So that will dominate much of what goes on.
But in the meantime, OregonPEN is, first and foremost, about Oregon, and about ideas for making Oregon better. Better meaning more just, more successful, more resilient to challenges, and more intelligent about how it governs itself.
The Oregon Public Empowerment News (Oregon PEN), is an, all-digital weekly newspaper that focuses entirely on giving readers news and commentary that empowers and engages, providing the knowledge and insights needed for making Oregon better.
Each week, Oregon PEN delivers a different kind of newspaper experience, one that is all signal, no noise: No horoscopes, no celebrity sex lives, no fluff — just deep content about news that actually matters, not just this week but this year, and next year, and beyond.
But the end of the year and the upcoming change to a more commercial entity provides a good opportunity to review some of the ideas that OregonPEN will continue to advance in the year ahead, the items that make up the OregonPEN Agenda.
OregonPEN Vol. 1, No. 40
Instead of making citizens request information, it’s time to make openness the default setting for all Oregon governments instead of just empty rhetoric:
1) All public work would be stored on fully open servers and indexed continually as created.
2) Instead of citizen public records requests, officials would have to ask for and get the OK to create or store any records outside the fully open systems.
3) Records would be “Born Free” instead of born hidden and then only released on request.
The Oregon Secretary of State’s office just issued a lengthy report on the state government’s persistent and widespread failure to comply with our Public Records Act. That act, one of the many “Sunshine Laws” that were created around the United States in the 1970s, followed in response to the realization by many that much of the worst harms by public agencies were allowed to grow into such catastrophes because, before these laws, the usual response from a government office to a request for information from ordinary citizen was “Who wants to know?”
The Public Records Act was intended to ban that kind of response, and create a default position of openness based on the idea that citizens in a democracy have a right to know what was being done in their name, and that we all have a right to know how the decisions are made, who influences them, and what was considered. But the many interests who prefer to operate outside the public view have been tireless in throwing up shade barriers, and so the “sunshine” is now less and less bright.
The whole public records act process in Oregon, as elsewhere, has become a bureaucratic swamp of agency evasion, vindictive fees and delay, because they are all baked into the very basis of a public records act where the citizen approaches the government on bended knee with a request for a record, and the government gets to decide whether or not it understands the request, how long it will take to understand the request, how much it will charge the citizen to come to that understanding, and how hard it will fight to oppose the request.
Thus, it is now time to give up on the idea that openness is optional, and that government is to be trusted to consider citizen requests and restrict refusals to produce records to a short list of obvious exceptions.
Instead, Oregon must move to a system where all public records are stored on openly accessible servers that anyone can access day or night and browse, anonymously and freely, without charge, and the records must be indexed so that the records are intelligible.
In this world, the only time citizens will need a public records act request is when a public official has completed the lengthy and somewhat difficult process of getting approval to create and store certain records outside the publicly accessible servers, a process that will create a trail to follow so that the citizen-requester can know that the record exists, who has it, and the reason it’s not already available, so that the citizen can challenge the rationale.
We don’t need more training for officials on how to handle public records requests — what we need are systems that make public record requests unnecessary 99.99% of the time, because all the records are either automatically accessible or indisputably not appropriate for public disclosure — with the burden on the creator of the record to obtain that status before storing the record out of public view.
Public Financing for Judicial Candidates
OregonPEN – Vol. 1, No. 45
What Oregon needs more than an end to the mandatory retirement age is something to address the growing role of money in determining who sits on our appellate courts. While Oregon has not yet seen the kinds of campaigns that have marred states such as Michigan, Ohio, and West Virginia, it is likely only a matter of time before corporations notice that Oregon’s total absence of campaign contribution limits makes judicial seats prime investment candidates.
In 2010, three candidates for two seats raised and spent just a hair over $100,000; but in 2012, four candidates for two seats (one uncontested, with the other three vying for the remaining seat) raised and spent over $750,000.
Tax Land and Bads, Not Work and Goods!
(Tax land, pollution and waste, not work, savings and investment.)
OregonPEN Vol. 1, No. 43 and No. 50
Several similarities and some differences occur between this analysis and the original study of a standalone Oregon carbon tax. As in the original study, we find that emissions begin to decline immediately after application of the carbon price, and at a faster rate than with just the programmatic measures by themselves.
Similarly, higher tax rates generate greater emission reductions.
OregonPEN – Vol. 1, No. 50
Time to Get Off the Pogo Stick. It’s Time to Root our Tax System in Oregon Itself
There ARE solutions to our funding problems, ways that would let us get off the pogo stick that gives us a painful jolt every time the spring bottoms out and hurts our head whenever we smash against the ceiling kicker.
But implementing the solutions requires being willing to think about the problem of raising revenue in a new way, with the “how” first, rather than the “who” first.
Oregonians never sat down and created our tax system from a clean slate, but ever since the days of the pioneers, the effort has been, as anywhere, to put the tax burden where it belongs, which is anywhere other than present company – and that applies for all values of present company, all across Oregon. When social scientists say that Oregon is one of the least religious states in America, that is only because tax avoidance and tax hatred is not a recognized faith.
