Few lawmakers opt out of PERS despite conflict of interest

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by Shelby Sebens, Northwest Watchdog

PORTLAND –  Oregon’s newest lawmakers will have to decide by Feb. 12 whether they want to participate in a state retirement system already $14 billion in the red.

Only three of the state’s 90 state lawmakers opted out of the Oregon Public Employees Retirement System or other state retirement options last year despite an obvious conflict of interest: lawmakers benefit from a system they control.

THE GANG’S ALL IN: Newly elected lawmakers will have to decide soon if they want retirement benefits despite potential conflict of interest.

State Sen. Brian Boquist, R-Dallas, and state Reps. Margaret Doherty, D-Tigard, and Bob Jenson, R-Pendleton, all declined to participate in PERS when elected in 2011, according to PERS documents reviewed by Northwest Watchdog.

“From the very beginning I just said no, let’s not even go down the PERS road,” said Boquist, who was first elected in 2005 to the House. He declined then to be part of PERS and has since served in the House until moving to the Senate in 2008. “I simply opted out and didn’t participate. I suppose if I wanted to be on the gravy train like everyone else…”

Boquist questions how his colleagues can reform the system when they are benefiting from it. He added the larger issue is the lack of sustainability in the PERS fund.

“The problem is that the system is simply not funded and not going to make it,” he said.

Officials did recently announce a positive return on investments that dropped the unfunded liability from $16 billion to $14 billion. But officials recognize that it’s still a large deficit to be tackled.

The PERS system is large with 900 employers, including local governments and schools participating. Teachers, firefighters, judges and several public employees are members in addition to the lawmakers. Lawmakers’ benefits are calculated by multiplying their salaries and years of service by 1.5 percent. They can take the pension in a lump sum or in equal installments spread over a time period, according to the National Conference of State Legislatures.

Among all elected officials, some do not have the option to decline membership in the state retirement program. A quirk in state law requires them to remain on PERS if they were members before being elected, according to PERS spokesman David Crosley.

Common Cause for Oregon President Kevin Mannix said because the Oregon Legislature has the ultimate authority over the public retirement system, lawmakers should not be on it. Even if it doesn’t cloud their judgment, it doesn’t look good.

“There’s certainly a perception that their decisions will be affected,” Mannix said.

Ten states do not provide retirement benefits for legislative service: Alabama, California, Louisiana, Nebraska, New Hampshire, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming, according to documents provided by the National Conference of State Legislatures. Many states allow legislators to opt out, as in Oregon.

Mannix, a former state lawmaker who served in both chambers as a Democrat and then a Republican, said he benefited from the state system because he was already on it when elected to office and didn’t think much of it at the time. He said the individual opt-out isn’t working, though — hence only three members declining benefits last session. He said lawmakers should consider a 401(k) plan or no retirement benefits at all for lawmakers.

“These are supposed to be part-time citizen legislators,” he added.

Mannix said when he was a lawmaker, from 1989 to 2000, he began looking at changes to PERS. He said other members came to realize they shouldn’t be on the system.

With the focus on PERS this legislative session, the question of lawmaker participation bound to come up.

“There’s going to be a conversation about PERS and this issue ought to be brought up,” Mannix said.

Gov. John Kitzhaber, a Democrat, has laid out a reform package for the system and estimates savings of about $865 million from a cap on cost-of-living increases and an adjustment to out-of-state benefits. The increased costs of the public retirement system is putting a strain on government agencies, especially schools. Kitzhaber said a $500-per student increase in the annual cost of education can be attributed to PERS.

Republicans have been pushing for reforms to the system for years.

State Rep. Jason Conger, R-Bend, told Northwest Watchdog in October he wants to introduce legislation that would take lawmakers off PERS.

As for getting lawmakers off PERS, Boquist is skeptical. He said you can be in line with someone politically on nine out of 10 issues but that 10th issue is usually a benefit.

“And if you talk about cutting that benefit, they’re not in favor of it,” he said.

Northwest Watchdog is a project of the Franklin Center for Government & Public Integrity