Latest PERS figures contain good news
A nice bit of news came out of the Oregon Public Employees Retirement System recently. The system has cut its unfunded liability to about $8.5 billion. That may not sound good, but it's about half of what it was a few years ago.
That's primarily because of a good return on investment and changes in the system that lessened its cost, while increasing its cost to employees. Legal challenges to the changes are in the courts and could yet change the system's financial outlook.
The PERS system
The system administers the pensions of about 95 percent of Oregon's retired public employees such as those who work for cities, counties, the state and school districts. It's funded by contributions from the employees, their employers and the return on investments, which provides by far the biggest part of the system's revenue.
The system has been under fire in recent decades because of pension benefits based on unrealistically high expectations on investments that finance most of the benefits. When investment returns didn't match up with expectations, employers such as school districts have had to find ways to make up the difference.
Over the long haul, PERS has done well with its investments, but investments are subject to radical fluctuation when the economy swings.
During the 2008 recession, the earnings lagged, but picked up as the economy did — even if it feels to those looking for jobs that the recession continues unabated.
Historical investing
From 1970 through 2013, investment income generated 81.76 percent of PERS revenue; member contributions, 5.8 percent and employer contributions, 20.8 percent. That last figure generally comes from taxpayers, who also include public employees.
In 2013, PERS benefits totaled $41 million for 1,661 recipients in Klamath County and $6 million for 226 recipients in Lake County. Statewide, the figures for 2013 were $3.2 billion in payments to 108,856 people.
The average annual PERS benefit statewide was $29,248. The county average ranged downward from $33,711 in Benton County, the home of Oregon State University, to $20,253 in Gilliam County, a lightly populated county along the Columbia Gorge.
For Klamath County
In Klamath County, the average was $24,647 and in Lake County, $22,173. An average, it should be remembered, is a phantom number that may or may not reflect reality.
But the big numbers — the amount paid in, the amount paid out and the amount gained (or lost) on investment — have significant impact on the services that can be provided. When investments fail, as they often do during the recessions, they force cuts in services — fewer policemen or teachers, for example — or higher taxes, which most of the time is simply not an option.
So any time PERS makes a comeback, that's good news.
— Klamath Falls Herald and News, Aug. 17, 2014
Pensions insolvent? Let's reward the staff!
The managers and the board overseeing the state's public-safety retirement system have not been especially good in recent years at what is supposed to be Job One, which is keeping the $7.9 billion retirement trust healthy.
The Public Safety Personnel Retirement System is one of Arizona's worst performing pension trusts.
But hold the judgmentalism. Stow those second guesses.
They may not be very good at making money on behalf of retired cops and firefighters. But they have been nothing less than zealous and tenacious at what they apparently consider Job One, which is assuring that the system's managers and staff max out on their own pay and benefits.
The lengths to which PSPRS managers will go to pad their own pay has been impressive. Appalling. But, still. Impressive.
The trust is under a federal criminal investigation looking into whether managers inappropriately inflated returns on real-estate investments so the PSPRS investment team would qualify for bonuses.
The system's director, Jim Hacking, was forced into retirement (a very healthy retirement, including retirement bonus) after defying state administrators whose approval he needed before issuing still more raises and bonuses.
Hacking gave his people raises and bonuses anyway. One of the illegal raises hiked a staff member's pay by 27 percent. As a sweetener, Hacking made the hikes retroactive. And some of the bonus-laden pay increases were contractual, meaning they couldn't be rescinded.
With Hacking gone, so too, should have gone the compulsive urge to hand out enormous compensation increases in defiance of authority and the harsh reality of poor investment performances. Or, one would think that urge would ebb.
It hasn't. On Monday, the PSPRS board awarded the trust's chief investment officer a two-year contract extension, including $50,000 in retention bonuses. Payable in two annual installments, the bonuses to chief investment officer Ryan Parham come on top of an already scheduled $75,000 retention bonus, which comes atop his annual salary of $268,000.
In keeping with PSPRS tradition, Parham's bonuses will be paid out regardless of the financial performance of the trust.
The leadership of this trust is in serious need of an overhaul. The majority clearly believes enormous compensation increases are some kind of entitlement divorced from real-world performance. That is financially insane.
All seven members of the PSPRS board have been appointed by Gov. Jan Brewer. It is worth noting, though, that the two board members with private-sector experience in finance and investment, Randie Stein and William Davis, are the board members most consistently opposed to this zealous raise-a-thon. The other five members need to start listening to them -- or have more drastic change forced upon them.
As reported by The Republic's Craig Harris, the Arizona Department of Administration formally raised concerns about Parham's contract extension but appears legally incapable of doing anything about it.
This needs to change. The PSPRS system is veering, long-term, toward insolvency. That sort of performance is nothing to celebrate. It is time this shaky pension system got some leadership that recognizes reality.
— Arizona Republic, Phoenix, Aug. 12, 2014