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Thursday, August 25, 2016

Oregon state worker's pensions underfunded due to intentionally deferred liabilities

A notoriously rightwing letter writer to my local paper asserted that

". . . had PERS routinely invested required contributions in Vanguard's S&P 500 Index Fund, the system would be flush with cash and substantially more than 100 percent funded." (Quoted from John Brenan, "Letter: PERS returns could be higher," Gazette-Times, Aug. 19, 2016, p. A9, posted Aug. 16)

In my opinion, both political parties have caused Oregon state worker's pensions to be underfunded, but for different political reasons. I don't have energy to detail the politics of it, but I was able to summarize my opinion in a letter to the editor of my local newspaper:

John Brenan's Aug. 19 letter questioned why PERS returns were so low compared to historical stock market returns.

His letter fails to acknowledge that the biggest reason for the underfunding of PERS pensions is the fault of Oregon's Republican legislators, convincing financially naive Democrats to exchange lower wage increases to state workers for the future costs of health care and other retirement benefits, which has caused the unfunded liabilities of PERS to grow faster than any return rate he mentioned.

(Quoted from Thomas Kraemer, "Letter: Here's another reason for PERS woes," Gazette-Times, Aug. 26, 2016, p. A7 posted Aug. 25, 2016)

Sadly, the way I think Democrats got duped by Republicans was with the idea of "balancing the budget" by giving state workers less money in exchange for netter retirement benefits, but unfortunately these benefits have been rising in cost much faster than hoped -- it is a classic case of pay me now or pay me later. As a former employer, I learned it was always better to have known current expenses instead of gambling on an unknown future liability that could be infinitely bigger in the worst case.

See the following links: