NORTHWEST LABOR PRESS | March 17, 2017 | PAGE 3
...PERS under threat … again
From Page 1
left a hole in the amount of
money the system will eventu-
ally need in order to pay retiree
benefits. Today, PERS’ assets are
valued at $69.9 billion, and the
hole, known as “unfunded actu-
arial liability” is estimated at
$21.8 billion.
To shrink the unfunded actu-
arial liability over the next 20
years, the PERS system expects
to increase the required contribu-
tion of all 925 participating pub-
lic employers — including the
state, cities, counties, school dis-
tricts, and special districts. On
July 1, employer contributions
will go up to 14 percent of pay-
roll from about 9 percent now,
and they’ll go up again every
two years.
What to do about all this?
Public employee unions, to-
gether in the PERS Coalition,
have defended beneficiaries
again and again in court against
retroactive cuts — cuts made to
benefits after they were prom-
ised. And the Oregon Supreme
Court has ruled repeatedly that a
deal is a deal: Public employers’
past promises to their employees
are legally binding and must be
honored. Thus, benefits can only
be cut “prospectively” — going
forward.
That’s what some Republican
lawmakers are seeking to do this
year: Cut future benefits for cur-
rent employees, and divert their
current pension contributions to
pay off the system’s previous li-
abilities. Since 2003, the re-
quired 6 percent employee con-
tribution to PERS has gone into
401(k)-style “defined contribu-
tion” accounts. One bill, SB 560,
would take that money and use
it to pay down the unfunded lia-
bility owed to those who worked
before 2003. Other bills would
raise the retirement age to 67, or
lower benefits by basing final
salary on a five-year average.
But public employee unions
argue that it’s fundamentally un-
fair to put the burden of the sys-
tem’s investment losses on cur-
rent and future employees, who
already get lower benefits thanks
to previous changes. Several
hundred fire fighters and other
public employees turned out to
make that point at a Feb. 13
hearing on SB 560.
“We are a union of publicly
funded workers,” said SEIU
Oregon State Council State Di-
rector Melissa Unger in written
testimony submitted at the hear-
ing. “So we are acutely aware of
the budget challenges and the
fact that the increasing employer
rates put pressure on the budget.
The answer to the budget chal-
lenges cannot be to decimate re-
tirement benefits of low-income
and middle class Oregonians
PERS AT A GLANCE
Participating employers: 925
Current retirees: 134,000
Benefits paid per year: $4 billion
Average benefit: $2,362 a month
Assets: $69.9 billion
Assumed rate of return: 7.5%
Last year’s rate of return: 6.9%
Unfunded liability: $21.8 billion
who had no role in creating the
PERS liability.”
Where to get the money
If it’s unfair to burden current
employees, who should shoulder
the burden? Unions have an an-
swer: The one group that’s done
very well in recent years — big
corporations and those in the top
1 percent of incomes. Right now,
according to a study by account-
ing firm Ernst & Young, Oregon
has the lowest “total effective
business tax rate” in the nation.
Some business groups have
suggested that they’ll support
proposals to increase taxes, but
only if the Legislature first reins
in the cost of PERS.
“They say we have to act on
PERS reform and we have to
have tax reform, but the truth is,
we never really get around to the
tax reform part,” says Everice
Moro, retired school employee
and former president of Oregon
School Employees Association.
Moro was lead plaintiff in Moro
Turn to Page 8
THOMAS, COON,
NEWTON & FROST
THOMAS, COON,
NEWTON & FROST
PERS’ Bellotti problem
There’s a public perception
that PERS is in trouble be-
cause benefits are too gener-
ous. In fact, the average
PERS retiree gets $2,362 a
month — not a fortune, but
together with Social Security
and personal savings, usually
enough to live securely and
comfortably after a lifetime of
work.
The way PERS calculates
benefits is actually pretty sim-
ple: It multiplies an em-
ployee’s final average salary
by the number of years of
service and then multiplies
that by 1.67 percent for those
hired before Aug. 29, 2003
(known as Tier 1 and 2 em-
ployees), or by 1.5 percent for
those hired after.
For example, a 911 opera-
tor retiring tomorrow after 30
years, whose salary averaged
$40,000 a year their final
three years, would get a
yearly benefit of $20,040, or
$1,670 a month (40,000 x 30
x 0.0167).
But that formula also
means that some public em-
ployee retirees who earned
very high final salaries are
getting very large pensions.
The poster child for that is
Mike Bellotti, who worked as
head coach for the University
of Oregon football team for
14 years, and now collects
$536,995 a year in PERS
benefits.
And his benefits aren’t the
only ones to raise eyebrows:
994 PERS recipients get over
$108,000 a year in benefits.
Most are top-level managers
or doctors at Oregon Health
& Science University. The
994 make up just 0.74 percent
of the total recipients, but
their lavish retirement pay-
outs are galling to many tax-
payers.
Going forward, there won’t
be any more Mike Bellottis
— and not just because his
116–55 win record for the
Ducks will be hard to beat. A
1996 federal rule change put
a limit on the formula for cal-
culating what is salary. The
limit is now $265,000. Belotti
is able to collect his outsized
pension because he was hired
before 1996.