PERS: A Problem Long in the Making
For many years Oregon offered an expensive and overly generous PERS pension plan for all government employees. The benefit goal for the original pension plan was an income worth 50 percent of final salary to employees with 30 years of service. Added to their Social Security benefits, employees woud be assured of a secure retirement. But poor management decisions greatly increased pension benefits for many employees. As a result, thousands of government employees have retired with annual PERS benefits higher than their final salary. While significant changes made in 2003 created a different system for employees after that date, a majority of all PERS retirees still enjoy benefits greater than the original goal. Taxpayers are on the hook for funding public employee pension benefits, including those that exceed the original target.
Only a part of the problem has been solved. In 2003 the Legislature reformed the system for new hires but left in place many of the generous pension benefits for employees hired prior to 2003. This effectively created two different benefit plans, but only a partial solution. Forty percent of employees hired before 2003 are still accruing unsustainable benefits.
So, the Oregon pension system limps along unfixed. When the stock market crashed in 2008, public and private retirement plans throughout the U.S. were forced to adjust to a more challenging investment environment to sustain their benefits. Most plans adjusted by slowing the accrual of new benefits and/or by requiring higher contributions from both employers and employees to replenish their assets. Oregon has yet to respond to this challenge, except by shifting the problem entirely to taxpayers. Since the market crash PERS’ investment returns have been exemplary, but the system’s unfunded liability has still climbed to $22 billion – a stunning $13,000 for every Oregon household.