When John Thomas took the helm of the PERS Board in 2012, he faced a daunting challenge. His predecessors were still frozen by the 2008 financial crisis, which took the PERS system from a comfortable funding surplus to a dangerous unfunded liability. With the board\u2019s assumed rate of return on future investments stuck at its 1989 level of 8.0%, progress on the PERS funding problem was impossible.<\/p>\n\n\n\n
Thomas, a no-nonsense registered Republican from Eugene with 40 years of experience in retirement planning, knew what had to be done and had the courage to do it. During his six-year tenure, he skillfully guided the board through three separate reductions in the assumed rate, taking it smoothly down to 7.2%, no small feat as he faced unrelenting opposition from public employee unions every step of the way.<\/p>\n\n\n\n
Enter Sadhana Shenoy, Kate Brown\u2019s pick to replace Thomas in 2018. Shenoy is a Portland Democrat with no previous pension experience.<\/p>\n\n\n\n
Chris Pair, a spokesman for Brown, said “Shenoy was chosen to assist the agency of tomorrow, not of the past … The board must adopt a creative approach.”<\/p>\n\n\n\n
Shenoy\u2019s creativity quickly became apparent the first time her board took up the question of setting the assumed rate in 2019. All materials presented to the board except for one outlier pointed to the clear need to continue reducing the assumed rate. Milliman, PERS\u2019s actuary, predicted future returns of 6.87%. Independent advisor Horizon predicted 6.64%. That outlier prediction was from Callan, the Oregon Investment Council\u2019s then-adviser. Seizing on Callan\u2019s number (7.32%), Shenoy cast the deciding vote to stop Thomas\u2019s smooth reductions and hold the rate steady at 7.2%.<\/p>\n\n\n\n
Fast forward to 2021. The board was back once again to review the assumed rate. This time, there was no outlier number (Callan had been replaced by the OIC). But Milliman\u2019s prediction of future returns was all the way down to 6.27%. They were now demanding that the rate be lowered at least to 7.0%, and strongly recommended going much further.<\/p>\n\n\n\n
On July 23, the board agreed unanimously to reduce the rate to 6.9%, just barely enough to satisfy Milliman, after a discussion that could not have been more orchestrated. Each board member gave their justification for the rate in short statements. Each suggested the rate should be exactly 6.9%. The theme throughout their reasoning was they wanted smooth reductions in the rate, not \u201cjerky\u201d ones. More than one member used the term \u201csmooth glide path\u201d.<\/p>\n\n\n\n
Smooth glide path? Shenoy\u2019s board stopped the reductions in 2019, then under pressure dropped it 0.3 percent this year. That\u2019s not \u201csmooth\u201d, and to try now to label itself as the board of smooth reductions is not only dishonest, but also reveals how politics influences this board more than its fiduciary responsibility to PERS beneficiaries.<\/p>\n\n\n\n
Now we see the \u201cagency of tomorrow\u201d is actually the agency of the bad old days when board after board shirked its fiduciary duty to PERS members and did everything in their power to keep contributions from public employers low. This board appears destined to lurch from one rate-setting period to the next, doing as little as its actuaries will let it get away with.<\/p>\n\n\n\n
We once again have no public entity working to improve the actuarial health of PERS. The legislature continues to throw sand in the gears with measures like Senate Bill 1049, which significantly extended the amortization period for the unfunded liability, actually worsening the funding situation over the next few years and costing PERS tens of millions to implement. And the governor has shown where her priorities lie with the appointment of Shenoy.<\/p>\n\n\n\n
There is no free lunch. The system needs a lot more money going into it. Investments returns, high as they currently are, come nowhere near to being enough. The only question is how the additional money will come in. Will it be from measured increases in contributions from public employers over a period of years? Or will it come when PERS is on the brink of collapse, and an emergency special session of the Legislature is convened to come up with the billions to save the system?<\/p>\n\n\n\n
Our public officials need to find their way to do better. John Thomas was a hard act to follow for sure. But a good start for this board would be to start being honest with both Oregonians and themselves.<\/p>\n\n\n\n
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When John Thomas took the helm of the PERS Board […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-246","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/posts\/246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/comments?post=246"}],"version-history":[{"count":0,"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/posts\/246\/revisions"}],"wp:attachment":[{"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/media?parent=246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/categories?post=246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/oregoncommentary.com\/index.php\/wp-json\/wp\/v2\/tags?post=246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}