A8
State
Blue Mountain Eagle
Wednesday, August 3, 2016
Report lays groundwork for higher PERS rates
By Peter Wong
Capital Bureau
State and local govern-
ments will soon know how
much more each of them will
have to pay into Oregon’s
public pension fund in the
next two-year budget cycle.
Combined, they will have
to come up with some $885
million more, due to a court
decision overturning most of
a pension benefi ts cut passed
by the Legislature, plus tepid
investment returns.
Based on a report present-
ed last Friday to the Public
Employees Retirement Sys-
tem Board, their total contri-
butions to the fund will jump
from $2 billion in the current
cycle to $2.9 billion in 2017-
19.
Board Chairman John
Thomas warns there will
be similar jumps in at least
the next two budget cycles
— through 2021-23 — be-
cause government agencies
would be unable to absorb
the full increases in a single
cycle.
“There is only so much
we can assess (employers),”
Thomas says. “The rest is
kicked down the road. That is
the reason this is not going to
go away for probably the next
20 years.”
The pension cost increases
are likely to eat into money
available for other programs
and for employee pay increas-
es.
The report says the pro-
jected increases amount to
$260 million for state agen-
cies, $335 million for schools,
and $290 million for all other
government employers.
However, the possible hit
to the 2017-19 state budget is
likely to be close to $500 mil-
lion, if the state continues to
pick up two-thirds of the oper-
ating costs of school districts.
Senate Republican Leader
Ted Ferrioli of John Day re-
newed his call for legislative
action to curb future public
pension costs.
“Unsustainable and esca-
lating PERS costs will not
lead to reducing class sizes,
adding school days, or mak-
ing our communities safer,”
he said in a statement released
before the PERS Board heard
the report. “We need fair and
constitutional PERS solutions
that reduce costs, ensure the
long-term stability of the sys-
tem to protect retirees, and
allow for investments in edu-
cation.”
Individual rates due
Based on the report pre-
pared by Milliman, the sys-
tem’s actuarial consultant, the
board is scheduled Sept. 30 to
approve specifi c contribution
rates for each of the 925 gov-
ernment employers, which
will take effect when the new
two-year cycle starts on July
1, 2017.
The rates paid by each
government will vary based
on three factors: the number
of workers hired before and
after August 2003, when law-
makers set less generous pen-
sion benefi ts for new hires;
their share of public safety
employees, who qualify for
greater benefi ts, and whether
they have set aside money,
known as “side accounts,” to
cover part of their future pen-
sion liabilities.
School districts are likely
to face higher-than-average
rates, and most state and local
governments less than the av-
erage.
State and local government
employers received prelimi-
nary rates several months ago,
in an earlier report by Milli-
man based on 2014 data.
Friday’s report, which is
based on an analysis of 2015
data, will lay the groundwork
for the fi nal rates.
“Most employers, partic-
ularly in the state and local
government retirement pool,
do not pay the average,” says
Milliman’s Scott Preppernau.
The system’s average
“collared” net rate will rise
by roughly one-third, from
10.61 percent to 14.23 per-
cent of payroll. That’s rough-
ly the same cost as giving
employees a 3.6 percent pay
raise. Ninety-fi ve percent of
state and local governments’
200,000 employees are cov-
ered by PERS.
The rate is “collared,” be-
cause government employers
will face similar increases
spread over the next two bud-
get cycles, through 2023. The
practice of collaring cushions
the effects of a big increase
over two or more budget cy-
cles.
Unfunded liability grows
Oregon’s PERS obliga-
tions had been funded at 86
percent at the end of 2013
— among the best in the na-
tion — but two years later, it’s
down to 71 percent. (With
side accounts included, the
numbers are 96 percent and
79 percent.)
PERS’ unfunded actuarial
liability over the next 20 years
— the shortfall in funding fu-
ture obligations — more than
doubled. At the end of 2013,
it had been $8.5 billion — ex-
cluding the money in side ac-
counts — but Milliman says it
is now $21.8 billion as the end
of 2015.
A big chunk of the new
liability ($5 billion) result-
ed from a 2015 decision by
the Oregon Supreme Court,
which ruled that lawmakers
cannot
retroactively pare
cost-of-living increases to
130,000 retirees based on
benefi ts earned before 2013.
That’s when the Legislature
agreed to make those reduc-
tions.
The court decision did not
affect 2015-17 contributions
by government employers,
whose rates were set by the
PERS board in 2014, before
the court ruling.
Although
post-August
2003 hires account for just un-
der half of Oregon’s 200,000
public workers, greater pen-
sion costs are incurred for
those hired before then —
including virtually all of the
current 130,000 retirees.
According to the Milli-
man report, most of the new
increase in unfunded liability
($2.6 billion) came from weak
returns on PERS investment.