This issue of OregonPEN focuses on the first, most fundamental change we need to stabilize our tax system and to improve how we pay for things, regardless of how much we pay.
Because our tax system is and always has been so dependent on income, we have an extraordinarily complex and inefficient system, since the income subject to an income tax is a defined quantity, and each definition is subject to countless exceptions, both intended and otherwise (exceptions to the definition of income are generally known as obvious or common sense when used by present company and loopholes when used by others).
A better tax basis than income, which is a purely defined quantity, is one where the tax basis is a real quality, and where that real quality is objective and apparent to all, rather than being something that can only be discovered by an accountant operating thousands of definitions in the aptly named “tax code” (where code means a system of sharing information with chosen allies while serving to confound all others).
As the articles in this issue will argue, the best basis for a tax system is with the basis for the state itself, the very land that makes up the state. And it is important to distinguish between land value taxation and property taxation, because property taxes – taxing both land and structures on the land — work counterproductively, just like income taxes. That is because property taxes discourage the same things we want to encourage, improvements to land in places where people derive benefits from the improvements.
One metaphor to keep in mind throughout this issue of OregonPEN is that of the strong horse and the 200 pound weight. A healthy horse bears a 200 pound burden on its back with ease; but that same horse can be completely immobilized just by lashing the burden to the horse’s leg. Oregon is like a horse in that we have a burden we must bear, in this case the burden of raising the money we need to support the investments and services we want.
Sadly, while we expend thousands of hours fighting over the right size of the burden and millions of hours trying to shift the burden away from present company and onto “them,” we have given little or no thought to how we could go farther, faster, just by carrying that burden on our backs instead of having it tied to our legs. By taxing Oregon itself – the land value of our state, rather than the work of Oregonians or their improvements to the land – we can better carry the burden, and we would soon obtain the many additional benefits of a more efficient, transparent, honest revenue system.
Make Ballots Better All Over Oregon
OregonPEN Vol. 1, No. 49
Why is Ranked Choice Voting Superior?
Promotes Majority Support
Too often, candidates can and do win election to offices like Mayor and Governor despite being opposed by most voters. With ranked choice voting, if no candidate has more than half the vote in first-choices, candidates finishing last are eliminated round-by-round in an instant runoff until two candidates are left. The winning candidate will be the one with majority support when matched against the other. In a multi-winner election, ranked choice voting promotes majority rule because the majority of voters will always be able to elect a majority of seats, without fear that an entrenched minority has used gerrymandered districts to ensure they stay in office.
Discourages Negative Campaigning
In non-ranked choice voting elections, candidates benefit from “mud-slinging” by attacking an opponent’s character instead of sharing their positive vision with voters. With ranked choice voting, candidates do best when they reach out positively to as many voters as possible, including those supporting their opponents. A comprehensive Rutgers University poll of voters in 7 cities with ranked choice voting found that voters report friendlier campaigns and that RCV had majority support in all of the cities using it.
Provides More Choice for Voters
Democracy is strongest when more voices are heard. Too often, to avoid “vote splitting” in which candidates can and do win with very little support (see “Promotes Majority Support” above), efforts are taken to limit the number of candidates who compete. This limits voters’ choices. In some places, that means a low turnout primary election eliminates most of the candidates; in others it means restrictive ballot access laws keep out challengers; and in others it means that candidates are shamed into staying out the race. Ranked choice voting allows more than two candidates to compete without fear of splitting the vote.
Minimizes Strategic Voting
Voters should be able to vote for candidates they support, not just against candidates they oppose most. Yet in elections without ranked choice voting, voters may feel that they need to vote for the “lesser of two evils,” because their favorite candidate is less likely to win. With ranked choice voting, you can honestly rank candidates in order of choice without having to worry about how others will vote and who is more or less likely to win.
Mitigates Impact of Money in Politics
Too often, candidates win by barraging opponents with a slew of expensive, negative ads, rather than building a positive, grassroots campaign for support. Candidates who have run and won in ranked choice voting elections have been successful because they built grassroots outreach networks. Those more positive and inclusive campaign tactics cost less than polarizing negative radio and television elections, helping to explain why candidates seem able to win ranked choice voting elections even when outspent.
Saves Money When Replacing Primaries or Runoffs
Many local offices are elected in two rounds of elections; either a primary winnowing the field to two followed by a general election, or a general election followed by a runoff if no candidate has a majority. In either case, the election that takes place outside of the context of the general Election Day often suffers from very weak and unrepresentative turnout, while raising issues of vote splitting in the first round and the possibility of disenfranchising overseas and military voters. Ranked choice voting can accomplish the benefits of a primary/runoff election structure with only one election, avoiding these issues while saving the jurisdiction the costs of running two elections. That’s why ranked choice voting is often called “instant runoff voting” when used to elect mayors, governors, and other single-winner offices.
