The Associated Press

SALEM - The bull market on Wall Street has helped ease the shortfall within the Public Employees Retirement System.

The system now faces a long-term shortfall of roughly $6.5 billion, said PERS actuary Mark Johnson. That's down from $8 billion after the 2003 Legislature passed a trio of reforms slashing public employee pensions and freezing cost-of-living adjustments for new retirees. It's also down from $15.8 billion at the start of the year, before the Legislature addressed the rising cost of the state pension fund.

PERS investments were up nearly 11.3 percent for the year as of Aug. 31. In the past 12 months, the PERS fund has grown by $4.5 billion.

"The ship didn't go down; the ship's started to float," said Dan Motley, a contract auditor for the state transportation department.

But the turnaround came too late for Motley. He's leaving his ODOT job Friday for a new post in Alaska.

House Bill 2003, the centerpiece reform, froze the regular accounts of public employees who joined PERS before 1996, until a $2 billion deficit is erased. PERS estimated that could take three years.

The 54-year-old Motley hoped to retire by 58. He had kept half his pension money in a variable account, and that plummeted in value during the three-year market slide. He wasn't eager to see the other half frozen while he kept working until 58.

"I'm going to work for a state that recognizes that a retirement system is important for the well being, welfare and morale of their employees," Motley said.

But the market upturn could end the freeze earlier than the initial projection of three years. If PERS earns enough to erase the $2 billion deficit, the pension fund managers could rule as soon as next March to lift the freeze.

"Does that mean we're out of the woods? Not by any means," said Jim Voytko, PERS executive director.

Two of the three PERS reforms are being challenged in court and could be tossed out by judges. And some Wall Street investment professionals are convinced market returns won't be as high in the next 20 years as many had expected.

"I don't think it's anything like: OK, OK, problem solved," said House Majority Leader Tim Knopp, R-Bend, who championed the PERS reforms.

Nevertheless, the market revival is causing some to question whether the reforms were truly necessary to rescue PERS.

"In actuality, PERS didn't need fixing," said Jack Sollis, secretary-treasurer of Oregon PERS Retirees Inc.

Sollis is one of many PERS beneficiaries who argued that the stock market swoon caused the pension fund's shortfall and would erase it in due time.

"To me, the whole problem has been distorted," Sollis said. "But the Legislature didn't have enough sense to listen."