Oregon public pensions

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Oregon public pensions are included in the Oregon Public Employees Retirement System (PERS) pension system which has more than 329,000 participants.^[1]

Oregon has 83,083 total public employees as of 2010.^[2] In Fiscal Year 2010, the state has a total of 214,374 active and inactive pension fund members, with 111,160 receiving periodic benefit payments. ^[3]

For the past four decades, investment income accounted for 69 percent of PERS dollars, 23 percent from employer contributions, and 8 percent from employee contributions.^[4]

In 2003, the Legislature passed changes to lower the system's cost, including creating a different plan for new workers, called the Oregon Public Service Retirement Plan. Under that plan, the normal retirement age is 65, and benefits aren't as generous. Membership in the cheaper plan has grown rapidly as the public workforce turns over. According to PERS, 71,000 people are in the new plan, out of a total of just over 200,000 current or former government workers with PERS coverage. ^[5]

According to the United States Census Bureau, the state has 5 locally-administered pension systems.^[6]

Pension plan

PERS

After 50 years of attempts to pass a bill to create a public pension plan, the Oregon legislature passed a plan creating the Public Employees Retirement System in 1945. In 1950, the state only had to match payments on the first $3,000 of an employee’s annual salary. This set the maximum amount of retirement at $125 a month for an employee who retired after 30 years of service. Beginning in 2004, member contributions (including Tier One and Tier Two contributions) were placed in the Individual Account Program. PERS members retained their existing Tier One and Tier Two accounts, but those accounts would not receive any additional contributions. Tier One accounts would continue to earn the assumed rate annually (8 percent) and Tier Two accounts would continue to be credited with earnings or losses. ^[7]

Contribution rates

On Sept. 24, 2010, PERS approved higher payroll-contribution rates for state agencies, local governments and school districts for the next two-year budget cycle, costing them approximately $1.1 billion.^[4] In the 2011-13 biennium, state and local governments will contribute, on average, approximately twice what they paid during the current biennium, meaning that total pension costs will increase a total $1.1 billion.^[8]

Rates vary based on the number of employees, their length of service, and their salaries.^[4]

• For employees hired before Aug. 2003, state agencies, the payroll contribution rate will increase from 3.28 to 10.73%
• For employees hired in August 2003 and later, rates will rise from 2.84 to 8.05% for general employees, and from 5.55 to 10.76% for public-safety employees

Funding levels

PERS states that it is 86% funded, with an unfunded actuarial liability, including side accounts, of $8.1 billion.^[1]

The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States,^[9] the American Enterprise Institute^[10] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.^[11]

Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":

This data is based on projected data from 2008 census data.^[12] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.

Pension board

In 2003, the state reduced the size of its pension board from 12 members down to five members, three of whom must be independent.^[9]

Contribution rates

Systemwide employer contribution rates for the 2009-2011 biennium average approximately 5.2% of PERS covered payroll after applying side account offsets, and that will rise to a total of 10.8% of PERS-covered payroll in 2011-13.^[1] Members contribute 6% of their salary, and approximately 70% of members “pick-up” their employees contribution.^[1]

Rate of return

Oregon presumes a 8.00% return rate on its pension investments.^[9] Oregon's public pensions achieved a 14% return in fiscal year 2012. Its five year return is just 3%, however, due largely to poor returns in 2008.^[13]

Benefits

In 2008, the average monthly benefit for all living PERS retirees was $2,060, slightly higher than the nationwide average monthly public pension benefit of $2,004.^[1]

Th list of the 837 people with pension benefits of more than $100,000 a year from the Oregon Public Employees Retirement System can be found here. The 837 recipient account for 0.79 percent of total of number of PERS recipients and they receive 3.43 percent of the total monthly benefits the system pays each month.^[14]

The recipient receiving the highest pension is former University of Oregon football coach Mike Bellotti, who gets just over $41,000 per month, for a yearly total right about $500,000 per year. That figure does not include post employment benefits like health insurance. His monthly 6 percent retirement contribution was paid for by the taxpayers, meaning he never contributed his own money into his PERS retirement. ^[15]

Double dipping

The practice of receiving state salary while also collecting a pension from prior government service is known as "double dipping," a practice Oregon prohibits.^[16] Gov. John Kitzhaber stopped receiving his state pension the day he was sworn in because he could not collect both under state law. ^[16]

Pension reforms

Planned reforms by Gov. Ted Kulongoski could result in more than $511 million in savings to the state over the next two years, but the Oregon Public Employees Retirement System believes the reforms would create sharp reductions in public employees' pay and retirees' benefits. ^[17]

A report drafted by the PERS found the reforms would:^[17]

• Lower state workers' annual wages or total compensation by 6 percent or more.
• Reduce annual benefits of the 15 percent of state retirees who have relocated out-of-state by about 6 percent.
• Cut annual cost of living adjustments for about 42 percent of all state retirees.

The governor's reform plans include:^[17]

• Elimination of the 6 percent pickup and the Individual Account Program
• Halting income tax offset payments to PERS retirees who live out-of-state
• Requiring a minimum 10 years of service to be eligible for annual cost-of-living adjustments to pension benefits
• Limiting cost-of-living adjustments to the first $24,000 of a retiree's annual benefits

In August 2012 the Public Employee Retirement System announced hundreds of millions of dollars in higher pension costs for the budget cycle, starting July 2013. That unfunded liability has grown from 13 billion to 16 billion according to this week’s numbers. Like many public retirement systems, Oregon’s PERS system depends on two funding sources: investment earnings and contributions from government budgets. ^[18]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has 5 locally-administered pension systems.^[6]

Transparency

Main articles: Public pension disclosure and Governmental Accounting Standards Board

Data availability

The OPERS site contains multiple forms of data about the pension funding, actuarial and financial information and investments. ^[19]

The names of pension recipients and the amount paid out to individuals is not posted on the site.

Fund performance data

OPERS posts investment performance data on the website of the state treasurer. Available information includes monthly and quarterly returns and portfolio information that includes public, private and real estate holdings. ^[20]

Rate of return

The assumed rate of return is posted in the annual actuarial report. ^[21]

Unfunded liabilities

Unfunded liabilities are reported in annual actuarial reports and the quarterly "by the numbers" reports. ^[22]

Oversight

It does not appear that Oregon has a history of pay to play in its public pension plans, following a web-based search.

The Oregon pension system is managed by the Oregon State Treasury, under the direction of the Oregon Investment Council. Audits are performed on the fund by independent contractors.

See also

• Oregon state budget
• Oregon state government salary

External links

• Oregon Public Employees Retirement System
• PERs pension data 2011
• Top 10 monthly pensions for Oregon public employees
• Searchable database of Oregon PERS pensions, The Oregonian
• Uncovered pension liability to public workers
• Oregon State Pension Fund Management - State Integrity Investigation

References

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