Promotes Reflective Representation
Compared to winner-take-all elections, ranked choice voting in multi-winner contests allows more diverse groups of voters to elect candidates of choice. This promotes diversity of political viewpoint as well as diversity of candidate background and demographics. Even in single-winner races, ranked choice voting can promote the representation of historically under-represented groups like racial and ethnic minorities and women. A report co-authored by FairVote and the New America Foundation found that racial minority populations prefer ranked choice voting and find it easy to use, and that ranked choice voting increased turnout by 2.7 times in San Francisco.
Build Strong Towns all across Oregon
(Dethrone Drivers as the only People who Matter)
OregonPEN Vol. 1, No. 52
I want to talk a little bit about congestion – traffic congestion, the scourge of our transportation system, the bane of our economy: traffic congestion.
If you listen to politicians, if you listen to advocacy organizations in the realm of infrastructure funding, they will most often talk about the scourge of congestion, the problem that congested roadways, congested highways cause. And they put these problems in terms of dollars. They’ll say we have billions, sometimes even trillions of dollars of losses each year due to congestion. The American Society of Civil Engineers, everyone’s favorite organization to go to, to report on this kind of thing, put out a report a couple of years ago that said over the next decade families and businesses are going to lose a trillion dollars of lost value due to, largely, to congestion. They also include wear and tear on your car and other kind of things, but most of it has to do with congestion. And that report further went on and said over the next 30 years that number is going to go up exponentially with the – I can’t remember how many trillion, it’s like $3 or $4 trillion.
Now, it’s important to understand how they come up with those numbers because those numbers are going to be the basis of a little bit of the conversation we’re going to have here today. When the American Society of Civil Engineers says families and business are going to lose a trillion dollars due to congestion, what they’re doing is, they are taking the time that you spend and assume that you could be traveling at free flow. And the time that you waste, they will multiply that by a bunch of factors and turn that into dollars.
So let me give you an example from a real world project that I saw put forth.
In this example, there was roughly 30,000, 40,000 cars a day traveling on this stretch, something like that. The DOT was going in and was going to add a couple more lanes. During this stretch it would reduce the amount time that a person’s commute took by about 45 seconds. And so the idea was, we take 45 seconds, we multiply that by 40,000 vehicles per day that traveled that stretch, we then multiply that by 365 days in a year, we then multiply that the 50 years that we think this improvement will be there and will be viable, and then we multiply that by some factor, $25.00 an hour or whatever, that would be the typical salary and benefits that someone would we receive, and all of sudden bam! We have billions and billions of dollars worth of savings that we can use to justify a large project, right?
When we step back and we look at this, it’s not too hard to see how insane this is, right?
These economic models are looking in the aggregate and we don’t work in the aggregate as human beings, right? When I save 45 seconds on my commute that’s hardly perceptible to me, right? In fact, the year or two that it’s going to take to actually build this improvement and the hours that I’m going to waste in traffic then is going to mean a lot more to me than when it’s done the 45 seconds that I’m going to save on my commute.
If that weren’t absurd enough, which it actually is — I mean the fact that you’re turning minute amounts of time into large dollar amounts. We all understand what happens at the end of the day, right? We understand that when we build more capacity, it becomes easier to get places and what happens, more people drive, right? There are people who don’t drive at times because it’s too congested and as soon as we relieve that traffic congestion, those people say, well, I’m going to drive at that time now and so they immediately fill up that extra capacity. We see this again and again and again and again.
Beyond that, I think it’s important to note that we don’t calculate time wasted in traffic the exact opposite way.
In other words, when we want to justify a big billion dollar expansion project, we’ll go through this tortured map and we’ll come up with these correlations and say, yes, we’re going to spend a billion dollars but look at this, we’re going to save $5 billion, and so this is a 5 to 1 return on our investment. We don’t do the opposite when we’re actually increasing their time, reducing their ability to go.
Let me give you an example: When we go in and we build the new interchange, so that we can have the new Walmart and the new strip mall, and the new drive-thru restaurant and the whole collection of things that you get along the frontage road, nobody says, look, now this merging traffic is going to increase traffic, it’s going to slow speeds, it’s going to increase travel time, you’re going to lose 45 seconds worth of time, so we’re going to take these $5 billion worth of losses and we’re going to charge that to the local municipality or the property owners who benefit from this or the people who are getting on and on at this spot.
We don’t do that at all, right? And it is very clear why we don’t do that: because that would mean we would build less stuff.
And all of our financing systems, all of our approaches towards building and creating places are about building more, right? If something in a system suggested that we shouldn’t build more, that thing would be discounted. And the models and the theoretical assumptions that allow us to justify building more are the ones that we promote, right? This is how humanity works. I’m not suggesting anything nefarious per se, but just the way we’re wired to look at things. We don’t look at the things that don’t get us the result we want. Which is, we want to be able to build more.
