OCT. 17, 2008:NWLP
10/14/08
9:55 AM
Page 5
...Union pension funds impacted
(From Page 4)
son of Portland-based Quest Invest-
ment Management, an adviser to union
pension funds. “That is political season
rhetoric,” Johnson said. “This was de-
signed to thaw the pipeline of credit.”
In September, the credit pipeline be-
gan to “freeze” because banks held so
many assets that had lost value, and
stopped lending to each other — fear-
ing the money would be lost if the bor-
rower went bankrupt. Even the market
for “commercial paper” (unsecured
short term corporate loans) was grind-
ing to a halt, as money market funds, a
major buyer, stopped buying. Large
companies were at risk of running out
of money and failing to meet payroll
obligations.
Johnson points out that taxpayers
will have a chance to be repaid when
the government sells back the securi-
ties it’s now buying.
Workers too, have a stake in Wall
Street — above all through their pen-
sion plans. Stocks have lost a fifth of
their value almost overnight, and that
will have an impact on retirement secu-
rity.
There are two basic kinds of pen-
sion plans, and both are under threat
because of the crisis. So-called “de-
fined contribution” plans, popularly
known as 401(k)s, are typically in-
vested in stocks, and they’ve lost value
in the crash. In 401(k) plans, individual
workers shoulder the risk if invest-
ments do poorly. And it’s been a bad
year: Over the past 12 months, more
than half a trillion dollars in value has
evaporated from 401(k) plans.
In the more traditional “defined
benefit” plans, the employer or em-
ployer group assumes the risk: They
commit to paying retirees a fixed
monthly check, and they set aside
money to make sure they are able to
The anger was audible at an Oct. 1
anti-bailout rally of union members
and workers rights activists held
outside the downtown Portland
federal building. Similar rallies took
place around the country.
meet that obligation. That money is in-
vested. But this year, those pension
fund investments lost value. That will
put pressure on employers to increase
contributions to help make up for the
losses. And that could have an impact
on workers’ wages.
Many unions take part in jointly-
trusteed pension plans with employers.
Typically, how much employers con-
tribute to those pension plans is part of
the contract that unions negotiate. Be-
cause of the recent losses employers
IN MEMORIAM
Steve Armony, a longtime union
leader among Portland Public Schools
(PPS) custodians, was killed Oct. 6 in a
car crash on his way to work at a
Beaverton elementary school.
Armony, 53, worked for almost 30
years at PPS. He was head custodian at
Franklin High School — and chair of
Service Employees (SEIU) Local 140
Executive Board — when the district
contracted out cleaning of the schools
and terminated its custodial workforce
in 2002. After the Oregon Supreme
Court ruled the outsourcing illegal in
2005, Armony was one of the two-thirds
of custodians who chose not to return to
PPS. But he chaired the steering com-
mittee that handled negotiations over the
reinstatement. And he joined PPS’ Cus-
todial Civil Service Board, first as board
secretary, and then as a member of the
board, which oversees the hiring process
and disciplinary appeals for district cus-
todians.
After the outsourcing, Armony had
OCTOBER 17, 2008
found work at the Beaverton School
District, first as a courier and later head
custodian at Fir Grove Elementary,
where he became a member of the Ore-
gon School Employees Association
(OSEA). He retired in 2006, but contin-
ued to work part time for the Beaverton
School District as a custodial substitute.
The morning of the accident, he was on
his way to Hazeldell Elementary to sub-
stitute for fellow custodian and OSEA
local President Terry Graham, who had
taken that day to work on union busi-
ness.
Just before 5:45 a.m., Armony was
driving his Nissan pickup on Tualatin
Valley Highway when the driver of a
Chevrolet Suburban ran a red light and
crashed into him at the intersection with
Murray Boulevard. The crash and inves-
tigation slowed local traffic for hours.
Armony is survived by his wife,
Vanessa, and a daughter, Lauren, a stu-
dent at Cleveland High School.
A funeral was held Oct. 11.
are likely to want to increase pension
contributions — and that would leave
less money available for pay raises.
In the coming weeks and months,
pension fund trustees will start to get a
better handle on how much their funds
have lost in this crisis. In the 2001 re-
cession, many pension funds lost 20 to
30 percent of their value, and it took
several years to overcome those losses.
Congress may end up relaxing the
rules on defined benefit pension funds
to give them more time to make up for
the losses. They’ve done that in the
past, but this time, they may have an
additional reason: The Pension Benefit
Guaranty Corporation, the federal en-
tity that insures pension funds, may it-
self be in trouble. PBGC collects pre-
miums from pension funds and pays
out if the funds can’t meet their obliga-
tion to retirees. Until February, the
PBGC had 75 percent of its reserves in
bonds — low-risk debt instruments
which hold their value over time. But
that month, arguing that the PBGC
needed to increase returns in order to
lessen the likelihood that taxpayers
would be called on to cover its liabili-
ties, the PBGC Board reduced bonds to
45 percent of the mix, and put the re-
mainder in higher risk investments.
In April, the Congressional Budget
Office warned that was a bad idea, be-
cause it meant PBGC was more likely
to experience a decline in the value of
its portfolio during an economic down-
turn — the point at which it is most
likely to have to assume responsibility
for a larger number of underfunded
pension plans. That warning now looks
prophetic.
Ultimately, so much of the current
crisis could have been avoided if the ti-
tans of finance had acted more like a
little credit institution at 9955 SE
Washington St. in Portland. IBEW &
United Workers Federal Credit Union
is a non-profit financial cooperative
that is run in the interest of its 14,526
depositors — local union members and
their families. Their $60 million in de-
posits are managed conservatively.
There are 83 credit unions in Oregon
with approximately 1.4 million mem-
bers. Some are associated with union lo-
cals. All credit union depositor accounts
are federally insured up to $250,000.
“Our members are also union mem-
bers,” said credit union president Bar-
bara Mathey, “and people join unions
because they like that extra security.”
The credit union makes mortgage
and consumer loans, but only to mem-
bers, and only if loan officers are sure
borrowers aren’t in over their heads.
And it doesn’t sell the loans to other
entities, but holds them until they’re re-
paid.
The current financial meltdown be-
gan when a housing price bubble
popped — a bubble that low govern-
ment-set interest rates and lax private
lending standards helped set. If De-
Fazio’s skepticism of Wall Street ortho-
doxy had held sway, or if Mathey’s
prudent practices had been the norm in
banking, workers might not now be
facing a season of uncertainty.
NORTHWEST LABOR PRESS
Endorsed by:
x Oregon AFSCME
x NW Oregon Labor Council, AFL-CIO
x SEIU Local 503
x UFCW Local 555
x Firefighters Assoc. of Clackamas County Local 1159
x Tualatin Valley firefighters Union Local 1660
x Clackamas County Peace Officers P.O.L.I.C.E PAC
x Labor Commissioner Brad Avakian
x The Oregonian Editorial Board (October 3, 2008)
See more endorsements and information at
www.CharlotteLehan.com
Q
Quest
Investment
Management, Inc.
• Serving Multi-Employer
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for for
Over
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Trusts
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Years
}
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Johnson
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Hamilton
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Garth Nisbet
Greg
Sherwood
Greg Sherwood
Monte
Monte Johnson
Johnson
Bill Zenk
Zenk
Bill
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Portland, OR
OR 97258
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