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By Fred Starkey

June 4, 2006

Oregon�s Public Employees Retirement System (PERS) is in a crisis that will, if extreme measures are not taken, destroy the faith and credit of Oregon�s State Government.

Misinformation has been the way with PERS. No one knows the truth because of deliberate deceit and, for the most part, ignorance. This includes our Oregon Congressmen, City Councils, Commissioners, and 99% of the people involved in this Grand Delusion; but that is about to change with this article.

PERS is destroying your future and will drive the middle class into poverty unless it is shut down. Over 50 years ago, Hayek understood how Collectivism operated and logically stated:

�If all sources of current information are effectively under One Single Control, it is no longer a question of merely persuading the people of this or that. The skilful propagandist then has power to mold their minds in any direction he chooses, and even the most intelligent and independent people cannot entirely escape that influence if they are long isolated from all other sources of information.�

�The moral consequences of Totalitarian Propaganda are even of a more profound kind. They are destructive of all morals because they undermine one of the foundations of all morals: the Sense and the Respect for Truth.�[1]

What follows is a truthful, factual documentation regarding PERS and your future.


Basis Historical Economics, PERS is under the category of �Fraud� and is properly classified as a Swindling Scheme.[2] It meets three necessary qualifications:

1. It is a violation of the Public Trust (due to deceit and chicanery)
2. It is a credit scheme based on leverage (Borrowing on credit, with the taxpayer as the guarantor, to make money)
3. It uses a standard of measurement that is contrived and fictional. In other words, its solvency, now and in the future, is a delusion.

Historically, Swindling Schemes are typically born from prosperity. But in this case, it was born from both prosperity and excessive credit creation by the Federal Reserve. Since 1980, U.S. household wealth, driven by easy money and credit, has risen from $7 Trillion to $49.8 Trillion in 2004. Our nation�s debt now totals 325 percent of our gross domestic product; which is the greatest debt in our history.[3]

This easy credit led people to believe making lots of money was easy, of which PERS took advantage of to increase its retirement benefits from 61.8 percent in 1988 to 106 percent in 2000 by further leveraging their assets while neglecting the reserve requirements; the Classic Swindling Scheme.

History clearly demonstrates that Swindling Schemes based on credit creation have great uniformity and follow a very specific schematic:

1. Deceive the public through lies and misinformation
2. Leverage your assets to make more money in the short term
3. When it collapses, spread the blame onto other people and exogenous conditions. (Avoiding any Accountability or Responsibility)
4. Borrow money or issue bonds to extend the fraud.
5. Flee with the money to another state or country when the scheme finally implodes and collapses.

Recently Oregon has completed Step 4 and we are now awaiting Step 5.


Let�s uncover the misinformation of PERS and look at some important facts, which have not been in the marketplace, to grasp the True Reality of the PERS system.

For instance: How does an Oregon PERS Pension compare with other States? Let�s use one sample for comparison. Assume a K-12 teacher who works 30 years and retires with a final salary of $50,000. What would be their single life annuity payout? What was their contribution rate? Do they also receive Social Security?

  • Washington: $30,000. Contribution rate: 6%. Social Security: Yes.
  • Idaho: $30,000. Contribution rate: 5.86%. Social Security: Yes.
  • Nevada: $37,500. Contribution rate: 9.75%. Social Security: No.
  • California: $33,000. Contribution rate: 8%. Social Security: No.
  • Arizona: $34,500. Contribution rate: 5.7%. Social Security: Yes.
  • Oregon: $53,000. Contribution rate: 0.00%. Social Security: Yes.[4]

Assuming $18,000 for Social Security, Oregon is 215% more than California, 189% more than Nevada, 77% more than Washington and Idaho and 53.6% more than Arizona. In addition, the contribution rate for Oregon is ZERO, and CA and Nevada receive ZERO Social Security.

As a consequence of PERS, it costs a minimum of $13 million to $15 million more per year to run the Springfield School District as compared to the same size school district in other Western states.[5]

In addition, Employee Benefit Research Institute concluded that State and Local Governments wage and salary costs are 40% higher and its� benefits are 60% higher than the private sector.[6]

In spite of these facts, they continually tell the citizens in the private sector that they need more money. Deception and lying is a way of life with these people.


How much savings/capital is needed to fund a single life annuity for $53,000 (106% of $50,000) in the private sector, for a male, at the age of 58? The answer: $873,000.00. How much does Oregon PERS say they need? The answer: $563,368.00. This is a difference of over $300,000. Do they have that money? Absolutely NOT: Not today and Not in the past; tax, borrow, tax, borrow, etc..[7]

Now you know why PERS almost folded during the stock market decline. Some say, that it is a fully funded Pension: WRONG. If it was fully funded, then they wouldn�t have to increase the employer contribution rate or sell pension bonds. (For example: The contribution rate for PERS for the Springfield School district started at 12% and will soon be 28%; the Springfield Police contribution is 47.2%; can it go to 100% ? The answer is yes on both entities.[8]

Since the taxpayers voted down raising taxes, the State back-doored the funding for PERS by more than DOUBLING Oregon�s bond indebtedness, from $674 per capita in 2003 to $1,367 per capita for 2005.[9]

The PERS debt obligation for each citizen is now $575 per year for 20 years. That amounts to a loss of capital of: $21,151.92 for each citizen, $84,607.80 for a family of four, and 76 BILLION, 677 MILLION, 933 THOUSAND, 945 DOLLARS for the entire population. This is being done to partially FUND A PERS PENSION.

