It is an age-old problem. Government overpromises. Financial crisis follows. And politicians, instead of fixing the mistake, simply grab whatever cash they can get their grubby little mitts on. That is the feeling you get when you look at what is happening in Oregon right now.
The state has what can be considered, by all reasonable standards, an extraordinarily generous retirement plan for state employees. Called the Oregon Public Employees Retirement System, or PERS, it lavishes what many in the private sector would consider extreme benefits on many (not all) participants in the plan. Not surprisingly, the state has a $22 billion public pension deficit, and the Governor has appointed a task force to find ways to deal with it.
Offering more reasonable benefits was, unfortunately, not one of their recommendations.
The group has come back with numerous ideas, which include expanding the state-owned liquor distribution business, increasing taxes on things like the state-owned liquor distribution business, changing the buying practices of the state-owned liquor distribution business, and possibly selling the state-owned liquor distribution business. The latter has been all but rejected, at least until they can build it to a level of more significant volume – when they are selling more liquor. A variety of other taxes and fees have been discussed, but the most disturbing one for me is the one that is most specific; they can raid the $1.6 Billion dollars in reserves held by the state-owned workers’ compensation insurer, SAIF Corporation.
Specifically, they are considering “repositioning” between $500 million to $1 Billion into the PERS system to stem the bleeding at the retirement fund.
So how bad is it at PERS? As of January 1, 2017, the system had 124,748 members, approximately 3.1% of the state’s population, receiving benefits. The system is paying out $327,721,508.70 each and every month. The top PERS earner, Johnny B. Delashaw, retired after 241 months of service and earns $55,959 per month. The system has 19 people earning over $20,000 per month, including one Brenda J. Peterson, who earns $20,384 per month after serving the state for 406 months. Her annual benefit of $244,605 is fully 74% of her $332,118 annual salary at retirement. You may not recognize Ms. Peterson by name, but you may have known her as Brenda J.P. Rocklin, the retired CEO of SAIF Corporation, who found herself embroiled in the controversy over the firing of her replacement, John Plotkin.
More than 26,300 people in the PERS system, about 21% of recipients, actually make more in retirement than they did while working, receiving anywhere from 101% up to stratospheric percentages of their final employment salary. One retired employee is listed as receiving 374,487% of their last annual salary in benefits. That HAS to be a typo. Lord, someone tell me that is a typo.
Don’t take my word for it. You can see it all here.
To further put this into perspective, if the state takes a full $1,000,000,000 from SAIF to shore up PERS, that amount will support the outflow for just over 3 months. Even more appalling, is the suggestion that if the state should agree to become “a financial backstop for SAIF’s liabilities”, then they could take even more cash for the PERS boondoggle.
That’s rich. Anyone looked into the “Social Security Trust Fund” lately? There is nothing in there but dust bunnies and IOU’s from the Federal Government. It would be the same thing in Oregon. There is no warmer feeling than knowing the incompetent entity that took all your cash to avoid their bankruptcy will have your back when you go broke.
SAIF is not the first state fund to fight this battle (I assume they intend to fight). Pinnacol Assurance in Colorado fended off the attack of the killer politicians a few years ago. Other funds have seen this challenge. It is one reason I opposed the creation of a fund in Illinois. Can you imagine what the elected officials there would do with a newly found slush fund?
The problem, of course, is that SAIF reserves are not made up of money belonging to the state. That cash belongs to SAIF and its policyholders, and is intended to cushion them from unanticipated crises. Oregon State, like so many other government entities, engaged in bad negotiations and dealings at the expense of its citizenry, and instead of addressing the problem, they are looking for a cheap and easy way out.
Except it isn’t cheap, and it isn’t easy. And it isn’t even a way out. It is, however, almost criminal in my view.
Oregon doesn’t seem to have a strong history of holding their politicians or government reps accountable. That doesn’t bode well for the employers in that state, who will likely see higher workers’ comp costs as a result of any loss of reserves. That would represent nothing other than a tax increase by another name, and they would have to pay it knowing that the problem at the source is still looming large over the state.
Nobody wins in that scenario; not even the winning recipients of PERS.