One of the most pressing issues for the longterm health of this state is a signed contract to pay for the Oregon Public Employees Retirees System — better known as the four-letter word PERS.
On Nov. 20, PERS actuaries forecast for the public their idea of how much more money will have to be funneled into the system in order for it to keep up its end of the deal. The actuaries predict a steady rise of 2 percent annual rate increases, at least for the next few bienniums. While that might sound pretty reasonable, it translates to cost increases of 20 to 30 percent for municipalities, school districts, emergency responders, prisons and more, all across the state.
Those kinds of increases are not sustainable. And rural Oregon — where a larger percentage of the workforce is government employees — is especially vulnerable to runaway costs.
First, a few facts. There are 200,000 public employees in Oregon, and 95 percent of them are tied into the PERS system. That system is also paying 130,000 retirees.
Each year, PERS gets less financially solvent.
The fund has $70 billion to invest, but returns from that investment bring in 70 cents for every $1 that is paid out. Losing 30 percent on every transaction puts PERS quickly into the red, and puts it deeper into that hole each and every year. Its unfunded liability is expected to soon reach $18 billion. That’s a black hole that reaches all the way to China — and to a depth that could cause the whole system to collapse.
So what do we do about it?
There are some facts both sides have to deal with. A contract is a contract. Deals were signed and — as we learned from the courts — past promises cannot be renegotiated. Cost of living increases can be renegotiated moving forward, but not looking back. That limits our options, but doesn’t keep us from designing a more sustainable system.
Another consideration, especially in rural Oregon where government employees make up about a quarter of our workforce, is the fact that public sector employee benefits vastly outpace private sector ones.
That’s great for attracting good candidates for important, taxpayer-funded positions. But is such a wide gulf between private and public sector employees in the best interest of our country?
We would argue it is not — and closing that gulf is imperative.
It will take movement from both sides. Wage increases will soon come to this country — either as inflexible law initiated in statehouses and Congress, or incrementally by employers themselves. As wages go up, competition to secure educated, reliable employees will increase. Benefits during working years, and for retirement, will help reduce the need for a social safety net. It might even spur economic growth, meaning those PERS investments would bring in a larger dividend on every dollar.
It’s a big problem with no easy solution, but action is needed before the hole becomes too big to fill.