‘Gas-guzzling’ PERS drains effectiveness of our tax dollars

Dan Lucas_July 2012_BW

by Dan Lucas

Imagine every government fleet in Oregon had vehicles that only got 4 miles per gallon (MPG), and that on average private sector fleets had vehicles that got 22 MPG. Assuming an average of 12,000 miles driven per year and around $3 per gallon of gas, that would mean that each government vehicle costs $7,400 more per year to operate. And all of those tax dollars would be just be being poured down gas tanks — not going towards hiring more teachers or police officers.

For every 8 government vehicles that got replaced with vehicles with the private sector fuel efficiency in this example, we would be able to hire one additional teacher or police officer — assuming an average payroll cost of $60,000.

That’s actually what’s happening with PERS costs for all levels of state and local government in Oregon.

A 2011 report on PERS by the City Club of Portland summarized “PERS today is heavily burdened by the past. Before earlier legislative reforms, members received a generous guaranteed annual return on their burgeoning retirement accounts. Members dominated the PERS governing board, frequently crediting accounts with more than double the generous guaranteed rate, sometimes as high as 20% in a single year.”

Those past PERS excesses are continuing to drain budgets for cities, counties, school districts and state agencies across Oregon. They are sapping the effectiveness of our tax dollars — making it where it takes more and more tax dollars to put a teacher in the classroom or a police officer on the street.

Total PERS costs for Oregon state agencies are 17% of the payroll costs. That’s an average PERS cost of $11,700 a year for every state agency full-time employee. The 2013-2014 Salem-Keizer School District budget reported their total PERS rate was 27% of payroll.

The percentage for state agencies includes the impact of the recent modest PERS reforms, and the percentage in the Salem-Keizer 2013-2014 budget reflected part of those reforms.

By comparison, private sector retirement benefits run around 4% of payroll, according to the U.S. Department of Labor.

Both the government and private sector percentage given above are on top of the 7.65% also paid by employers for Social Security and Medicare.

There are about 38,000 full-time positions for state agencies. If Oregon government workers had the same level of retirement benefits as non-government workers, Oregon state agencies could hire an additional 5,600 unemployed Oregonians or college graduates to work as state police officers, prison guards, child services workers, etc., or Oregon income taxes could be reduced, or Oregon could choose a mix of those options.

Similar efficiencies could be gained for other public employers. There are 66,000 school district employees, 56,000 local government employees and about 13,000 university full-time positions in Oregon.

One example of how PERS costs affect local governments is Polk County. In their current budget, they had to cut the equivalent of almost five full-time deputy sheriffs just to cover the costs of PERS increases.  Polk County has fewer than ten deputies for patrol for the entire county.

It’s very unlikely that there will be any efforts to make additional PERS reforms in the next few years, given the Democratic makeup of the recently elected Oregon Legislature and a governor who has stated that further PERS reforms are “off the table.” What that means for Oregon, even assuming that the modest PERS reforms of the “grand bargain” hold up in court, is that our tax dollars will continue to be used very inefficiently.

It’s just something to remember when you’re paying for our current “gas-guzzler” — when you look at your property tax bill, when you pay your Oregon income taxes or when you wish there were more teachers in your children’s school or that you didn’t have to go 14 hours a day without sheriff’s patrol.

Click here for a breakdown of components of the total PERS costs for Oregon state agencies

To read more from Dan, visit www.dan-lucas.com