Infusing $5 billion into PERS might be just treading water

Gov. Kate Brown has asked a committee to address “uncomfortable” options that would cut the Public Employees Retirement System’s unfunded liability by $5 billion. The state is currently computing the obligation at $22 billion, so that would represent a reduction of almost 25 percent.

But it turns out $5 billion, an arbitrary sum in the first place, might actually represent only about 10 percent of the system’s unfunded liability. More on that in a moment. 

Revenue boosters the committee is eyeing include privatization of the Oregon Liquor Control Commission, State Accident Insurance Fund and/or Oregon Health & Science University. It is also evaluating possible sale of the state’s master data center, automotive fleet, highway rest stop network, state-claimed water rights and/or OLCC warehouse array, along with pieces of prime real estate, at least one of which is occupied by a part of the Portland State University campus.

The panel acknowledges some of these options might be “uncomfortable.” We contend that adjective is being applied on the wrong side of the equation — the revenue generation side rather than the cost containment side, which is where the real challenge lies.

What’s “uncomfortable” to us is the infliction of an utterly unwarranted PERS liability on the rest of us by the state of Oregon. Attempts to cut PERS liability won’t bear fruit until the governor accepts and assertively conveys a real sense of urgency.

During the last legislative session, a single bill aimed at curbing the PERS burden made a few timid ripples, then died. Senate Bill 1068 would have required public employees to contribute 1 to 4 percent to their own over-generous pension fund — a common requirement in other states.

The bill invoked no legal threat from public employee unions, considered “progress” by some. But we’re past symbolic gestures and moral victories at this point.

On Friday, the PERS board will decide whether to lower its projected annual investment gain of 7.5 percent. Most economists and investment advisers think that’s unrealistically high, but even a token cut to 7 percent would serve to raise the system’s unfunded liability by $4.5 billion — almost the amount the state is attempting to inject on the revenue side.

Some argue the state should use a virtually risk-free projected net of 5 percent. And that would push the system’s liability to almost $50 billion. 

The governor’s committee knows it will have to think big to reach her $5 billion target. Unfortunately, given the degree of PERS insolvency, even thinking big makes a remarkably small contribution.