NYTimes gives Oregon PERS a superficial once-over, doesn’t cite Sickinger or explain why PERS wants $20B more for its $70B endowment

Reporter Mary Williams Walsh has a poorly-cited rehash of issues originally raised by the excellent coverage of the Oregonian’s Ted Sickinger, who doesn’t even get a shout-out. Walsh:

For decades, PERS calculated pensions two different ways, and retirees could choose whichever produced the bigger numbers.

The first way was similar to what most states do, basing pensions on each worker’s final salary and years of service. But Oregon’s lawmakers included a golden touch, redefining “salary” to include remuneration from any source.

That was how Mr. Bellotti, the former football coach, came to be the state’s third-highest-paid pensioner, at roughly $559,000 a year.

When he retired in 2010 as the university’s athletic director, the standard pension formula was applied to his salary, plus a share of the outside licensing fees and product endorsements the football program brings in. (His pension details, along with those of other retirees in the system, were first obtained in 2011 from PERS by two newspapers, The Oregonian and The Statesman Journal.)

The link goes to the PERS database, not to Sickinger’s 2011 expose:

A new analysis by The Oregonian shows that his pension windfall is not solely the product of his base salary from the university, which was a relatively modest $150,000 in 2005 and 2008 as head coach, and $299,999 as athletic director in 2009. Rather, it was inflated by endorsements by Nike and the Oregon Sports Network, ticket sales incentives and other perks, according to public records released to The Oregonian. Those are sweeteners few public employes get. And it’s a stretch to define some of it as pay from the state. But it falls under the definition of PERS salary for pension calculations under Oregon law.

While Bellotti’s benefits are an outlier, they demonstrate how the mechanics of the PERS system can generate huge benefit flows for a fortunate few. They also show how PERS operated without any absolute cap on covered salary until 1996. And they illustrate how the burden of those benefits will be spread around the state for years.

These payments were included in his PERS calculations even though UO and Nike never made PERS contributions from them.

Walsh’s story then goes on to discuss the burden of PERS payments on Oregon at length, while managing to avoid any discussion of how salary replacement rates for new Tier 1/2 retirees with 30 years of service have already plummeted from 100% to 60% of final salary. From the PERS website:

Nor does she discuss the main reason for the increases in the contributions the PERS Board is requiring from state and local governments and school boards: the Board’s insistence on moving as rapidly as possible to add ~$20B to its endowment and make PERS a fully funded pension system, instead of the leaving it as a partly “pay as you go” plan, like social security.

There are economic arguments for fully-funded pensions, and for “pay-as-you-go” plans that use payments from current workers (or their employers) to pay the pensions of retired ones. Most states have made defacto decisions to go with a mix, with much smaller endowment funding than the 100% Oregon is shooting for. The average is 66%. Oregon is already above that.

As the story points out, the money the PERS board is demanding from the state to get to 100% has many negative consequences for Oregon.

So who will benefit from increasing the PERS endowment? The PERS consultants, the Wall Street banks and investment houses that manage the money, and – way off in the future – Oregon taxpayers who will someday be able to use the endowment earnings to pay retirees, leaving more money for public services and/or lower taxes.

Of course those future taxpayers will in all likelihood be richer and more numerous than we are today – so why does PERS think we should suffer for their benefit?

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10 Responses to NYTimes gives Oregon PERS a superficial once-over, doesn’t cite Sickinger or explain why PERS wants $20B more for its $70B endowment

  1. Jack Bogdanski says:

    The Portland police and fire pensions are 0% funded (not a typo).

    • uomatters says:

      Seems reasonable. Portland is growing, presumably the number of cops and firemen is too, and so the ratio of workers to retirees and therefore the pension cost per worker will be falling.

      Of course some economist probably said the same thing about Detroit, back in 1965 or so.

  2. Anas clypeata says:

    I found it strange that the article did not mention voters’ hamstringing of local governments through limits on property taxes. That was and remains a non-trivial factor in all of this “we are choosing not to pay teachers or rebuild roads” hand-wringing.

    • RCO says:

      Indeed. If I didn’t know better I would think, from reading this article, that we have to choose between funding the retirement of seniors and educating children. Nice work, New York Times.

    • oldtimer says:

      Yes, and paradoxically, measure 5 typically passed in blue counties and failed in red counties. Another one of Oregon’s many puzzles, like the Oregon vortex.

      • Dog says:

        that may or may not be true, would have to see the actual data – however, I know that Measure 5 passed in Multanomah county because the rapid escalation of property values there meant significant more amounts of property tax each year and that vote in favor gave the Yes about 50,000 more votes (out of the 1 million that were cast) which was enough to pass it on a state wide basis.

      • Oldertimer says:

        Vortex I was awesome brah! We’re you there?

        Can’t wait for Vortex II ! See you there?

  3. oldtimer says:

    Yes, that is right, passed by large margin in multnomah county and also passed in lane, and most other blue counties. Typically failed in the other, mostly red counties.

  4. Owl says:

    Nicely summed up UoM. Thanks.

    • Dog says:

      With respect to the Figure above and other tidbits, for academics on a 9-month salary, it is important to remember:

      1. The figure above refers to 12 month State employees.

      2. If you do not get summer salary (I have no idea what fraction of UO faculty get full or partial funding in Salary, but I have often thought this real world thing is relevant to salary discussions – but UO matters has not written a topic on this so I will stop here) then your 12 PERS Tier 1/2 benefit will be a much higher percentage of your replacement salary.

      3. Remember that you also gain 8.6% more in take home pay (over those 12 months, since payroll taxes are gone).

      4. If you have had summer salary in the past, that goes into retirement as well (yes your NSF grant helps pay your retirement benefit – yes this may be nuts, but it is what it is). So suppose you worked at the UO for 25 years – then that’s 75 academic terms. Now let’s suppose that for a while you got summer salary; say integrated over those 25 years it was 18 months – that means you now have the equivalent of 2 extra years of academic year salary contribution to retirement.

      5. In case you ever wondered when you looked at your salary history according to PERS, it seemed too high – this is because, yes, employer paid retirement is counted as salary – don’t believe me: https://apps.pers.state.or.us/pers238/Content/pers_final_average_salary.htm

      6. Bottom line: if your currently on Tier 1/2 and a 9-month employee and have had some past summer support, then your take home pay from your retirement benefit plus taking your market driven IAP over 5 years will likely exceed your 9-month academic take home annual salary. So If you think your days of getting summer salary are over (like me) then you are likely financially better off by retiring. Just a thought …

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