Oregonians On The Hook For PERS!
The other day in PERS Rates To Go Up!, I posted that governments at all levels in Oregon would see their the payroll rates to cover their employees’ pension and health care benefits more than double in 2011, from their current level 5.2 percent of payroll to 10.8 percent of payroll.
There’s a lengthy article, The Muni-Bond Debt Bomb, at City Journal by Steven Malanga that features Oregon. Now we know why the payroll rates are going up and why you and I are on the hook:
Seven years ago, (Oregon) officials there began to push for a change in the state’s constitution to let its pension funds issue bonds, saying that it would save millions of dollars. The Statesman Journal in Salem called the idea “a no-brainer,” while the Oregonian claimed that it constituted “state government acting prudently, like a business.” The measure passed, and Oregon municipalities loaded up with billions in pension debt, which they invested in the market—often using risky investment strategies in an attempt to beat what the bonds paid out in interest. That approach proved ruinous during the financial crisis. In 2008, Oregon pension funds lost 27 percent of their value, the largest decline in the state’s history. Oregon taxpayers are now staring at a $1.2 billion hike in the state’s contributions to the pension system. “That could force school districts, cities and counties to lay off workers or cut services as they struggle to pay higher pension contributions,” the Oregonian noted, conveniently omitting its earlier support for the bonds.
Malanga shares some ideas for fixing the problems brought on by too much debt, but owners of munis beware. Governments may not like the medicine and decide that default is easier.
About ten years ago my husband was talking with some recently retired Oregon teachers.
They said they were making more on their retirement than they had teaching.
Someone slipped up somewhere and the Oregon tax payers paid for it.