PERS History

PERS

IT’S METAMORPHOSIS FROM SERVANT TO MASTER

 

            In 1945, the people of Oregon, acting through the Legislative Assembly, established the Oregon Public Employees Retirement System (PERS) to provide retirement benefits to the State’s public employees.  Oregon’s population in 1945 was around 1,300,000 and PERS had 18,000 members.  Today, Oregon’s population has almost tripled to 3,800,000 and PERS membership has increased seventeen times to 311,000. 

 

            Originally, Legislators and Judges were not in PERS.  All Oregonians had independent representation on PERS matters in the legislature and that PERS disputes were decided by judges who had no financial stake in the outcome of a PERS case.  These protections continued for over twenty-five years.   But in 1975, the Legislature began making fundamental changed to those protections, changes that financially benefited the legislators and the judges at the expense of the people who elected them.  Today, all PERS decisions are made by PERS members and the people have no independent representation. This is how that happened:

 

1. Legislators Join PERS.  From 1945 to 1971,  When PERS started, Legislators were not eligible to join.  Their ineligibility was not even questioned until 1963 when the Oregon Attorney General, in response to an inquiry, confirmed that Legislators could not join PERS.  In 1971 that issue was revisited under a new Attorney General and this time it was held that Legislators could join PERS.  Based in part on that 1971 AG opinion, the 1975 Legislature enacted a law that allowed its members, past and present, to retroactively join PERS.  Once the Legislators were in PERS, their personal financial interest was in direct conflict with the interest of the non-PERS citizens, who make up over 90% of the State’s population.  Thereafter, the Oregon courts were the only place where PERS decisions would be made by elected officials who were not in PERS.

 

              2.  Employer Pick Up Of Employee PERS Contributions.  From it’s start, PERS has required each PERS member to contribute a percentage of his or her salary to that member’s retirement account.  The public employer also makes a contribution for each PERS member.  In 1979, the Legislators amended this law to give public employers two options for payment of the employee contribution: the employer could require the PERS members to pay it; or, the employer could require the people of Oregon pay it.  The second option is the “pick up”.  The contribution percentage for each non-judge PERS member is 6% of compensation and today almost every public employer has elected the pick up option.  The people are even required to pick up the employee contributions for each Legislator who is a PERS member. 

 

3.  Judges Become PERS Members.  Prior to 1983, Oregon’s Judges had a separate retirement plan.  This plan required the Judges to contribute 7% of their compensation to their retirement accounts.  In 1983, the Legislature put the Judges into PERS and required the State to pick up the Judges’ 7% employee contribution.   This created a conflict between the personal financial interest of the Judges and the interest of the non-PERS citizens every time a PERS case was tried in the Oregon courts.  Whenever the contribution pick up issue was before the courts, the Judges actually had the highest stake in the outcome of the case.  Once the Judges were in PERS, PERS members had absolute power over the making and judging of all PERS laws and they would aggressively use that power to enhance their personal financial interests.    

 
          
4.  PERS Funding Becomes Oregon’s Top Priority.  In 1989, the Legislature made new laws to punish public employers that do not pay their PERS assessments on time.  Laws already allowed the Attorney General to sue public employers to recover late PERS payments, but that was not enough.  The new laws made the public employer pay interest on any delinquent PERS assessment and, after the delinquency is certified by the PERS Board, the State Treasury must withhold all money due the delinquent public employer until the deficiency is paid.  The purpose of that legislation was clear: PERS assessments must be paid first.  If services to the public are reduced, then so be it.  To the PERS members who control the decision making process, PERS funding is more important than services to the people.

 

5.  Oregon Supreme Court Invalidates Ballot Measure 8.  In 1996, the Oregon State Police Officers Association v. State of Oregon case held that Ballot Measure 8 was  unconstitutional.  The vote was 4 to 3.  Ballot Measure 8 was passed by the people of Oregon in 1994 and it made three changes to PERS: (1) it eliminated the pick up of employee contributions; (2) it ended the 8% guaranteed minimum annual return on PERS employee accounts; and, (3) it prohibited the use of unused sick leave to compute PERS retirement benefits.  All seven Justices of the Oregon Supreme Court were PERS members  In reaching their decision, the four Justices in the majority disregarded the court’s prior decisions and found a contract existed with PERS employees under facts where the court had never found a contract to exist before.  

 

The changes that have been made to PERS impact everyone in Oregon.  School districts are laying off teachers, cities are reducing fire and police protection and prison inmates are being released early.  In 2009, the Oregon Department of Corrections was allowed to release prisoners before their terms were up to save $6,000,000.  However, in 2009 the Department picked up almost $14,000,000 in employee PERS contributions.  Eugene School District 4J states that if  Measures 66 and 67 fail, it will have a $8,500,000 budget shortfall for the two year period of 2009 - 2011.  But the District’s budget for the fiscal year of 2009-10 shows that during that one year period it will spend almost $4,700,000 to pick up employee PERS contributions.  

 

PERS no longer serves the people of Oregon as was intended to do in 1945.  After the legislators and judges joined PERS, the people were effectively removed from the decision making process and PERS became the master.   Every public employer must now pay PERS before it can provide the very services for which it was created.   The mission statement of  public agencies has been changed from “Serve The People” to “Pay PERS First , Then Serve The People With What’s Left”.   The PERS changes were made without the input of the people and when the people did exercise their rights, PERS members on the Supreme Court threw out the decision the people had made.   PERS members make up less than 10% of Oregon’s population and less than 100 of them, in the legislature and on the Oregon Supreme Court, have seized 100% control over all PERS matters.   If the PERS system was reversed so that financial rewards were given to legislators and judges each time they reduced PERS benefits, the public employee would cry foul.  The same analysis applies to the current PERS decision making process.  Today, the legislature and courts have an impermissible conflict of interest regarding PERS.  That is fundamentally unfair to the people of Oregon.  Legislators and judges cannot be in PERS if they are going to make PERS decisions.  

 

Daniel C. Re, In RE The People, Inc., 86 SW Century Drive, PMB 365, Bend, OR 97702.



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