When we sit back and we look at this – and maybe I should point out what the original thought is here and the justification — because we’re not crazy, right? I mean, we haven’t just dreamed up this system out of thin air. When you built a highway, when we, as taxpayers, as Americans — I wasn’t around then, but — as people in the early interstate days decided that it would be a really good idea to have an interstate, let’s say, between Chicago and St. Louis, or between New York and Boston, or between San Diego and Los Angeles, when we made those initial connections, those high-speed, high-capacity, high-engineered connections, we transformed economies. We changed the way economies worked.
Particularly because, and I look here in Minnesota. If you were on a rail line that went to Duluth, you did not have the option to put your stuff on a rail line that would go to Minneapolis. You were essentially a captive market by that rail line, and there was certainly kind of monopoly-type of things that would go on. Yes, you could transfer to another line, but it was going to be slow, it was going to be very expensive. All of the sudden, when we started connected places with high-speed interstates, now we could move goods and materials over long distances in multiple different ways, and it lowered costs, it increased competitiveness, and it added to the overall economic benefit of the economy. All right? We became in many ways more prosperous.
We took these insights, and we just correlated them out forever. We said, “Well, obviously, when we made a highway between San Diego and Los Angeles, we added value and benefit to those places. Thus, every time we add more highways or every time we add more lanes or every time we make an improvement, we’ll have a corresponding increase in wealth and value and prosperity.”
And we just long passed the point of diminishing returns.
In fact, it’s fascinating because if you go back to that American Society of Engineers report that I cited earlier, when they say the cost of inaction is $1 trillion, the cost of us not going out and making the improvements that the American Society of Engineers would like to see us do, it’s going to cost families and businesses $1 trillion. Not in cash, but in the equivalent of lost time, a little 30 seconds here, 45 seconds there, what have you. Even though we know that that’s complete bunk, that’s what their report says.
The report also says in order to avoid that loss, we just need to spend a quaint $220 billion a year. Now, $220 billion doesn’t sound like much compared to a trillion, right? $1 trillion is a lot of money, but the problem is, is that it’s $220 billion per year; $1 trillion over 10 years. So when you do some basic, third grade multiplication, what you wind up with is a total cost of inaction, the pain and suffering people have of sitting in traffic, it has an equivalent worth of $1 trillion, but the amount of actual cash we need to tax those people in order to overcome that huge, unbearable burden is going to be $2.2 trillion.
This is math that shows a diminishing return.
We’ve long since passed the period of time where we’re making high-returning investments in our transportation system. Now, it’s just simple inertia. We just have a method, we go about doing it, we have all the vested interest lined up to continue it, and despite the fact that it’s bankrupting our cities, and it’s completely insolvent, we’re going to keep doing this and finding ways to do it. It’s our national political obsession. How do we find the money to continue to do the things that we’re no longer able to do, right? To me that borders on the definition of insanity, but even if you didn’t want to go there, it calls into question the sincerity of those who would argue for continuation of this approach. . . .
Abolish Corporate Personhood and Stop Corporate Bullying
OregonPEN Vol. 2, No. 4
Court reverses a terrible decision by the lower court that let a business’s SLAPP suit (Strategic Lawsuit Against Public Participation) proceed against a wedding guest who posted a negative review.
Case affirms that Oregon’s strong anti-SLAPP statute protects people posting negative Internet reviews from bankrupting attacks by the businesses subject to the negative reviews.
“We conclude that the online review at issue in this case is entitled to First Amendment protection. We therefore reverse the decision of the Court of Appeals to the contrary.”
In a well-written and well-reasoned opinion written by Justice Baldwin, the Oregon Supreme Court gave Oregonians a great victory early this month when the seven justices who heard the appeal unanimously agreed to throw out a terrible decision the Oregon Court of Appeals issued after the business appealed the trial court’s ruling in favor of the citizen. Had the Court of Appeals decision been allowed to stand, corporations in Oregon would have been unleashed and given the ability to use defamation suits to grind into bankruptcy anyone who posted a negative review of the business on the Internet.
The Supreme Court’s decision in the case of Neumann v Liles, found in Volume 358 of the Oregon Reports, starting on page 706, was issued on 3 March 2016 [358 Or 706 (2016)].
The case was so important that a lengthy group of mainstream press organizations submitted a joint “Friends of Court” (amici curiae in Latin) brief to the Supreme Court. Such briefs are often influential in helping an appeals court see and understand the real-world consequences of a decision, which the parties to the dispute often are not concerned with. The groups joining the amicus brief were Reporters Committee for Freedom of the Press, Willamette Week, Gannett Co., Inc., KPTV, Oregon Association of Broadcasters, Oregon Newspaper Publishers Association, Oregon Public Broadcasting, The Oregonian Media Group, and The Bulletin of Bend.
