If you've been watching our occasional editorials about Oregon's troubled public pension fund, hoping to spy even a sliver of good news on the topic, well, today's your lucky day.
Just don't read past the fifth paragraph in this editorial.
Because, while there is a bit of good news to report about Oregon's Public Employees Retirement System, the bigger picture continues to grow increasingly ominous.
Here's the good news, as promised: Investments in the Public Employees Retirement Fund have earned 12.5 percent through the end of October. That's much better than the system's assumed rate of return — and, in fact, according to a weekend story in The Oregonian, the improved performance knocks nearly $2 billion off the system's $25 billion deficit.
There's no way around it: That's a positive development for a system that continues to groan under its multibillion-dollar unfunded liability.
And, unfortunately, that's about it for the good news on the PERS front.
Here's the bad news: The booming market isn't going to be nearly enough to bail out the rest of the unfunded liability. And, in fact, government employers will be on the hook for big increases in pension costs for at least the next five years.
Remember that PERS payments from the 900 or so employers in the system already jumped some 45 percent this past July. But, according to new rates published last week, more big increases are on the way. Governmental entities will have to cough up an additional $1 billion for the two-year budget cycle that begins in 2019.
And, then, in 2021, those same entities will need to contribute yet another $1 billion or so for the following two-year budget cycle.
According to The Oregonian, it all means that by 2021, government employers will be required to contribute about $5 billion per biennium to the pension system. That's 2.5 times more than they contributed last biennium.
Jim Green, the executive director of the Oregon School Boards Association, told the newspaper that by 2019, some school districts will find that their PERS contributions make up a third of their payroll costs. Even a booming economy won't be able to generate enough additional money into the state school fund to cover that cost.
And, of course, that's all money that could be spent instead on lowering class sizes in Oregon's public classrooms or other programs meant to improve the state's schools.
The really frustrating thing about all of this is the continuing disconnect between the enormity of the problem and the response to date among Oregon's elected leaders. To be fair, some PERS proposals actually gained a little bit of traction in this year's Legislature, but those were abandoned in the waning days of the session after tax-reform talks ran aground.
More recently, Gov. Kate Brown convened a blue-ribbon panel to try to identify ways to trim $5 billion of costs from the system — but instructed her panelists to not even look at the benefit side of the equation. The panel has since delivered its report to Brown, who says her staff is considering it with an eye toward making proposals to the Legislature. The problem, of course, is that even if every one of those cost-shaving proposals is adopted, it still leaves at least $18 billion in unfunded liability.
"This is not going to go away," John Thomas, the chairman of the PERS board, said during the Friday meeting where the rate increases were discussed. "We're going to do what we can to get to sustainability, but it's not going to be easy for employers."
Fixing the state's pension system won't be easy, either. But the difficulty of the task offers no excuse for the reluctance of state leaders to treat this problem with the urgency it demands. (mm)