Why didn�t your Lane Commissioner, City Council, State Representative, School District, or any other Government official tell you this? I suggest you contact these people and ask them.


PERS will tell you that the 8% return per year is guaranteed. That is a half-truth at best. They not only guarantee an 8% return (The private market rate is at 4 � 6 %), but they also guarantee a 2% Cost of Living, exclusion from paying State Income Taxes, Medical Benefits, and no Administrative or Insurance costs.[10] This means, in reality, an annuity rate of 11% to 16% and sometimes higher.

Is the 8% return valid? Yes. Actuaries use a 50-year time horizon, and for that time period it is valid. But it is not valid for 80 years, 100 years, or 200 years. This is called curve fitting; more commonly, it is known as cheating. (Making the data fit the premise)[11]

As a general rule, people have short memories, and tend to let the recent past become the norm. For example, in 1966, the Dow was 1,000, and by 1982, the Dow was below 800. That is a decline of 20 percent in 16 years. Can Oregon continue to pay an 11% � 16% annuity, survive that market return, without raising taxes or passing new bond measures?

Let�s also keep in mind that Long-Term Capital Management which began in 1994 by a group of Ph.D.�s and Noble Prize Economists, leveraged their account, betting on regression to the mean and then went bankrupt in 1998. They were bailed out by the Federal Government. The defined benefit pension in the private sector is another disaster sponsored by FALSE ASSUMPTIONS; so much for the experts and their theories.


How does PERS compare with the private sector? The Median (typical) Household in the USA has a net worth of less than $15,000, excluding home equity. The top 20% of Americans have a median net worth, excluding home equity, of less than $60,000. The median value of retirement accounts by workers from ages 55 � 64 was $55,000 in 2001, and only 11% of all Americans have a retirement savings of $250,000 or more.[12]

Millionaires represent 3.5% of the population, but only 2.8% are first generation. That means that a 30 year PERS employee with the highest salary of only $50,000 will receive a pension that requires a minimum of One Million to fund in the private sector; the top 2.8% of all the citizens in the USA.[13]

What is even more important to know is that when this leveraged investment account loses money, YOU, the citizen, are responsible to make up the difference. That is the reason the Police, Schools, County, and other Government Agencies are constantly asking for more money; to make up the losses from the investment account.

In the moral sense, PERS is an act of complete irresponsibility; shifting the risk and the debt burden for their retirement off to their friends, neighbors, our children, and grandchildren � this is so they can live a life of perpetual childhood.


So, what does the future hold for every Oregonian? According to the Oregon State Debt Policy Advisory Commission: �The State�s Debt burden has increased significantly (103%) in the last few years and this trend is expected to continue during the current and next several biennia.�[12]

In other words, PERS will need continued funding (The Reality) through bond indebtedness and new taxes; this cycle of perpetual debt will eventually grind the middle class into poverty.

In the larger picture, PERS is a harbinger for the USA; Oregon like the USA is living on credit. Historically speaking, no nation or empire in the history of the world has ever taken on this level of debt and not had a financial crisis. In fact, throughout history, all great empires, towards the end, suffer a sharply depreciating currency, rising interest rates and accelerating inflation; it is only a matter of time when all three will be in force. That is economic history and those market forces are on the horizon.

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In conclusion, Oregon is a theatre of the absurd. The Oregon Supreme Court actually believes it can ignore all historical precedence and order the tides to recede � which it is free to do; the tides won�t mind, but it won�t stop the iron laws of economics.

Unless the Court and the citizens can understand that PERS is a Swindling Scheme and a Criminal Action, then your future is to live in poverty as an indentured servant to public employees.


1. "Manias, Panics, and Crashes: A History of Financial Crises," Charles P. Kindleberger, 2000;
2. "Extraordinary Popular Delusions and the Madness of Crowds," Charles Mackay, 1841;
3. "Can 'IT' Happen Again: Essays on Instability and Finance," Hyman Minsky;
4. "The Remarkable Story of Risk," Peter Bernstein;
5. "Tomorrow's Gold, Asia's Age of Discovery," Marc Faber;
6. Alan Stonewall, PERS Report 2000, Empire of Debt, The Millionaire Next Door, Running on Empty/Peter Peterson, The Law of Civilization and Decay/Brooks Adams, Decline of the West/Oswald Spengler, Tragedy and Hope/Quigley; and others.

� 2006 - Fred Starkey - All Rights Reserved

Fred M. Starkey is a former Lead Long-Term Analyst for Shearson Lehman and American Express out of NYC. After turning down a lead analyst position with Merrill Lynch and Pru Bache/NYC, he was recruited by Stoltler and Company and moved to Oregon. He is now a private consultant to many firms involved in commodities and those involved in trading and investing: Banks, S&L’s, Mortgage Companies, Grain Elevators, Cotton Mills, Growers, Merchants, Duck Farms, Soybean Crushers, Bullion Buyers, and much more. His financial acumen and 12 years of research into PERS have revealed the real truth behind what he calls Oregon State’s “PERS Ponzi.” A long-term resident of Springfield, Oregon, Fred has been married 43 years and is the father of six.




Basis Historical Economics, PERS is under the category of �Fraud� and is properly classified as a Swindling Scheme.