Excerpts from the opinion explains the case and the result. First the court identifies the players and the basis for the appeal:
Plaintiff Carol Neumann (Neumann) is an owner of plaintiff Dancing Deer Mountain, LLC (Dancing Deer Mountain), a business that arranges and performs wedding events at a property owned by Neumann. Defendant, Christopher Liles (Liles), was a wedding guest who attended a wedding and reception held on Neumann’s property in June 2010. Two days after those events, Liles posted a negative review about Neumann and her business on Google Reviews, a publicly accessible website where individuals may post comments about services or products they have received.
The review was entitled, “Disaster!!!!! Find a different wedding venue,” and stated:
“There are many other great places to get married, this is not that place! The worst wedding experience of my life! The location is beautiful the problem is the owners. Carol (female owner) is two faced, crooked, and was rude to multiple guest[s]. I was only happy with one thing. It was a beautiful wedding, when it wasn’t raining and Carol and Tim stayed away. The owners did not make the rules clear to the people helping with set up even when they saw something they didn’t like they waited until the day of the wedding to bring it up. They also changed the rules as they saw fit. We were told we had to leave at 9pm, but at 8:15 they started telling the guests that they had to leave immediately. The ‘bridal suite’ was a tool shed that was painted pretty, but a shed all the same. In my opinion [s]he will find a why [sic] to keep your $500 deposit, and will try to make you pay even more.”
A few months later, Neumann and Dancing Deer Mountain filed a defamation claim for damages against Liles. Liles then filed a special motion to strike under ORS 31.150, Oregon’s Anti-Strategic Lawsuits Against Public Participation (anti-SLAPP) statute.
Although the trial court rightly dismissed the SLAPP suit, the Court of Appeals reversed, putting Liles in peril of being bankrupted by the legal fees necessary to defend himself against Dancing Deer’s suit. Luckily, the Supreme Court agreed to hear Liles’s appeal and knew how to read the First Amendment:
“We allowed Liles’s petition for review to determine how an actionable statement of fact is distinguished from a constitutionally protected expression of opinion in a defamation claim and whether the context in which a statement is made affects that analysis.”
Initially, we conclude that, if false, several of Liles’s statements are capable of a defamatory meaning. Throughout his review, Liles ascribed to Neumann conduct that is incompatible with the proper conduct of a wedding venue operator and, as the Court of Appeals noted, “inconsistent with a positive wedding experience.”
As a result, a reasonable factfinder could conclude that Liles’s statements were defamatory if he or she found that the statements were false. . . . Moreover, because, if false, Liles’s defamatory statements were written and published—and therefore libelous—they are actionable per se.
The question remains, however, whether they are nevertheless
protected under the First Amendment.
To resolve that question, we must first determine, by examining the content, form, and context of Liles’s statements, whether those statements involve matters of public concern.
Neumann has not disputed that Liles’s statements involve matters of public concern, and we readily conclude that they do. Liles’s review was posted on a publicly accessible website, and the content of his review related to matters of general interest to the public, particularly those members of the public who are in the market for a wedding venue.
Next, we must determine whether a reasonable factfinder could interpret Liles’s statements as implying assertions of objective fact.
Applying the three-part inquiry that we articulated above, we first consider whether the general tenor of the entire work negates the impression that Liles was asserting objective facts about Neumann. From the outset, it is apparent that the review is describing Liles’s personal view of Neumann’s wedding venue, calling it a “Disaster!!!!!”
The general tenor of the piece, beginning with the word “Disaster,” is that, in Liles’s subjective opinion, the services were grossly inadequate and that the business was poorly operated. However, read independently, two sentences in the review could create the impression that Liles was asserting an objective fact:
“Carol (female owner) is two faced, crooked, and was rude to multiple guest[s]. * * * In my opinion [s]he will find a [way] to keep your $500 deposit, and will try to make you pay even more.”
Standing alone, those statements could create the impression that Liles was asserting the fact that Neumann had wrongfully kept a deposit that she was not entitled to keep. In the context of the entire review, however, those sentences do not leave such an impression.
Rather, the review as a whole reveals that Liles was an attendee at the wedding in question and suggests that he did not himself purchase wedding services from Neumann. The general tenor of the review thus reflects Liles’s negative personal and subjective impressions and reactions as a guest at the venue and negates the impression that Liles was asserting objective facts.
We next consider whether Liles used figurative or hyperbolic language that negates the impression that he was asserting objective facts. Although the general tenor of the review reveals its hyperbolic nature more clearly than do the individual statements contained therein, several statements can be characterized as hyperbolic. In particular, the title of the review—which starts with the word “Disaster” and is followed by a histrionic series of exclamation marks — is hyperbolic and sets the tone for the review.
The review also includes the exaggerative statements that this was “The worst wedding experience of [Liles’s] life!” and that Liles was “only happy with one thing” about the wedding. Such hyperbolic expressions further negate any impression that Liles was asserting objective facts.
Finally, we consider whether Liles’s review is susceptible of being proved true or false. As discussed, Liles’s statements generally reflect a strong personal viewpoint as a guest at the wedding venue, which renders them not susceptible of being proved true or false.
