Legislators and PERS

PERS and the PERS Legislators Breach of Trust

               1975 was a turning point for the State of Oregon and the Oregon legislature.  It was the year that the Oregon Ethics Code became effective.  It was also the year that the Oregon legislators, despite the Ethics Code, passed a law which allowed them to retroactively join the PERS.   With most legislators in PERS, 1975 was the year that control over PERS shifted from the people to PERS legislators.

               The Ethics Code had been referred to the people by the Legislative Assembly and it was adopted in the November, 1974 general election.  The Code declared that a public office was a public trust and public officials were prohibited from using their official position to obtain personal financial gain, other than official salary, honoraria or expense reimbursement.      

               Each legislator who joined PERS would have the opportunity to use his or her official position to obtain personal financial gain each time PERS legislation came before the legislature.  1975 ushered in an unprecedented period of legislative changes to PERS.  During the next 20 years, numerous PERS laws were enacted that substantially benefitted PERS members and drastically increased the costs required to fund PERS benefits. 

               In 1979, PERS legislators passed the PERS employee contribution pick-up law.  Prior to 1979, each public employee was required to make a contribution to his or her retirement plan.    After the pick-up law, every public employer was allowed to make the people of Oregon, rather than the employee, pay each employee’s PERS contribution and most public employers did just that.  The people were even required to pay the employee contribution for each PERS legislator.   

               In 1983, PERS legislators forced almost all Oregon judges to become PERS members.   This created a conflict of interest for the judges that prevented PERS cases from being decided by independent judges.

               In 1989, PERS legislators passed a law which made PERS funding Oregon’s highest financial priority.  Under that 1989 law, public employers were required to pay their PERS assessments before they provide the services they were created to provide.  That is why a school district, when faced with a budget shortfall, cuts back teaching children rather than reduce its PERS payments. 

               By the mid-1990s the changes made by the PERS legislators had created PERS retirement benefits so generous that general service public employees were able to retire in their mid-fifties with a retirement benefit equal to their full salary. That was not only unreasonable, it was unsustainable.  Many bills were introduced in the 1995 legislature to address this problem.  One bill, HB 2476, proposed lower retirement benefits for public employees hired after 1995.  Another bill, HB 2477, provided that the following statewide elected officials would be prohibited from joining PERS after their current terms expired:  members of the Legislative Assembly; the Governor; the Attorney General; the Secretary of State; the State Treasurer; the Superintendent of Public Instruction; and, the Commissioner of the Bureau of Labor and Industries.  Both of these bills were similar.  They were intended to address specific PERS problems.  Unfortunately, they did not experience similar results.

               HB 2476, which benefited the PERS legislators, passed easily by a vote of 16 to 11 in the Senate and 45 to 15 vote in the  House.  This new law became effective January 1, 1996 and it reduced PERS benefits for employees hired after 1995.  It insured that the PERS legislators who passed the law would receive the highest PERS benefits, unless they also passed HB 2477.  HB 2477, which would have made legislators ineligible for PERS, did not pass.  In fact it didn’t even get a vote.  It died quietly in committee when the legislature adjourned on June 10, 1995. 

               The failure of the legislature to pass HB 2477 was unfortunate.  The law would have eliminated the conflict of interest that was the root cause of the PERS funding problem that existed in 1995 and which still exists today.  The PERS legislators’ conflict of interest has clouded their vision.  For the last 35 years, they have put their personal PERS interest above the interests of the people of Oregon.  Today, Oregon is projecting a $3.5 billion deficit for the 2011 – 2013 biennium.  During that same two year period, $2.5 billion will be paid to PERS through employer contributions and picked up employee contributions.  Laws passed by the PERS legislators require that the $2.5 billion be paid to PERS ahead of all other state expenses.  Budget cuts must be made but no cuts will be made to PERS.  Only PERS legislators could have come up with such a law.

               As public trustees, our legislators are required to represent the interests of the people of Oregon.  Generally, a trustee with a conflict of interest cannot act unless the beneficiaries of the trust consent to the conflict in advance and after full disclosure.  The legislators know how to get the approval of the people if they want to get it.  They did that with the Ethics Code.  If the legislators want to be PERS members, they must get approval from the people of Oregon.  Until they get that approval, they are in breach of their trust.  That puts the validity of all PERS laws made since 1975 into question and subjects every PERS legislator to disgorgement of all PERS benefits received in violation of their trust.

   
February, 2011            

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