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Oregon must contain the roaring PERS fire: Editorial Agenda 2016

Wednesday, September 7, 2016

By The Oregonian Editorial Board 

…The fiscal conflagration known as Oregon’s Public Employees Retirement System will burn an extra $885 million in the next biennium to ensure retirees get their pensions and benefits as negotiated…

… Contributions by employers…are expected to go up by 4 percent of payroll in 2017, 2019 and 2021. That puts the employer contribution to the system at $4.5 billion for the 2021-23 biennium, more than twice what it is now…

But that’s to say nothing of the pressure upon public school systems, expected to find $335 million more to ship to PERS in the next biennium,..

…earnings on PERS investments last year were 2.11 percent, and this year through June just 1.24 percent — well below the unrealistic PERS-set expectation, upon which the system is configured, of 7.5 percent… [emphasis ours)

We Respond & Your Comments

PERS, and therefore Oregon taxpayers who pay for it, are in deep doodoo  – old news.

What we want to focus on today is the last paragraph (above), which tells us that PERS projections rest on an assumed 7.5 % rate of return. The only way to get that kind of assured return today is to take risks that are far beyond unacceptable for pensions. Zimbabwe sovereign debt, anyone?

Why can public pensions use Bernie Madoff-type returns in their projections? Because they’re doing it with your money. Meanwhile, according to Steve Malanga, senior fellow at the Manhattan Institute, private pension funds, those offered by companies, must project future earnings based on a “risk-free” rate – currently below 3 percent. (http://www.wsj.com/articles/covering-up-the-pension-crisis-1472164758).

Why the difference? Because private pension funds need to live up to their projections. Public pensions? They can just reach deeper into your pockets to meet shortfalls caused by their delusional forecasts.

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