UO administrators and Republican legislators love doom and gloom stories about the cost of PERS and its outrageous retirement benefits. But the truth is that they’re repeating fake news, and are now going to have to look for a new bogeyman. The truth is that the state could redirect a significant portion of the PERS money it’s now sending to Wall Street and use it for spending that would would help Oregon. This made sense before Covid and it makes even more sense now.
From PERS by the Numbers: While Mike Belotti and his ilk are still sucking on the what Huey Long called the government sugar-tit, past reforms have already reduced typical PERS payouts for new retirees from 100% to 50% of their top 3 years of salary:
And the right wing’s quest for a 100% fully funded plan that will raise the cost of government – and provide a gift from Oregon taxpayers to Wall Street, the private equity firms that get their fees from managing the reserves, and their lobbyists – is doing fine. The downward blip shown in the chart below does not include the market recovery after the Spring market drop. The S&P ended the year up 18%. PERS will be fully funded in 20 years, probably less:
And that’s before the latest good news (for PERS and Oregon taxpayers). Covid-19 will reduce life expectancy for 65-year-olds by an estimated 5%. (PNAS paper here.) This will of course reduce the unfunded liability even faster, as PERS annuity recipients die off without collecting the full value of their pre-Covid calculated annuities:
UO should see even larger reductions in its PERS contributions, due to a fluke in the formula for getting the system to 100%. As high-paid older Tier 1 faculty retire, not only does UO no longer have to pay into PERS for their salary, but the state reduces UO’s share of the cost of building up the cost of the systems unfunded liability for past retirees like Belotti. That cost – not the cost of providing retirement for new retirees – is about 66% of what UO now pays to PERS:
The part of this I don’t understand is how PERS continues to earn less than its benchmarks, year after year. Don’t get me wrong, they do way better than Paul Weinhold’s UO Foundation. But, given year after year of missing your benchmarks by 1%, wouldn’t you just fire your advisers, abandon active management, and put the money in the benchmarks?
From what I can see the poor performance and fees of active management is enough to account for almost all of the current unfunded liability. But I’m just an economist, so any explanation would be welcome: