Today I delivered a floor speech in the Oregon
Senate in opposition to SB 822. That bill was crafted by
Democrat leadership in their partisan attempt to address
the enormous financial problems with the Public Employee
Retirement System. No participation by Senate
Republicans was either sought or allowed. The result
fell far short of what most Oregonians could describe
with a straight face as meaningful restructuring of
With slight editing, this is what I said on the
Senate floor today:
With due respect Mr. President the majority party’s
1.) Addresses about 23 percent of the immediate two
billion dollar PERS problem
2.) “Collars” or delays payment on about 17 percent of
the problem, making that $350 million delayed payment
plus interest due and payable by the taxpayer in the
budget period starting July 1st 2015.
3.) And totally ignores the other 60% of the immediate
two billion dollar problem.
Stated another way, SB 822 totally ignores one
billion two hundred million dollars ($1,200,000,000) of
the current PERS obligation and kicks another $350
million can down the road two years for the next
Legislative Assembly to worry about.
Let’s be clear! The Co-Chair’s plan for “collaring”
part of this massive obligation is nothing more than a
delayed, balloon installment payment for $350 million
plus interest. According to a PERS actuarial analysis,
another $60 million in interest that will accrue over
the next two years must be added to the delayed payment.
That brings the total to more than $4oo million that
will be due and payable by the people of Oregon during
the budget period starting July 1, 2015.
In my opinion, that is not a solution!
Mr. President, in order to solve a problem we first
must define the problem.
Public employers are already paying $1.1 billion
more in PERS contributions during this budget period
than they were required to pay during the previous
budget period. Starting July 1st of this year (2013-15),
they will be liable to pay an additional $900 million.
Starting July 1st 2015, they will be liable for “yet
another” $650 to $700 million according to the PERS
The total Increase is two billion seven hundred
million dollars ($2,700,000,000)!!! Moreover, the PERS
actuaries expect that gigantic increase to continue each
budget cycle into foreseeable future.
That is, it will be limited to “only” $2.7 billion
if the assumed eight percent return on Trust Fund
Investments is actually achieved. Sound private-sector
retirement plans generally assume no more than a four
percent annual return on investment.
This incredible $2.7 billion debt, due and
payable by the taxpayers of Oregon each budget period,
will grow significantly larger in the very likely event
that the Trust Fund does not produce a compounded eight
percent return on investment.
$2.7 billion is a huge number that needs to be put
In the budget period beginning next July 1st, the
taxpayer contributions to PERS, including principle and
interest payments on Pension Obligation Bonds, will
equal 26% of payroll. Virtually all public employers
also pay an additional 6 ¼ percent to Social Security
for their employees. That means that starting July first
of this year, nearly a third of the entire payroll
expense will be paid toward employee retirement
benefits. No one can seriously believe that is
Cities, Counties and Special Districts are
obligated to pay at least 40 percent of the entire
statewide PERS obligation. Starting July 1, 2015, their
share of just the increase in PERS contributions will
exceed one billion one hundred million dollars
The increase in PERS contributions during the
current budget cycle is about $440 million. That is
equivalent to the full compensation for as many as 3,000
police or firemen.
The increase in PERS payments due this July 1st
will be another $360 million, an amount equivalent to
another 2,500 critical employees. Moreover, the increase
scheduled for July 1, 2015 will cost yet another 2,000
For local governments, just the increase in PERS
costs over three budget period will be equal the full
compensation for more than 7,500 policeman, firefighters
and other critical public employees. They cannot spend
the money twice. If it is paid into the PERS Trust Fund
for the benefit of future retirees it will not be
available to pay the wages for these critical public
SB 822 is a Democrat bill. There was absolutely no
effort made to incorporate Republican ideas or
Republican drafted concepts. For instance, I personally
introduced fourteen bills designed to restructure PERS.
I was never contacted or consulted regarding any of
these concepts. To my knowledge, no other Republican was
asked to participate in developing this partisan bill.
From my perspective, SB 822 is tentative, faint
hearted and simply not sufficient. It simply does not
adequately address the clear and present danger that is
represented by the looming PERS fiscal cliff.
Mr. President, colleagues, with respect, who are we
trying to fool, ourselves or the taxpayers of Oregon who
must pay the bill?
Please remember, if we do not stand up for rural Oregon
no one will.