Again, the sentences quoted above referring to Neumann as “crooked” and stating that, “[i]n my opinion [s]he will find a [way] to keep your $500 deposit, and will try to make you pay even more” could, standing alone, create the impression that Liles was asserting facts about Neumann. However, viewed in the context of the remainder of the review, those statements are not provably false. The general reference to Neumann as “crooked” is not a verifiable accusation that Neumann committed a specific crime.
Moreover, in light of the hyperbolic tenor of the review, the use of the word “crooked” does not suggest that Liles was seriously maintaining that Neumann had, in fact, committed a crime.
Similarly, Liles’s statement that “[i]n my opinion [Neumann] will find a [way] to keep your $500 deposit, and will try to make you pay even more” is not susceptible of being proved true or false. That statement is explicitly prefaced with the words, “In my opinion” — thereby alerting the reader to the fact that what follows is a subjective viewpoint. Of course, those words alone will not insulate an otherwise factual assertion from liability. However, given that Liles—as a mere guest at the wedding—presumably did not pay the deposit for the wedding involved in this case, his speculation that Neumann would try to keep a couple’s deposit is not susceptible of being proved true or false.
Based on the foregoing factors, we conclude that a reasonable factfinder could not conclude that Liles’s review implies an assertion of objective fact. Rather, his review is an expression of opinion on matters of public concern that is protected under the First Amendment.
We therefore further conclude that the trial court did not err in dismissing Neumann’s claim, and we reverse the Court of Appeals determination to the contrary.
Build Citizen Media
OregonPEN Vol. 2, No. 10
This issue of OregonPEN – an online-only newspaper with a mission of helping empower people in Oregon – is given over to republication of a milestone opinion from the Attorney General about the ability of nontraditional media to demand parity with the declining “institutional” media outlets such as traditional printed newspapers. The absence of public interest coverage in the traditional media is already a calamity; as the disappearance of corporate-owned and corporate advertiser-funded newspapers accelerates (at an accelerating rate), this opinion is crucial, because it paves the way for publications such as OregonPEN to start filling the gaps left by the collapse of printed media.
Just as the skirmishes at Lexington and Concord were small events that heralded a much greater one soon to follow, the welcome conclusion to the new Attorney General opinion will have profound effects on the ability to oversee public entities in Oregon in the 21st Century. The conclusion to the opinion:
The law permits news-gathering representatives of institutional media to attend executive sessions. The statutory term “news media” is broad and flexible enough to encompass changing technologies for delivering the news. A governing body may not exclude a representative of the news media from an executive session except as specifically allowed by ORS 192.660(4) and (5). The commission generally may adopt rules to carry out its duty to enforce the executive session law, but it is prohibited by ORS 192.660(10) from adopting a rule that establishes which entities are considered representatives of the news media. Governing bodies may adopt policies relating to the admission of media representatives to executive sessions, but those policies cannot limit the statutory right of representatives of the news media to attend executive sessions. In evaluating allegations that an individual was wrongly excluded from executive session, the commission must assess compliance with the statute, regardless of a governing body’s policies.
By the end of 2007, PERS was 112 percent funded.
This was indeed cause for celebration
PERS 1997-2007: The change years
As the 20th century came to a close, a whirlwind of activity swept across the country. With technology changing at break-neck speed, both new and experienced investors rushed in to take advantage of the accompanying robust stock market. The first DVDs were launched, World Wide Web usage expanded from 100,000 websites in 1996 to nearly 1.5 million sites within two years; eBay, an online auction house, made online shopping mainstream; and dotcom businesses sprouted throughout cyberspace as businesses and entrepreneurs clamored to enter the world of e-commerce.
By the early 2000s, the dotcom bubble burst, stocks took a beating, and newfound wealth became as quickly lost as it had been found. This downward trend continued, and by PERS’ 60th birthday in 2008, the United States had the highest deficit in its history, the country had been attacked by terrorists, and was in a war in Iraq. The stock market had suffered devastating losses and both the financial and auto industries were in serious jeopardy in 2008. In short, shortly after the sixth decade came to a close, the country’s financial and domestic security were both sitting on shifting sands vulnerable to swift, unpredictable winds.
Like the country itself, PERS experienced both the best of times and the worst of times during these years. Stock market booms and downturns, concerns over technological inadequacies, lawsuits, and public perceptions that PERS was unsustainable necessitated both radical changes and time-intensive, costly projects.
During this period, the agency had four executive directors, numerous changes in executive positions, and an entirely new Board. It experienced a record number of retirees, due to both investment returns and the baby boomer population reaching retirement age. RIMS, the computer system that had once been viewed as the agency’s salvation, was antiquated and a new system had to be designed. The agency adopted a new mission statement, underwent restructuring, and expanded its workforce by nearly 30 percent.
The single most significant event in 2003 was PERS Reform Legislation.
New trusts added to PERS’ administrative responsibilities
The 1997 Oregon Legislature added two trusts for PERS to administer—the deferred compensation trust and the Benefit Equalization Fund.
