We had an enlightening visit Monday from representatives of one of Oregon’s largest unions of public employees. The American Federation of State, County and Municipal Employees brought big news: Oregon’s Public Employees Retirement System doesn’t need Gov. John Kitzhaber’s reforms. PERS needs to be looked at differently — try closing your eyes — and the problem is solved.
Naturally, we were relieved. All these years we have written about how having an unfunded liability in the billions was something to worry about. Listen to AFSCME and you’ll hear that PERS is just about carefree.
We had worried about the Bend-La Pine Schools. Officials there said the district was going to have to cut 96 teachers out of 755 or cut an additional 16 days from the school year if the governor’s budget were approved without the savings he wants from PERS. Even with the PERS savings, the loss would be about half that much.
We can’t quite see any bright side to that, but AFSCME assured us it was coming to the rescue.
PERS now adds up all the money it has to pay out to retirees over the next 20 years, figuring in how much it expects to earn in interest and calculates the state of the pension fund. PERS has said it has an unfunded liability of about $16 billion. Then, PERS calculates how much employers, such as the Bend schools, have to kick in to cover those future costs.
AFSCME’s solution is to stretch out the amortization period for the PERS debt. Go to 25 years or 30 years and the PERS burden for Bend schools or any other government entity gets smaller. AFSCME is right about that. PERS calculates that switching to a 25- or 30-year amortization rate does save the state some money in the near term. Switching to 25 years, for instance, reduces contributions to PERS for 2015-2017 by about $331 million and decreases the employer contribution by 1.8 percent.
In the other words, it’s pretend and extend. Let somebody else pay.
But why should AFSCME stop there? Why not push the burden of current employees and retirees further off to somebody else? Set the amortization period at 50 years, 100 years, 1,000 years.
AFSCME has other ideas, too. It says we need to stop thinking about PERS as needing a fix. Think about it as “self-correcting.” Trust the stock market. It wouldn’t dare go down again, right?
Based on AFSCME’s message, we developed a new motto for PERS: “Send the bill to the grandkids.”