We first need to correct a statement from our Sept. 14 editorial about the Oregon's Public Employees Retirement System:
Retirement benefits do not average 105 percent of final salary for all public employees, as suggested in that editorial. That is the average, since 1996, for "variable plan" retirees with 31 or more years of public service. Others, who make up the majority of retiring public employees, receive smaller pension benefits.
This clarification, however, does not diminish the PERS financial crisis.
PERS staff recently released information on how the system's "unfounded actuarial liability" could escalate out of control. The report included reasonable scenarios in which that deficit could hit $12.3 billion, or even $21 billion, by 2007. Even if PERS investments average 8 percent per year, the report said, Oregon governments in five years will pay about 21 percent of salaries into the PERS system, not counting the "6 percent pickup" that many governments pay.
Average PERS retirement benefits skyrocketed over the past six years because during the 1990s the PERS Board put too much money into individual accounts and not enough into a reserve fund. We can't be sure of today's average retirement benefits, since PERS reports only the average from 1996 through 2002. The PERS report admits that with Social Security included, most Oregon public employees retire today with more than 100 percent of their final average salary, and many are at 150 percent and higher.
The system is broken, and must be replaced. Individual retirement accounts were credited with money that should have been diverted to a reserve fund. That kind of willful mismanagement cannot be considered a legal contract for lifetime pension payments.
A huge political/legal battle over PERS already has begun. As that battle unfolds, Oregonians should focus their criticism on the system, not on the public employees who find themselves as surprised recipients of these windfalls. However, public employees need to recognize and admit that these windfalls are illegitimate gains that Oregonians cannot afford to pay, and they need to persuade their powerful unions to accept a fair replacement pension program.
Otherwise, PERS payouts threaten to decimate public services at every level of government in Oregon.