Senate Republican Office
Salem, OR – The State Senate has chosen to leave a massive deficit in the Public Employees Retirement System (PERS) unaddressed for another year. An important deadline for scheduling bills came and went on Friday without so much as a public hearing on at least four bills that could address the $15 billion shortfall in the state’s retirement system.
“The PERS system is on cruise control headed straight for a cliff,” said Senator Chris Telfer (R-Bend). “At best it will equal years of deficits, at worst, bankruptcy and lawsuits. Ignoring this problem is irresponsible. It won’t be easy, but we need to start talking about solutions. Pretending it doesn’t exist is not going to make things better.”
The 2008 market implosion caused a 27 percent dive in the PERS investment portfolio. When the dust settled, PERS was missing 25 cents for every dollar that it owed.
Last year, the unfunded future obligations of PERS resulted in a doubling of the rate charged to employers in the system. State agencies, school districts and local governments were all forced to shoulder an additional $1.1 billion in expenses this budget cycle alone, with additional rate increases sure to come. Every rate increase comes straight out of state and local budgets and means fewer dollars to pay for teachers, police officers and other services.
According to PERS, as of December 31, 2009, there are 241 active members of PERS with an account balance of $500,000 or more. If these individuals retire under the money match provision they will get more than $1 million from the State of Oregon. Some of these PERS millionaires currently serve in the state legislature.
Several bills were introduced to help stem the bleeding in PERS. Senate Bill 897 would eliminate the six percent contribution employees are required to make to their retirement accounts. More than 70 percent of PERS members have this six percent contribution “picked-up” by their employers. This solution, endorsed by The Oregonian, would save taxpayers $750 million every two years.
Senate Bill 970 would require employers to make yearly payments to fund projected liabilities in 25 years or less. Many public employers know how much will be needed to pay for promised post-retirement benefits, but choose to spend money on more immediate needs instead, leaving future administrations to pay for the promises.
“With every year that we put off addressing the PERS issue the problem increases and becomes more entrenched,” said Telfer. “By ignoring the problem, we are passing on the burden to our kids and grandkids, putting them at a disadvantage when it is their turn to lead. That is not the legacy I want to leave.”