Public retirees face significant changes

A retired Portland State professor advised other retirees Tuesday that legislative reform of their retirement system

may lead to more pain than pleasure.

Marc Feldesman, professor and chair emeritus of anthropology, presented his personal conclusions to a meeting of

the Retirement Association of Portland State (RAPS). He called his presentation “PERS reform: the good, the bad

and the ugly.” PERS is the acronym for the Oregon Public Employees Retirement System, which covers all faculty

and staff members at Portland State.

One piece of bad news Feldesman passed on to his listeners was that they can no longer retire after simply 30 years

of service. The new law has the pension kicking in only at age 65, or at 58 with 30 years or more of service.

Laws passed by this year’s legislative session aimed to reform PERS, which is underfunded by billions of dollars.

Whether any of the laws passed will eventually stand the test of legality will depend on the Oregon Supreme Court.

The Legislature referred its work to the court in hopes of having possible constitutional issues settled by the time the

2005 Legislature convenes. The new laws also face a barrage of court suits in various jurisdictions.

“PERS has been on the radar since 1984,” Feldesman said. The issues it was facing then were identified by 1993.

“If there had been the foresight to grapple with the problems then, we would not have them today.”

What he called “the mess” in PERS occurred when the stock market collapsed and the PERS board of directors

made questionable policy decisions. One of those bad decisions was the board’s continued failure to change the

mortality tables as life expectancy increased. Another was to pay out too much in surplus benefits over an 8 percent

guarantee. The result, he said, was a $15 billion-plus future liability.

“Oregon has the most complex public employee retirement system in the U.S.,” he said. This results in complicated

and sometimes seemingly contradictory solutions to its problems. One new law introduces new mortality tables with

updates every two years beginning in 2005.

He voiced mixed feelings about changes in the PERS governing board, which has been reduced from 12 to five

members. He criticized the old board for voicing the policy that “we will not change actuarial tables unless they

produce a positive benefit to members.” Feldesman viewed that as an impossible contradiction of aims.

The new board consists of three private-sector members with no PERS connection, one state manager or local

elected-official member, and one bargaining-unit employee member. The governor will appoint the chairman, as

compared to the old board, which elected its chairman.

Feldesman saw a number of dangers here. The private sector will obviously dominate the board. There is no retiree

on the board. The new board can create, and has, subcommittees of only two members, which excludes its

deliberations from the requirements of the public meetings law.

One provision is sure to stick in the craws of PERS members who retire between April 1, 2000, and April 1, 2004.

They will get no cost-of living-increases until the benefit is equal to what it would have been if a smaller payout had

been made in 1999. Feldesman said he hopes the state Supreme Court will throw this provision out as unfair. He

predicted if the law stays, it will mean no cost-of-living increase for those retirees for three years.

The new laws make the present PERS fund a dead end. Since Jan. 1, PERS members are paying their 6-percent

member contribution to what was first called a transition account outside the PERS fund, since changed to become

an Individual Account Program.

Under the new laws, PERS retirees are still guaranteed an 8 percent increase in their pension benefits, with a

significant difference. Currently, it is a guarantee of 8 percent every year. The new law guarantees an average of 8

percent gain as a lifetime guarantee rather than year-to-year. Feldesman saw this as not a threat, predicting that it

would not negatively affect any of those present during their lifetimes, based on past fund experience.

One piece of good news: Although PERS members pay 6 percent of salary into the individual account program, if an

employer has been paying the member contribution into PERS, the employer must continue to pay the member

portion until at least Dec. 31, 2005.

Feldesman emphasized that PERS has five years to remove its liability deficit but that employers are not responsible

for liquidating the liability of the fund.

PERS has posted an Oregon Legislative Summary on the Internet that outlines major provisions of 15 bills passed

by the Legislature. Five relate generally to PERS members, the others cover various special issues. The site may be

accessed through