A random thought about the Oregon Public Employees’ Retirement System (PERS) sent me to the Oregon Revised Statutes, chapters 237, 238, and 238A, which deal with public employee retirement funds and the PERS system.
I am not an expert on PERS and the statutes, and I may have missed something when I went through these chapters. My reading of the statutes is that they don’t require non-participating public employers to join PERS, but once an employer elects to join PERS, the employer can’t withdraw from PERS. In effect the employer who joins PERS must continue to offer PERS benefits, and contribute to PERS, under whatever terms the legislature may impose.
What would happen if the legislature amended ORS Chapter 238 and 238A to provide that a public employer may withdraw from PERS, subject to any collective bargaining agreement to which it was then a party? A local government could, when its union contract comes up for negotiation, say that it’s willing to pay X% of salaries to a pension fund, but not to continue to contribute to PERS and run the risk that PERS earns more or less than 8% on its investments. As PERS (unlike Social Security) is not supposed to be a Ponzi scheme but is intended to be fully funded by its participants, the long-run health of PERS should not be endangered by allowing local governments to negotiate their way in and out of PERS. Local govenments that now participate could continue to participate, but they would have to make that decision every few years as they negotiate their collective bargaining agreements.
It’s reasonable for PERS to have to compete for the business of the employers and employees that it serves. Can it offer fair benefits at a reasonable price? If not, then let the employers and employees get their retirement benefits somewhere else.
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I would like to address two components of the argument.
The union centric notion, I believe, is irrelevant. Union membership is not always coterminous with the entire set of employees of a local government. Individual employees have the right to bargain collectively or individually, but their rights for bargaining collectively are little more than an aggregation of individual rights. Thus if unionization were a key factor, subject to bargaining on PERS (bargaining with the local government rather than PERS directly), then individual non-unionized employee bargaining must include the same power to bargain. Yet, the practice has been for the employer, through a legislative act, to join PERS as an entire body, regardless of unionization.
The net result is that union and non-union employees alike are, or should be, subject to one policy of general applicability. It would be inconsistent to make adjustments that are within a CBA that are not applied to all, and equally as well for non-unionized employees that are not applicable to unionized employees. An employee, or their bargaining representative, could object, but without regard to the whether they are or are not unionized.
One feature of the present battle in Josephine County is the disparate treatment of non-union and unionized employees on cashing out un-utilized sick-leave.
Curiously, in Rhode Island, the government could not restrict pension related rights that were targeted to one class of claims but could affect the very same result if it was enacted as a general policy that overlapped with the previously targeted class of claimants.
One thing I find troubling at the state level in Oregon is the notion, seemingly agreed to by both Democrats and Republicans alike, that the appropriations authority that is isolated to the legislature by the constitution is considered secondary to a back room secretly negotiated bargain so long as it is a union that is on one side of the table. That evidences a fundamental misunderstanding of the role, the limited role, of unions.
The Oregon Supreme Court, in the Strunk case, rejected a couple claims that relied on individual bargaining with an employer other than, and in addition to, their claims against PERS. They stated that PERS is not a hybrid plan. The point, the key point, is that the court has ascribed to the notion of a legislative contract as the basis for assuring that certain payments are guaranteed. If the rights were not guaranteed by a legislative contract then this would leave the door open to a wide variety of results that are as varied as are the number of employer participants, and further varied by individual employee negotiation.
The other point is the pay-as-you-go notion versus full funding. PERS is neither of the two. It is all wrapped up in the notion of minimum guarantees, guarantees that might be based on pay-as-you-go, but with a change that introduces features of a fully funded plan. My objection to the multiple simultaneous minimums and maximums is that it leaves the scheme subject to arbitrary result depending upon the advocacy of the lawyers and the vision and skepticism of a judge to such arbitrary presentation of claims.
This multiple-analytical-regime thing is the theme of one of my objections to the Portland safety worker pension reform. I say that they must pick one regime to the exclusion of the other going forward, not set up minimums based on two irreconcilable regimes, and not introduce the added complication of multiple classes of active workers. It underlies my demand that they terminate the present plan and settle up, and only then go forward with a plan, an actuarial sound plan, if it is to be fully funded, and then only cover active workers. The current actives could go to court based on the terminated plan, immediately, and obtain certainty and finality as to their earned and anticipated annuity stream. It does not provide even a hint of a justification to issue bonds, as it is just an annuity stream.
Back to the elective thing. If participation is elective, by a given bargaining unit of employees, and thereby elective too for each individual non-unionized employee, what then is left of the legislative compulsion to join for schools, or legislative authorization to local government’s to compel participation? If there is no compulsion then it is merely a bargainable term and the Oregon Investment Council and PERS would have no greater appeal than say Capital Consultants in offering their pension management services. The OIC and PERS members are statutorily immunized, by the way, from all personal liability, unlike the decision-makers of non-governmental trustees of pensions. I do not disagree that participation should be elective. I just see that the statutes do not yet comply with the elective option. I think there is a liberty interest to opt out, as an individual right. The notion that the local employer, rather than PERS directly, is the prism through which I would obtain vindication of that individual right just alters the procedural steps and named parties in a case but neither adds nor detracts from the description of the individual right and its’ violation under color of law. I would name the local government and PERS and the OIC, and the John Doe Entrustees to whom the Oregon Investment Council has redirected the funds held on behalf of PERS. It is those John Doe’s, after all, that want a captive set of clients and a means to escape all notions of personal liability, through the conversion of the government into their personal play toy.
I hope that this helps to illuminate rather than confuse any readers. Any employee can go to court and say they have had enough of PERS and demand certainty now, it is not within the power of the legislature, as far as I am concerned, to impose the restriction on their choice for saving and investing for retirement. The PERS thing and investment in stocks, at the outset, was created to accommodate a voluntary individual privilege under federal tax authority to obtain preferential treatment on a portion of earnings so as to encourage individuals to plan for retirement. The federal offer of preferential tax treatment is “elective” and not compulsory on the state or local government nor the individual.
The target of my argument is not the Democrats, but the Republicans that are supposed to insist upon individual liberty. So, give liberty to the public employees, duh!