Fewer than 9% of the 3,800,000 Oregonians are in Public Employees Retirement System (PERS). But PERS members have total control over PERS laws. No Oregon PERS law can be made or changed without their consent. It wasn’t always this way. When PERS was first created in 1945, PERS members did not control the process. They had to negotiate with state legislators, who at that time were not permitted to join PERS. As a result, both parties involved in PERS – the public employees and the people of Oregon – had independent representation when PERS laws were made.
That procedure remained in place through 1970, and so did PERS retirement benefits. For the first twenty-five years that PERS existed, a retired PERS member received a retirement benefit, after working a full career, of approximately 50% of his or her final average salary. One half of the retirement benefit was funded by the employee and the other half by the people of Oregon.
But in 1971 the Oregon Attorney General ruled that legislators could join PERS. Since then, most have signed up. And why wouldn’t they? Once in PERS, legislators had a personal financial incentive to increase PERS benefits. And that is just what they did. By 1981 they had dramatically increased PERS retirement benefits. During that period PERS legislators also created new benefits. One of these guaranteed that each year their employee PERS accounts would earn a minimum rate of return and that law allowed PERS members to decide what the guaranteed minimum return would be.
Another new law created the PERS Pick Up. The Pick Up gave PERS members two separate benefits. First, it gave them the right to shift the obligation to pay the employee PERS contributions from themselves to the people of Oregon. Second, it increased their employer funded pension by treating the amount picked up as salary in computing their final average salary, although it was not treated as salary for any other purpose.
Once they had substantially increased PERS benefits the PERS legislators made all elected judges PERS members, starting in 1984. For the first thirty-eight years that PERS existed, judges had their own independent retirement plan. That insured they would be impartial when deciding PERS lawsuits. Once judges became PERS members, however, they could not be impartial. Their personal retirement benefits would depend on their decisions.. By forcing judges into PERS, PERS legislators neatly stacked the deck in favor of PERS in every PERS lawsuit.
This move paid off handsomely for PERS members a few years later. In 1994 Oregon voters passed Ballot Measure 8, which eliminated three benefits. In 1996 the PERS judges on the Oregon Supreme Court invalidated Ballot Measure 8 and reinstated those PERS benefits.
Today PERS funding is Oregon’s highest financial priority. But it was not elevated to that status by the people of Oregon. This priority was given to PERS funding by the very same PERS legislators who personally benefit from it. As long as legislators can join PERS, PERS members will control PERS laws.
So do not expect any changes to PERS. If you are concerned about this situation, ask your legislators if they are PERS member. Then tell them what you think about legislators making the PERS rules that benefit themselves.
Daniel C. Re
Daniel C. Re is an attorney practicing in Bend, Oregon