In 2008 Oregon PERS, along with other pension systems around the country, suffered a disastrous investment year when the U.S. stock market endured its worst year since the Great Depression. As a result of those losses — some 27 percent of the PERS’ value — the system’s actuarial unfunded liability increased to over $16 billion by the end of 2008. Although good market performance in 2009 (and to date in 2010) has begun the process of a return to financial health, nonetheless some are arguing that the 2011 Legislature should once again, as in 2003, take up the task of "fixing” Oregon’s Public Employee Retirement System.
But the two situations are not parallel.
As the 2003 legislative session convened, Oregon PERS had just suffered through three difficult investment years, causing a rapid increase in the unfunded liabilities of the system that topped out in the spring of 2003 at approximately $17 billion, leading to significant increases in employer contribution rates. In addition, Marion County Circuit Court Judge Paul Lipscomb ruled (in the City of Eugene case) that the PERS Board had not followed the statute in administering the PERS system. In turn, the 2003 Legislature made significant changes to PERS that were challenged in the Oregon Supreme Court, with the Court eventually rejecting certain changes and holding that others were, in fact, constitutional. As a result of these changes — as well as improved market performance — the financial health of PERS quickly improved.
The purpose of this discussion is to point out how different today’s PERS is from the system addressed by the 2003 Legislature. In 2003 active PERS participants were receiving a "Money Match” benefit significantly more generous than the historical benefit provided by PERS. In contrast, in 2011 over 80 percent of active PERS participants will receive a "Formula” benefit that is in line with historic PERS standards. Therefore, any attempt to "fix” Oregon PERS in 2011 will face a very different set of challenges from those that were addressed in 2003.
This information comes from the PERS Coalition and was written by Greg Hartman of Bennett, Hartman, Morris & Kaplan, LLP.