$24B pension debt (PERS) at risk … following bank fails

By Taxpayers Association of Oregon

Wall Street Journal columnist, Allysia Finley is sounding the alarm on state pension problems impacted by high interest rates.

Because Oregon’s public employee pension system (PERS) is $24 billion in debt, it cannot handle a weak economy, nor handle a non-boom cycle stock market.

Finley shares, “A report by the research shop Equable estimated that the 228 largest public retirement systems were running a $1.4 trillion unfunded liability at the end of last June. But stock prices haven’t increased much, and the values of other pension-fund investments are falling. Fixed-income assets such as government bonds used to make up about half of pension-fund portfolios but now are only about 20%. To meet their targeted investment return rates—typically between 7% and 8%—pension funds loaded up on higher-yielding stocks and “alternative investments” such as real estate, hedge funds and private equity, which rely heavily on leverage. These alternative investments now make up about 30% of pension-fund investments and are getting slammed by rising interest rates. Defaults on office buildings are increasing while property values fall, which will ding pension funds and make it harder for local budgets to fund retirement obligations.”

She also shared “Insolvent cities could declare bankruptcy, but states as a matter of federal law can’t. That means their taxpayers will inevitably have to pay more to cover the pension shortfalls.”

How can Oregon PERS pay for itself when it can’t even pay for itself during the mostly economic boom time from 2009 to today?

If Oregon PERS debt can’t pay for itself right now, how much less will it be if Kotek hires nearly 5,000 new government employees as she has planned?

This is bad news for Oregon and unfair both to retirees who expect a sound pension system and taxpayers who are being asked to bail them out.

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