TIGARD, Ore. — The board overseeing Oregon’s public pension system has lowered assumptions about how much return the system will make on its investments.
The Oregonian/OregonLive reports ( http://bit.ly/2v7Qp1g) the board voted unanimously Friday to cut assumed earnings from 7.5 percent to 7.2 percent. The change will increase the system’s unfunded liability from $22 billion to more than $24 billion, forcing government employers to boost their required contributions into the system.
Market experts said a 7.5 percent return was too rosy an outlook. But lowering expectations too much, even if realistic, was politically difficult because of the budget problems it would cause school districts and other governments.
“This was a prudent action,” said Steve Rodeman, executive director of the Public Employee Retirement System.
Portland Treasurer Jennifer Cooperman said the board missed an opportunity to take more aggressive action.
“The city of Portland strongly supports recognizing the full PERS liability,” she said. “The city has no interest in pretending that the PERS liability is any less than it truly is. The city has always paid our full actuarially required contribution and intends to keep doing so, in compliance with ORS and internal city policy.”
The new assumed earnings rate, which takes effect in 2019, also falls short of the Oregon Investment Council’s recommendation of 7.1 percent. The citizens panel that oversees PERS investments had adopted an internal estimate of 7.1 percent, based on projections by a consultant that does the most detailed analysis of Oregon’s investment portfolio, as well as those of four other consultants. But its recommendation is not binding on the PERS Board.
The Oregon Legislature adjourned earlier this month without making changes to the state’s pension system.
House Republican leader Rep. Mike McLane, R-Powell Butte, called today’s vote a “sobering reminder” for lawmakers.
“As our pension debt continues to explode, so does the burden placed on our schools and local governments,” he said. “We cannot ignore this problem any longer. It is well past time for us to act. If our current cast of politicians in Salem are unwilling to confront this problem head on, then perhaps it is time for new leaders to take their places.”