Record gains and losses keep PERS spinning
As PERS began its sixth decade, the stock market was strong. With the Internet providing investors an easy access to buying and selling stocks, people were almost frenetically looking for the next company that would double or triple within a few months. Even people who had never invested in stocks before entered the arena and watched the Dow Jones Industrial Average (DJIA) as closely as they watched the sports page. From 1996 to 1999, the DJIA nearly doubled in value.
Many PERS members opted to put some of their money (members were allowed to invest 25, 50, or 75 percent of their contributions) in the variable account and were rewarded with uncommonly high return rates. PERS investments also grew with unprecedented speed, and the Board allocated earnings to member accounts accordingly.
However, as the new millennium came, the stock market proved volatile, and the media began reporting how overvalued many stocks had become. Between the unpredictability of the market and fears about how low the market might go, many people who had just gotten into the market began selling off their shares. By 2002 the DJIA gave back most of the late-90s gain, and the markets continued to be volatile.
The public began to be concerned with PERS’ unfunded liability, and PERS became a major political issue. (See The call for PERS Reform below.)
PERS is required by statute to give members the highest benefit calculation, and Money Match frequently proved to be the highest method for many Tier One members. However, while members may have earned high returns on their variable accounts, employer funds were invested much more cautiously, and employer accounts had simply not kept up.
The notable gains in members’ variable accounts proved detrimental to employers. PERS is required by statute to give members the highest benefit calculation, and Money Match frequently proved to be the highest method for many Tier One members. However, while members may have earned high returns on their variable accounts, employer funds were invested much more cautiously, and employer accounts had simply not kept up with their employees’ earnings. Thus, the pension system faced a higher unfunded actuarial liability (UAL), employers faced higher rates, and the public became increasingly resentful over the high benefits some retirees were receiving.
While the market picked up somewhat in 2003, it remained almost flat through 2004 and 2005. PERS investment returns rebounded in 2003 and continued to be strong through 2007.
By the end of 2007, PERS was 112 percent funded. This was indeed cause for celebration, especially when PLANSPONSOR magazine, a trade journal focused on retirement issues, named PERS the winner of its Plan Sponsor of the Year award. In 2007, the magazine termed Oregon PERS “the best funded pension system in the country.”
As reported in the Statesman Journal February 8, 2007, “The state pension system was honored for its strong investment returns and reforms that closed most of PERS’ $17 billion funding gap since the spring of 2003. ‘PERS’ made tough decisions and confronted the issues head on,’ said Nevin Adams, the magazine’s editor-in- chief.”
A large increase in employer rates was triggered primarily by House Bill 3349 and the impact of high earnings distribution. As reported in the agency’s 1999 Comprehensive Annual Financial Report, “In response, the Board reviewed numerous concepts and created new administrative rules that will help stabilize employer rates while preserving the Board’s fiduciary commitment to the beneficiaries of the trust.”
As a result, fiscal year 2000-2001 included a session of the Oregon Legislature, which passed Senate Bill 134 that had a provision that allowed local governments to join the existing state/community college actuarial pool. Those who joined the pool could expect significantly less rate volatility.
This did offer some relief, but the issue was far from resolved and continued to be of concern to employers. Healthy investment returns somewhat eased concerns over these rates in the mid-2000s, but because the value of PERS’ assets are linked with employer rates, any change in PERS financial status always brings the issue of employer rates back into the public eye. SB 134 also allowed members to elect a double lump-sum payout at retirement, effective January 1, 2003.
The call for PERS Reform
According to an Associated Press article published July 26, 2002, “Shortfalls in private companies’ pension plans soared to $111 billion last year, the highest level ever reported by the Pension Benefit Guaranty Corp.” While PBGC spokesman Jeffrey Speicher down played this in the article, pointing out that most were still at least 80 percent funded, pensions were on people’s minds.
In Oregon, PERS became a hot topic both because of its unfunded liability— estimated to be $8.5 billion in late July 2002 — and because of high employer rates. Both Democrat Ted Kulongoski and Republican Kevin Mannix, the state’s two gubernatorial candidates, made PERS reform part of their platforms.
The media reported on PERS with increasing regularity, and when Ted Kulongoski was elected governor, one of his first steps was to reform PERS. In his inaugural speech in January 2003, Kulongoski said, “The debate we’re having over PERS is creating real uncertainty for our public employees. I know that. I also know that PERS – as it is currently structured – is creating financial uncertainty, bordering on crisis, for Oregon. We need to go back to the drawing board and come up with a retirement system that is fair, sustainable, and affordable. This is a test of leadership for both the legislature and me. It is also a test of leadership for those who speak on behalf of public employees. We are duty-bound to get this job done.”
An opinion piece by SEIU Local 503 Executive Director Leslie Frane that ran in the March 7, 2003 edition of the Portland Tribune stated the general public’s opinion about PERS succinctly,
“PERS has been blamed for everything from shortened school years to rising crime. Public sector retirees have been cast as wealthy freeloaders instead of hardworking people who protect and teach our children, keep our communities safe, and provide health care to elderly and disabled Oregonians.”
