Phil Keisling served as Oregon Secretary of State from 1991 to 1999 and is most famous for having championed the state’s vote-by-mail system. Now, he is turning his attention to the impending crisis in Oregon’s Public Employee Retirement System, known as PERS. His 54-page memo is called PERS in Crisis: The Sequel.
PERS impending crisis is driven by rules that mandate that PERS accounts earn at least 8 percent per year. Even if PERS investments have double digit losses, the accounts must earn at least 8 percent. The gap between the mandated earnings and what is actually earned is filled with increased taxes and fees imposed by state and local governments or reduced spending on government programs.
The PERS crisis is well-documented. An crisis earlier in decade prompted a set of reforms, many of which were rejected by the Oregon Supreme Court. As noted in a recent op-ed, despite efforts by some state and local governments to slow the impacts of the crisis on their own budgets, the crisis continues, even though the PERS Board touted Oregon’s system as the best funded in the country (pdf).
Some of Kieslings findings:
- An estimated $1.5 billion of additional tax dollars will be required by state, K-12, and local government employers in 2011-13 to meet PERS-related obligations.
- By 2013-15 PERS obligations will require $2.5 billion in new, additional money that could otherwise be used to provide government services and/or reduce taxes.
- By early 2009, leaders and financial officials in Oregon governments were keenly aware—or should have been, based on available public documents produced by PERS, its staff, and hired experts—that PERS’ problems were going to cause significant budget pressures on state and local governments. Nonetheless, no widely visible, public debate of the enormous implications of this scenario occurred in key arenas—especially during the 2009 Oregon legislature—foreclosing the possibility of certain actions that could have been taken ameliorate the current crisis.
The Oregon Public Employees Retirement System (PERS) is an impending train wreck. We can delay the wreck and we can move some passengers to the back of the train. Nevertheless, the PERS train will wreck and taxpayers are going to pay for it.
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