P.E.R.S.
AND OREGON'S DEVELOPING SCHOOL CRISES
SCHOOL
BOARD MEMBER BLOWS WHISTLE ON P.E.R.S.
By
William J. Bonville
July
25, 2002
NewsWithViews.com
On
12 of August 2002, the Public Employee Retirement System (PERS) Board will
consider updating the mortality tables used to calculate public employee
retirement benefits.
The system, as will be explained, is a classic example of the road
to Hell being paved with good intentions.
In this instance it will be educational Hell for a generation of
Oregon children, and financial Hell for Oregon taxpayers --- all because
we wanted our public employees to have a decent retirement program.
Stupidity, lethargy and a dash of greed have turned it into a
fiscal nightmare.
Since
the PERS Board is controlled by people who benefit from the system, do not
expect this or any other Board action to produce significant taxpayer
relief. Taxpayers must, under current law and union agreements,
ante up an unfunded retirement system liability recently estimated
at $8.5 billion.
It must be funded by taxpayers during the next several decades so
that government employees can be guaranteed well-funded retirements that
will generally be denied to ordinary non-governmental folks who must foot
the bill.
PERS
is now managed as a beggar-your-neighbor retirement system.
The Cascade Policy Institute analysis conducted a year ago, when
the unfunded liability of PERS was
$1.5 billion
less than today, calculated that the annual cost to every
individual Oregonian over the next forty years would be $400.
For a couple with three children that is a theoretical family
burden of $2000 each and every year.
But don’t worry.
It won’t come directly out of your pocket.
It will come out of the general fund of each governmental agency
that your taxes support.
That is what will turn our school systems into educational Hell.
Back
in April, before the latest melt down of Wall Street and the carnage it
worked on the PERS investment portfolio, the PERS Executive Director
estimated that “the average increase in PERS employer rates....due to
recent poor investment returns is between 3.75 and 4.25 percent.”
After the market’s recent plunge downward, it is likely to be
more like five percent.
If stocks retreat further to historic P/E levels, the necessary
increase could be six percent or more.
The
Three Rivers School District Board in Josephine County, of which I am a
member,
now adds a burden of 21 percent on our personnel wage costs to pay
for PERS benefits.
That is, for every $100 we spend on salaries, we send $21 more to
fund PERS.
According to the PERS Board estimate, the burden soon will be about
25 percent, probably more.
Given a personnel wage budget of $21,000,000 in this district, we
may expect annually to send at least $5,250,000 to PERS out of our general
fund, over $1,000,000 more, than at present.
The actual burden no doubt will be something greater since PERS
investments continue to collapse.
Since
the courts will not step in and declare PERS rules and its guarantee of
eight percent per annum earnings to be unreasonable and essentially
untenable in the current investment climate, and since the state
government won’t have the income to fund all of the government agencies
involved in PERS with the projected increases needed to cover the unfunded
liability the PERS Board anticipates, and since our local district has
exhausted our reserve operating funds, and since nearly ninety percent of
our budgeted expenditures are personnel related, then the district will be
forced into a reduction in staff that can only be described as
catastrophic.
This school district, and probably every other public school
district in the state, will be reduced to a shambles.
The probability of being able to recover in the foreseeable future
would be nil.
For kids and teachers it will be educational Hell.
My
advice to every parent in the state of Oregon is to think very seriously
about enrolling your children in a private or parochial school, or
preparing to home school your children.
We in the public school domain soon
will not be able to provide your children with a sound education,
given the circumstances proscribed by the PERS Board, the Oregon
Department of Education with its wasteful implementation of the 21st
Century Schools Act, and a Governor and Legislature who play politics as
usual. Talk
about fiddling while Rome burned.
All
that will be true if the parties involved in this budgetary fiasco
continue on with business as usual.
The governor’s or legislature’s counsel, although themselves
benefitting from the PERS system, might work out a statutory solution
that, under current or a proposed legislation, could rein in the excesses
of PERS and make it affordable in a recessionary business climate.
The PERS Board itself might take an enlightened approach to its
rules and regulations and modify them so as to assist in reducing the
burden on its participating agencies instead of crippling them.
None
the less, if all that fails to materialize, there is still one potential
savior for the system: the employee unions.
By happy coincidence, the six percent employee contribution to the
PERS system, now (by bargaining agreement) paid for by employers such as
my own school district, would probably suffice to cover the unfunded
liability of the PERS system, if it were to be once again paid by the
employees, as originally was the case.
What
could be more fair?
The folks who benefit from the system would pay for the unfunded
liability of their own retirement program, instead of dumping it on the
taxpayers as they have up to now.
Better than that, they would save their own jobs, and certainly
would escape the consequence of unending chaos in their working
environment.
Of course, if they don’t really care about their children and
ours......
Well, there will be educational Hell to pay.
© 2002
William J. Bonville - All Rights Reserved
William
J. “Bill” Bonville is a long-time member of the Board of Directors of
Three Rivers School District in Josephine County, Oregon, where he has
resided for more than twenty years after retiring from the aerospace
industry as a manager of technical training and documentation. He may be
contacted at bonville@cdsnet.net
or through his web page, at http://home.cdsnet.net/~bonville/
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