHORTFALL ................................................................3Studies Show Oregon PERS Faces Financial Challenges .........................................................3PERS Has a Signicant Unfunded Actuarial Liability .............................................................3ADEQUATE RETIREMENT BENCHMARK .............................................................................4PERS LIABILITIES: BENEFITS PROMISED .............................................................................5Nearly All Oregon Public Employees Are in PERS ...............................................................5PERS Oers Generous, even Excessive, Benets ................................................................5PERS Members Are Divided into Three Tiers ...................................................................6PERS Individual Account Program / Dened Contribution Plan ..................................................8PERS Pension / Dened Benet Plan ...........................................................................8HISTORY OF EXCESS AND THWARTED REFORMS ..................................................................10 The Legislature’s Irresponsible Decisions on Money Match and Guaranteed Returns ............................10Legislature Permits the 6% Pick-Up ...........................................................................10PERS Board Over-Credits Regular Accounts ...................................................................10Ballot Measure 8 .............................................................................................10Oregon Supreme Court Overturns Measure 8 ................................................................10Oregon Legislature Creates Tier 2 ............................................................................11PERS Board Over-Credits Regular Accounts Yet Again. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Dot-Com Bust Exposes PERS Problems; Legislature Passes Reforms .............................................11Oregon Supreme Court Strikes Down Some Reforms and Allows Others .......................................12Political Implications of PERS Reforms ........................................................................12PERS ASSETS: WHO CONTRIBUTES AND HOW MUCH? .............................................................12How PERS Is Funded .........................................................................................12PERS GOVERNANCE STRUCTURE .................................................................................15Conicts of Interest: Legislators and Judges ..................................................................16STRONG EMPLOYEE UNIONS, LESS VISIBLE EMPLOYER GROUPS ....................................................16Who Represents Employers and Employees? ..................................................................16
DISCUSSION ............................................................................................18
PERS: PROBLEMS REMAIN ........................................................................................18 Tier 1 and Tier 2 Liabilities Drive the Unfunded Actuarial Liability ..............................................18Investment Returns Alone Not Sucient......................................................................19Impact of PERS on Government Services .....................................................................19City of Eugene: Restructuring Services ....................................................................19City of Pendleton: Hope Is Not Enough ...................................................................20Salem-Keizer School District: Cutting Teachers ............................................................21Owyhee Irrigation District: Struggles of a Small Employer ..................................................22Multiple Dimensions of Inequity .............................................................................22
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HISTORY OF EXCESS AND THWARTED REFORMS for City Club of Portland PERS Report 2011
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