As the Oregon Public Employees Retirement System (PERS) grinds through its fourth year of poor investment returns, media outlets have taken notice.  Recent reporting by Oregon Journalism Project, Lookout Eugene-Springfield, and The Oregonian paint a dire picture of the effects of this epic investing failure on every public agency as they struggle to shoulder sharply-increasing pension costs.

Later this month, the PERS Board will set a key rate that determines whether those costs climb even higher.

Since the 2008 investment crash, PERS has struggled to recover.  Almost overnight, the system went from over 100% funded to 80% (PERS By The Numbers). Today, the unfunded liability is nearly $30 billion (PERS Board Meeting, May, 2025), about the size of Oregon’s entire general fund revenue for two years. Why can’t the PERS Board reduce it?

Big contributions from public agencies must supplement investment returns to reduce the liability. But PERS Boards, under pressure from public employees, have proven very reluctant to ask public agencies for enough. Agency contributions pay less than half of the $7 billion needed for annual pension payments, leaving investments to shoulder the rest.

This worked while investment returns were strong, but now, as PERS investments continue to struggle with no quick solution in sight, the PERS Board can no longer conduct business as usual.

Low returns and PERS Board complacency are the system’s worst nightmare, threatening to push the system toward a “death spiral,” where pension payments steadily drain the fund.

PERS investment returns from 2008 to present stand at less than 6.5 percent per year (author’s calculation from Treasury data). The PERS Board is assuming 6.9 percent returns when it calculates employer contributions. The Board must close that gap to reduce the system’s unfunded liability.

The solution is simple but extremely painful: lower the assumed rate of return, thereby raising contributions from public agencies, until PERS investments have proven they can match their assumed rate of return.

But there is a good chance this board will choose the status quo. PERS Boards and even the Legislature have a long history of bad behavior when making pension decisions.

After the 2008 financial crisis, PERS Boards did not act for six years to address the unfunded liability by lowering the assumed rate of return (PERS By The Numbers).

But this pales in comparison to the conduct of the Legislature in 1975, which established a guaranteed minimum rate of return for PERS members, regardless of investment performance.

Then the 1975 PERS Board, emboldened by the Legislature’s action, began crediting member accounts with more than the minimum rate of return when investment returns were good. PERS Boards, heavily influenced by public employees, continued this practice for over two decades, transforming PERS into a massive transfer of wealth from Oregon taxpayers to future retirees. Billions more taxpayer dollars went to future pension commitments than were ever envisioned when the system was created (PERS History). System liabilities exploded, setting the stage for today’s crisis.

Missing in the long sordid history of PERS is one important element: meaningful accountability for missteps. Twenty-five years of dreadful financial decisions by PERS Boards went unchecked by governors and lawmakers alike.  The Oregon Investment Council, the governor-appointed body that oversees PERS investments, still expresses confidence in its investment managers. And the governor appears unconcerned with the Investment Council itself. They all continue along as always, despite the wreckage they leave in their wakes. Something must change. But no one in a leadership position seems to have what it takes to act.

So as the PERS Board makes it decision this month, I urge it not to allow itself to be remembered like those of the past—for deepening the crisis rather than addressing it. It needs to be the board that treated this moment with urgency and acted decisively rather than once again delaying and hoping for the best.