FINANCIAL RAPE: PERS OF OREGON
By Fred M. Starkey
June 3, 2009
“The very word secrecy is repugnant in a free and open society: and we are as a people inherently and historically opposed to secret societies, to secret oaths, and secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers, which are cited to justify it.” [JFK, Speech of April 27, 1961]
It has been almost 15 years since I spoke at a Springfield School Board Meeting, which my attendance was met with a vile hatred. Reason: I wanted facts on the Retirement System called PERS. After a small amount of research, I called Fred McDaniel, a School Board member at that time and told him they needed to discuss the costs of PERS. His response: “PERS: we’re going to keep that a secret.”
I immediately challenged him to the public debate or the entire school board: the answer from all was NO. Today, we still have this group of people who have conspired against it’s own citizens for their own PERSONAL GAIN. They have operated in complete secrecy for over 15 years: the same today. And for over 15 years I have challenged the School District, the City of Springfield, and Lane County to a public debate or a public discussion on PERS and have repeatedly been turned down. In fact, within the last 3 months I was turned down again by the School District. Moreover, I have been basically barred from speaking at supposedly open Public Meetings because I am going to tell the truth, which is something they do not want the taxpaying citizens to know.
Frankly, in 15 years speaking with over 1,000 people, I have never met anyone who understands Oregon PERS. That is why I believe it is necessary to have an Open Public Debate or Public Discussion on a subject that controls the financial destiny of Oregon. This is so every citizen, especially our young people, can truly understand what is going on this town and across the state, especially when we are talking about their future for the next 30 years and the debt that is being placed on them.
In short, State Pensions are much different than Private Pensions. Private Pensions, by law, must use the AAA Corporate Bond discount rate of 4.9%: whereas, State Pensions use an 8% or higher discount rate. A discount rate is the assumed rate of return on their investments over an extended period of time. This assumption is based on the Statistical “Bell Curve”. As a consequence of this assumption, states only fund their pensions at approx. 60% as compared to the private sector.
For example, a $53,000 a year annuity requires a capital investment of $900,000 in the private sector. PERS states they can fund that with $552,000, which is 61.33% of private sector requirement. This makes PERS a leveraged account, open to violent fluctuations on the upside and the downside. Moreover, according to Dr. John Shoven from the Hoover Institute, PERS is paying a 10% plus annuity.
The latest PERS report states that the average retirement is at age 59 with 21 years of service. The average retirement for this time period is a $24,774 Annuity with a 2% COLA (Cost of Living Adjustment), which for most retirees, includes full medical insurance valued at $1,075 per month. The Capital Requirement in the Private Sector for this Pension, excluding the Health Insurance is $661,000.
The average retirement at age 59 with 30 years of service receives a $40,200 Annuity with a 2% COLA, which for most retirees, includes full medical insurance valued at $1,075 per month. The Capital Requirement in the Private Sector, excluding the Medical Insurance is: $1,200,000.00/One Million, Two Hundred Thousand. Only 2.8% of all citizens in the USA have Net Worth over a One Million, and that usually after 40 years.
The Private Sector: In 2007 it was reported that citizens between the ages of 55 – 65 have a median retirement account of $100,000. This will buy an annuity (life time monthly payout) of $5,000 - $7000 a year without a COLA. The top 20% of all Americans, after home equity, have a savings of $60,000.00. PERS is, at a minimum, is 600% more with only 21 years of service than the private sector and 1200% more with only 30 years of service than the private sector.
How is PERS Funded? They say 30% is from contributions and 70% from investments. This is difficult to believe because Net Tax Supported Debt went up over 300% beginning in 2002 (#2 in the USA) and the PERS balance almost doubled. PERS participants (Employers) are billed for contributions.
The biggest part of the PERS participants budget is Payroll cost: approx. 80%. Today, PERS cost is 40% of that payroll cost and is due to increase another 13% in the next 3 years: to 53%. An easier way to understand this is when you send $1,000 in taxes for payroll cost, $400.00 of that money is deposited in their PERS account and soon $530.00.
In addition to PERS, Lane County, has a deferred compensation account (another retirement account)which, to date, has been funded with over 30 million of taxpayer money. And, they state they do not have money to open the jail. The money gathered from high school events is not set aside for an annuity to make these things self sustaining for the students, but goes into PERS: approx. one million per year.
Today, PERS (Mercer Actuary) states that they are spending 2 Billion more a year than they are taking in, and are now short 24 Billion at the 8% discount rate. In addition, 15 – 20% of the asset base is in risky investments, which are on the books at full value, but are marked to market at 10 – 20%: their true value. PERS is more under-funded than stated.
Can PERS be paid? NO. Why not? In a Monte Carlo Statistical Study using a starting balance of One Million, excluding a 2% COLA and Medical Cost, which draws out 10% a year will be out of money in 15 years or sooner. (PERS is paying a 10% + annuity) If a person retires at age 60 that annuity will be gone at age 75. Problem: the life expectancy of a male is now 80 and a female 85. They will be short 5 years and 10 years. But, many are retiring between the ages of 50 – 55. The account will be out of money for 15 – 30 years. Where the will the money come from? How much debt will be needed to fund PERS? Think for yourself.
This is only a brief outline. There are more facts and evidence. However, it now time for the truth and time to expose those who have conspired against us to steal our property, savings, and burden our posterity with never ending debt. A Public Debate or Discussion at Silke Field is needed, where the entire town of Springfield can attend. Please contact the Springfield Times and express your opinion. I will endeavor to answer all questions.
Fred Starkey was formerly the Lead Analyst for Shearson Lehman out of NYC and Stotler & Co. out of Chicago. He turned down a lead analyst position at Merrill Lynch and Pru-Bach in NYC to raise his 6 children in Springfield. He is now a consultant to FCM’s, Grain Mills, Cotton Merchants, Bullion Dealers, regarding pricing, hedging, and forecasting. He has been married for 37 years and lives by the McKenzie River.
© 2009 - Fred M. Starkey - All Rights Reserved