The fund gained 2 percent in
value last year, far short of
the assumed rate of 7.5 per-
cent used to set pensions. The
PERS Board reduced the as-
sumed rate from 7.75 percent
last year.
Also, retirees are living
longer than forecast, account-
ing for a $300 million in-
creased gap.
As of June 30, the PERS
fund held investments valued
at $68.9 billion, down from
$70.4 billion a year ago, but
up from $66.2 billion in Feb-
ruary.
Investment earnings ac-
count for about 70 percent of
what PERS pays out to retir-
ees, and contributions from
government employers sup-
ply most of the rest.
Although the stock market
has improved in 2016, PERS
Board Chairman Thomas says
the unfunded liability could
grow even more if actual in-
vestment returns fall short of
the assumed rate this year.
“Assumptions for the fu-
ture of capital markets are
not as they were three or four
years ago,” Thomas says. “So
there could be the likelihood
of an adjustment.”
Poll: Brown, Pierce in dead heat in governor’s race
By Paris Achen
Capital Bureau
Democrat Gov. Kate
Brown and Republican Bud
Pierce are nearly tied in the
race for the state’s chief ex-
ecutive, according to poll re-
sults released last week.
The poll by Clout Re-
search, a right-leaning firm
based in Columbus, Ohio,
found Brown holds a lead of
43.4 percent over Pierce’s 42
percent. The margin of error
is 3.71 percentage points.
“What we are seeing in
the race for governor is the
same as the race for pres-
ident,” said Fritz Wenzel,
pollster and owner of Clout
Research. “Voters across the
country are dissatisfied with
the status quo.”
Pierce’s surge in support
comes mostly from indepen-
dent voters. About 41 per-
cent of independent respon-
dents favor Pierce, while 29
percent support Brown, ac-
cording to the poll.
“The tsunami in Oregon
right now is where indepen-
dents are heavily supporting
Trump and Pierce,” Wenzel
said.
Pierce, a Salem oncolo-
gist, said the results don’t
surprise him.
“I think voters like my
message of being open and
transparent with them,”
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have a breakfast of ADVERTISED JUICE, cereal and toast, toasted in an
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hesitates to advertise, saying that advertising doesn’t pay. Finally, when his
non-advertised business is going under, HE’LL ADVERTISE IT FOR SALE.
Then it’s too late.
AND THEY SAY ADVERTISING DOESN’T WORK?
DON’T MAKE THIS SAME MISTAKE
Advertising is an investment, not an expense. Think about it!
Blue Mountain Eagle
Dr. Bud Pierce
Gov. Kate Brown
Pierce said. “Since the pri-
mary election I’ve been out
in many Oregon commu-
nities spreading the word
about what I would do to
improve Oregon, if elected
governor. Kate Brown has
basically been an invisible
candidate, not attending
debates or answering tough
questions. The governor
has only been accessible to
insiders and lobbyists. I’ve
tried to make myself acces-
sible to the people and the
media.”
Brown’s campaign was
not immediately available
to comment on the poll
Wednesday. Brown and her
campaign director are at-
tending the Democratic Na-
tional Convention in Phila-
delphia this week.
About 700 voters re-
sponded to the telephone
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more people supportive of
the measure than opposed to
it, but as people learn more
about the measure and who
would pay the new taxes,
the support appears to be
dwindling,” Wenzel said.
“Anytime a measures falls
below 40 percent support, it
is in dangerous waters.”
Our Oregon, the nonprof-
it behind the corporate sales
tax campaign, dismissed the
poll as biased.
“This is a poll conduct-
ed by a consistently wrong,
right leaning group,” said
Katherine Driessen, Our Or-
egon spokeswoman. “That’s
clear based on their inaccu-
rate results throughout the
poll. Every single finding in
this poll is without credibil-
ity.”
Nate Silver’s FiveThir-
tyEight, which rates poll-
sters on their accuracy, gave
Clout a “C minus.” The
publication stated that Clout
calls races correctly about
33 percent of the time.
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poll, which was conducted
July 9-13.
The national polling
company serves mostly
Republican clients, but no
one commissioned this poll,
Wenzel said. The pollster
said he conducted the poll
to satisfy his own interest
in Oregon politics. Wenzel
is originally from southeast
Portland.
The poll also found that
support for a corporate sales
tax measure, known as Ini-
tiative Petition 28 or Mea-
sure 97, is eroding. About
39 percent of respondents
favor the measure, com-
pared with 44 percent in
early May, Wenzel said.
The nonpartisan Legis-
lative Revenue Office has
said the 2.5 percent tax on
certain corporate sales ex-
ceeding $25 million would
act as a consumption tax.
The tax would cost the aver-
age family in excess of $600
per year in higher prices.
“There has always been
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