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.

When financial markets tanked earlier this decade, governments were facing huge increases in the amounts they would have to contribute to their employee’s PERS accounts to fill the defined benefit gap. The Oregon economy was in recession and the electorate had little or no tolerance for increased taxes. In response, the state and some local governments issued pension obligation bonds.

The plan carried some risks: While it would make high returns higher, it could make low returns disastrous. At the time, the stock market was about to begin a four-year run of double digit annual returns, the housing market was taking off and interest rates were nearing record lows. These factors caused state and local governments to determine that the benefits of issuing bonds outweighed the downside risks. The governments that used the bonds have moved themselves toward the back of the train, but they nevertheless remain on the train.

Read the entire op-ed at the Statesman-Journal, or download a PDF.