A Lonely Fight to Reform PERS

Right From the Start

The Oregon Public Employees Retirement System (PERS) is in the news again. First, there was a story in The Oregonian reporting that former University of Oregon football coach and athletic director, Mike Bellotti, is receiving a whopping $496,100 annually from PERS. And second, an article in the GazetteTimes notes that Bend attorney Daniel Re is pursuing a suit to overturn the Oregon Supreme Court’s invalidation of two PERS reform measures.

The Oregonian story isn’t really about Mike Bellotti. As far as I know, Mr. Bellotti was a fine coach and athletic director. He was a significant part of making Oregon one of the premier football programs in the country and reaping the financial windfalls that come with that honor. When Mr. Bellotti joined the Oregon football program in 1989, it is doubtful that he was even aware of Oregon’s PERS program or the riches that it would bestow. Twenty years later when Mr. Bellotti retired at the age of 60 to become a well paid analyst for ESPN, he became entitled to his nearly one half million dollars per year pension. According to actuarial tables, Mr. Bellotti’s life expectancy is another 21 years – age 83. For twenty years of service to the Oregon football program, Mr. Bellotti will be paid for 23 years of retirement at $496,100 per year with periodic COLA adjustments. That means Mr. Bellotti, over the remainder of his life will receive over $11.4 Million dollars from the taxpayers of Oregon.

No, the real story here is about corruption. Corruption at the expense of Oregon taxpayers for the benefit of Oregon’s public employee unions and Oregon’s governing class. Let’s put this in its simplest terms.

The terms and conditions of Oregon’s Public Employees Retirement System are determined by the Oregon Legislature. All of the members of the legislature are eligible to be members of PERS and most are. Thus, those who design the system benefit from their decisions. And one of the clever provisions of the PERS system is that legislators get to count their part time service in the legislatures as full time service for determining eligibility. Couple that with the provisions that require PERS payments to be based on your three highest years of government salaries and you see the reason that there is a constant migration of legislators into high paying government administrative positions to enhance their PERS benefits.

The administration of the PERS system falls to the executive branch (governor). The governor and all the members of his administration, including those who directly administer PERS, are beneficiaries of PERS. Their decisions regarding administrative practices, such as updating mortality tables, application of earnings from PERS investments, etc. have a dramatic effect on the cost taxpayers must bear to fund the program. For instance, early in Gov. Ted Kulongoski’s term, it was determined that PERS administrators had “failed” to update the mortality tables for nearly a decade. The net effect was that beneficiaries were paid higher amounts over longer periods of time than they would have if current mortality tables would have been used.

The judiciary, all of whom are eligible to be members of PERS – and most of whom are – determine the constitutionality of attempts to reform PERS. Twice reforms have been adopted – once by initiative and once by the legislature in response to public disclosure of the crushing future liability created by PERS. Twice the Oregon Supreme Court invalidated those reforms. In doing so, the Oregon Supreme Court, citing the United States Constitution, carved out a unique position for Oregon public employees. The court ruled that once a benefit is granted to a public employee it can never be withdrawn or reduced on a going forward basis. The justices of the Supreme Court voting to invalidate those reforms directly benefited from their decisions. The decision, because it was based on a federal constitutional provision, could have been appealed to the federal courts, but then-Attorney General Ted Kulongoski elected to not appeal. Mr. Kulongoski was a member of PERS and a direct beneficiary of his decision to not appeal the court’s ruling. To the best of my knowledge, that ruling has never been followed by any federal court in America.

The primary beneficiaries of PERS are Oregon’s public employee unions. With nearly $130 Million collected by state and local governments and forwarded to the public employee unions each election cycle, Oregon public employee unions have provided the campaign funds to Oregon legislators (primarily, almost singularly, Democrats) who determine the provisions of PERS. The latest attempts at reform were buried in the Democrat controlled Oregon State Senate this past session. The public employee unions have also provided campaign funds to Oregon’s unbroken string of Democrat governors over the past twenty-five years and as a result have had substantial input into the actual administration of the PERS program. They have also provided campaign funds to Democrat attorney generals, including Mr. Kulongoski who made the decision not to appeal the Oregon Supreme Court’s decision invalidating the PERS reforms. The majority of the members of Oregon’s Supreme Court over the past decade have had the habit of retiring before their terms is up thus allowing the succession of Democrat governors – presumably with the advice and counsel of the public employee unions – to appoint successive justices of the Supreme Court. (Those appointments allow the newly appointed members to run in the next election with an asterisk after his/her name indicating that he/she is an incumbent – they never lose.)  And the public employee unions have provided much of the funding for both the lobbying to defeat reforms in the legislature and to challenge those reforms in court.

And you wonder why the Oregon’s PERS system has an unfunded future liability of between $12-14 Billion – and that doesn’t include the unfunded future liability for healthcare to be provided to PERS beneficiaries.

But this is where the second story begins. Daniel Re, an attorney in private practice, has undertaken a series of lawsuits designed to expose the corruption inherent in Oregon PERS. He has focused tightly on the failure of the members of Oregon’s Supreme Court to recuse themselves from a decision from which they directly benefited. (The new decision to release benefit payments to PERS recipients should help quantify those benefits.) There is little doubt that Mr. Re will not get a fair hearing from the Oregon courts – he hasn’t thus far – but his intent is to move this matter eventually to the federal courts in hopes of finally getting justice for Oregon’s taxpayers.

Sometimes, one man can make a difference.