The Sunday New York Times briefly trained a national spotlight on Oregon's underfunded public pension fund and the impact that increased pension payments are having on government employers around the state, despite increased overall budgets.
It's a seemingly perennial problem in Oregon, and has become a third rail of state, and in some cases, family politics.
Consequently, as The Oregonian/OregonLive has covered extensively and The Times story noted, required contributions from public employers are going way up, displacing cops, teachers, school days and every other form of public service around the state. One expert has called it "a moral issue" for the state.
1. Top earners draw attention but are not the main reason for PERS costs
The Times story highlighted the massive pensions being earned by the retiring president of Oregon Health & Science University and a former football coach at the University of Oregon. They are eye-popping, to be sure. But in the end, they are outliers that are gradually disappearing due to federal limits on pensionable salaries, and they are not a major driver of the overall pension deficit or costs
2. PERS benefits average $2,692 or $3,771 a month
As organized labor groups were quick to point out on social media this weekend, normal benefits are much lower. Out of some 136,000 retirees receiving PERS benefits, only 2,000 or so collect more than $100,000 a year.
The average monthly benefit for public employees who retired in 2015 was $2,692, or about $32,300 annually. That includes all retires that year, whether they worked five years or 35. For career employees, with 30 years of service, the average monthly benefit was $3,771, or $45,252 annually. The Oregonian/OregonLive maintains an online database of public employee pensions.
3. The troublesome Money Match is the problem, but it's going away, too.
So what are the roots of this pension problem? Much of it is the product of the system's original retirement formula, called money match. Along with the guaranteed rate of return for older members' pension accounts, and the decision by a PERS Board packed with public employees to credit most of the system's bull-market earnings to employee accounts for two decades ending in 1999, the money match formula inflated pensions for a large cohort of public employees. By 2000, starting pensions were averaging 100 percent of a worker's final salary, almost double the level contemplated when lawmakers created a new pension formula in 1981.
That's an average. Many retirees did much better, and the system's actuaries were slow to recognize the mushrooming liabilities and set employer contributions at a level high enough to cover them.
4. The current deficit is $22 billion
The dot.com bust in 2001 and the great recession in 2008, however, uncovered the structural hole in the system, one that remains about $22 billion deep even after a nine-year bull run in financial markets.
5. Still, we're not as bad off as some states
In the pantheon of poorly funded public pensions systems, Oregon's can't compare with the financial fires burning through public budgets in Kentucky, Connecticut, Illinois or New Jersey. Still, Oregon's deficit is large – about $22 billion – especially compared with the relatively small public payroll being taxed to dig out of the hole.
- Ted Sickinger
503-221-8505; @tedsickinger