Paying for the Past, part 2: past retirement plans affecting current plans
MEDFORD, Ore. - "People who are running PERS are aware they've got a grave problem and therefore the result is that cities and counties and schools and state tax payers, all of us, have to chip in more than we thought in order to build up those reserves because after all - if the investments don't earn the money then they need extra booster payments by current taxpayers," 30 year financial advisor, Peter Sage said.
The decision to guarantee returns to Tier 1 employees is having tremendous impact on the how money is being used and distributed today.
Take a look at the investment earnings over the last 45 years.
You can see in a year like 2003, when 8 percent returns were promised and 23 percent was achieved, the burden to guarantee returns was met and exceeded - so a good year for the PERS Board and public employers.
However, for a year like 2008, when there was a loss of negative 27 percent - the obligation to pay that 8 percent is still there - so where is PERS to draw money from?
"A huge amount of city tax, county tax, that money we're paying for schools are not going to pay for teachers in the classroom now. They're going to pay to buttress up the PERS benefit for people who retired three and five and 10 years ago," Sage said.
Back in 2003, schools were contributing about 10 percent of every payroll dollar to fund benefits for PERS members, retired and active - that rate is double that amount now.
"The increase we got to PERS is pushing about 2.8 million dollars - just the increase portion - and that's about equivalent to what we're expecting in our revenue increase for the district. That means we don't have money for any other cost increases," Medford School District Chief Operations Officer, Brad Earl said.
This means having to cut down on services statewide.
"Classroom sizes are larger or there are fewer minutes or days of instruction with kids. Those are the ultimate impacts that occur with all of these changes," Earl said.
Not only are student resources in jeopardy but so is securing the best and brightest instructors.
"Teaching is not as attractive a profession to a lot of young college students these days because they are nervous about the wage and benefit structure and what does the future look like for them," Earl said.
And that applies to other workforces as well.
"Now the PERS that I receive, and most people who work for the state receive, is a bare bones plan. There are coworkers that are talking about looking for employment elsewhere if there are any cuts at all," DHS Child Welfare Support Staff, Barbara Walsh said.