We May Need the Beast to Escape the PERS Hole

The chronically underfunded Public Employees Retirement System has been in the news again, so I returned to my muse on the subject. I last visited Gil Farsnow almost two years ago, but nothing had changed — same dank basement apartment, same ragged furniture, same quick mind being put to almost no good use.

Farsnow’s sweatshirt had a ketchup stain that looked all the world to me like Nelson Mandela, but that may show only how desperate we are for a profile in courage on the topic of PERS reform. Phil Keisling, former Oregon Secretary of State and current director of Portland State University’s Center for Public Service, published a new study last month that sounded the alarm yet again.

Farsnow was taking my measure while I was taking Mandela’s. “You come see me only when you’re stuck,” he said, motioning me to a futon that I really didn’t want to touch.

I started at the most recent beginning. “Phil Keisling’s study says the cliff could be only five years away. Retirement expenses keep rising faster than state revenues.” I was pleading for some new ideas. “He says the state may soon have no money to do anything except fulfill its public pension obligations. What are we gonna do?”

“First thing, don’t cure cancer,” he said.

“Wait. What?” Was Farsnow changing the conversation to a brighter subject — like cancer?

He popped open a can of something I’d never seen before. Its fizz sounded more like a squeak. He didn’t offer me one and I was glad. “Legislators made some mistakes in the 1980s, but it was the actuaries who really got it wrong.”

He took a swig, then smirked as my whole body must have conveyed confusion. “Look at us. Nobody’s eating red meat, processed sugars, trans-fats. We avoid the stuff that was killing us. And it’s killing us.”

I objected, “Actuaries didn’t bring us Whole Foods.“ I expected Farsnow to cut me off, but he was reading the label on the can. “Did they?”

“Actuaries screwed up!” He jutted his chin far enough forward to drool his beverage past his sweatshirt and onto the shag carpet. “Their job is to estimate how long we’ll live. They guessed low.”

“People are living longer. Who’s unhappy about that?” I replied, not understanding his point.

“You’re not understanding my point,” he said. “You’re unhappy about it.”

“PERS recipients are living longer,” I was trying to catch up.

“Look at the hole.”

I checked the futon. I wasn’t catching up. “What hole?”

“The state’s.” He paused for another swig. “It’s deeper than anyone thought, because PERS retirees are being paid their defined benefits for longer than the actuaries estimated.”

I could finally catch my breath. The cliff had become a hole. Was this any better? “So the actuaries failed to tell us how deep the hole would be?”

“Yep.”

Information is easy. Action is hard. “How do we get out of the hole?” I demanded.

“You’re not gonna like it,” he promised.

It couldn’t be worse than the futon.

“Inflation.” He took a scolding tone. “Carter-era, ‘misery index’ stuff! Sky-high interest rates. Terrible for anyone building a business, buying a house or car. It would fatten PERS investments and cheapen the payouts.”

“PERS benefits are defined in dollars, not purchasing power. Goose inflation to five or seven percent for a few years, those dollars will be worth a lot less. Wages go up, but only for those who are working.

“We can’t pay our legacy obligations unless we make the money itself worth less. It’s painful to think about it like that, but it would work.

“Only problem is we don’t know how to slow down runaway inflation. Nobody does. You can’t tame the beast, so you don’t approach it. At some point, the hole’s so deep, only the beast can maybe get you out.”

I left exhausted, not wanting to think about the cliff, the hole, or the beast — focused instead on that ketchup stain and hoping for the best.

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Don Kahle (fridays@dksez.com) writes a column each Friday for The Register-Guard and blogs at www.dksez.com. Kahle’s previous encounters with Farsnow can be read here: http://www.dksez.com/pers-retirement-funding-prompts-creative-solutions/ and http://www.dksez.com/kesey-could-be-square-around-here/