It is a weak link; a chink in the armor if you will, in the concept of state-owned insurance solutions. The money they collect in reserves can be greedily eyed by less than competent politicians as a solution to their government’s financial ineptitude. Multiple state funds across the nation have faced the challenge on more than one occasion. In Oregon, a state where legal eagles bristle and send me terse corrections when I refer to state owned workers’ compensation insurer SAIF as a “state fund,” the story is no different. SAIF, a state owned quasi-governmental insurance company (But God no, NOT a state fund despite the fact that SAIF actually stands for State Accident Insurance Fund), is facing down an attempt to steal $486 million from its reserve funds.
The funds would be used to shore up the Oregon PERS (Public Employee Retirement System). While PERS covers employees of all state agencies, the funds being sought at this time are intended to shore up and protect the retirement programs of Oregon’s public-school systems.
By all private sector comparisons, PERS is a lavishly generous retirement system. And its fiscal condition is typical of many municipal pension plans around the nation. Politicians years ago, developing systems and luring votes with OPM (Other People’s Money), overpromised and are now poised to underdeliver. The program today is struggling to maintain financial viability. At last reports, the Oregon PERS system had unfunded liabilities of around $26.6 billion.
Gov. Kate Brown has put forth a new proposal for shoring up PERS, and one of her suggestions is that the state seed a “stabilization fund” by confiscating $486 million from SAIF Corp.
Brown’s office seems to believe that SAIF is holding on to too much cash in relation to its potential liabilities and noted that SAIF already pays a bigger dividend back to policy holders than any of its peers (those would be state funds!).
Personally, as a businessman I found her comments to lawmakers regarding her proposal, which includes other maneuvers beyond the SAIF cash grab, to be exceptionally infuriating. She said:
“There’s something for everyone to both love and hate in this plan that I’ve introduced. Both of these options are framed as being extremely difficult politically. But in reality, the choice is very clear: do you, state legislature, want to smartly pay down PERS debt to help our schools? Or do you want to send out almost a billion dollars in tax refunds and insurance rebates? It is the height of fiscal mismanagement, to on one hand say something must be done about the PERS unfunded liability, and on the other hand do nothing to stop the state from sending out over a billion dollars in tax breaks to wealthy Oregonians and businesses over the next 12 months.”
Smartly pay down PERS debt to help your schools? God forbid you actually do something to fix the underlying problem. No, much better to throw more money at that gaping hole. Even if the money isn’t yours to begin with.
Somehow, tax refunds and insurance rebates are now magically “breaks for the wealthy.” Never mind that her entire proposal is merely a minor stopgap for a poorly conceived system, or that “fiscal mismanagement” is defined by her as leaving cash in responsible programs instead of propping up irresponsible ones. The biggest issue is that the SAIF money simply does not belong to the government. It belongs to the businesses of Oregon. And it is there to protect their injured workers. To take it in this manner is, at best, an undeclared tax on employers. At worst it is out and out theft. To nobly prattle on about fiscal responsibility while incorporating such a maneuver is galling, to say the least.
And even worse is the underlying foundational flaws of PERS remain unaddressed. It is not only an intellectually dishonest solution; it really turns out to be no solution at all. Just a band-aid applied to the side of the Titanic. A band-aid they stole from their citizenry, no less.
Of course, this is just a proposal. The legislature has to act on it as well. There is opposition to this in the state, and we will have to see where the chips fall. The legislature must decide if using the money for the purposes for which it was originally intended is the right thing to do, or if they think they know better and will use it for PERS. One thing we know for sure. A positive legislative vote on the proposal will mean that Governor Brown has found a reliable partner in crime.