Tensions between public employees in the PERS system and the private sector became increasingly hostile, fueled by reports the plan had hit record shortfalls.
Two task forces studied PERS structure and liabilities and offered suggestions to reform the system. In 2003, Governor Ted Kulongoski signed several bills that reformed PERS.
2003 Reform legislation – The following bills were part of PERS Reform:
House Bill 2001
Tier One regular accounts would be credited with 8 percent earnings (no more, no less) until the Tier One assumed rate deficit has been eliminated and the Tier One reserve account is fully funded in each of the last three years.
House Bill 2003
A number of changes occurred with the passage of this bill, including:
Earnings may not be credited to Tier One regular accounts in any year in which there is a deficit, and no earnings may be credited that would result in a deficit.
For Tier One members who retire under Money Match on or after April 1, 2000, and before April 1, 2004, PERS will adjust the annual cost-of-living allowance (COLA) as through 11.33 percent (instead of 20 percent) was credited for 1999. Members receive the fixed allowance (with no additional COLA) until the revised allowance (with COLA) provides a higher benefit.
Member contributions are redirected into the Individual Account Program (IAP).
House Bill 2004
PERS must use new actuarial equivalency factor tables beginning July 1, 2003.
House Bill 2020
Established a successor retirement plan, the Oregon Public Service Retirement Plan (OPSRP).
Public employee challenges to reform legislation
Challenges to reform legislation were immediate. They were consolidated into a case commonly referred to as the Strunk case, which reached the Oregon Supreme Court.
The Oregon Supreme Court held that PERS could not suspend COLAs to certain retired members and that the annual crediting at the assumed rate for Tier One member regular accounts could not be eliminated.
The Oregon Supreme Court held that PERS could not suspend COLAs to certain retired members and that the annual crediting at the assumed rate for Tier One member regular accounts could not be eliminated.
Prior to PERS Reform, PERS employers took legal action against PERS, requesting the courts review employer contribution rates for both 1998 and 2000.
Several different suits against PERS were consolidated into what became commonly referred to as City of Eugene v State of Oregon, Public Employees Retirement Board. Judge Lipscomb resided over the case, and his decision became known as the Lipscomb decision. Lipscomb ruled that the PERS Board’s settlement agreement in the City of Eugene case had resolved the issue.
PERS reallocated 1999 earnings to Tier One member regular accounts, employer accounts, and the benefits in force reserve at 11.33 percent instead of 20 percent, and new mortality tables were implemented.
Additionally, PERS would redirect member contributions to the IAP, and PERS would use new actuarial equivalency factor tables beginning July 1, 2003.
The Strunk decision voided HB 2003, which stated that earnings would not be credited to Tier One regular accounts in any year in which there was a deficit and no earning would be credited that would result in a deficit.
Strunk and Eugene Project
The results of both the Strunk and Eugene cases had an impact on benefits, and a special section at PERS was set up to recalculate benefits.
All the uncertainty that came with PERS Reform and the subsequent legislation caused huge retirement spikes, the likes of which PERS had never experienced before. Retirements climbed past 10,000 by the middle of 2003, more than double what the previous record had been for an entire year. To help retirees, PERS began holding after-hour sessions in which PERS staff helped members fill out retirement forms. Sometimes lines backed up outside the building, with media on scene to report the mass exodus on the evening news.
The public began to worry about having enough teachers in the schools and adequate coverage of public agencies to meet consumer needs. PERS was seen as the culprit for staffing-related problems. The newspapers ran frequent articles fueling this with stories of teachers who weren’t ready to retire and regretted leaving their positions but fearing that if they didn’t, they would lose huge chunks of their retirement benefits.
PERS staff expands to meet demands of retirement spikes and PERS reform
Combined with lawsuits, the creation of a new computer system, and instituting a new plan, PERS was non-stop activity. New employees had to be hired to meet the exploding workload demand, and PERS had to rent space in a separate building to accommodate the new staff.
Employees worked at a frenetic pace, but no matter how many overtime hours were devoted to creating the new plan, new computer system, and meeting the needs of members who wanted to retire, for the next several years, staff could barely keep up with all the changes and challenges.
PERS’ efforts to catch up with technology were challenging. The agency began a major reengineering effort in 1999 to create a new information system that would be completed by 2005. However, the 2001 legislature showed its reservations about the plan by voting only $1 to fund the new system.
Consequently, PERS searched for an outside consultant to prepare a plan to create the new computer system. This passed the legislature in the following session, and work began on Oregon Retirement Information Online Network (ORION), a new system expected to be completed in 2010.
By the end of its sixth decade, PERS had instituted new technology for employers to report their employees’ earnings and demographic records. This was a major undertaking and PERS began a significant communication effort with employers that included employer education workshops and seminars, a new website specifically for employers, e-mail communications, and other outreach efforts.
In 2002, legislation directed PERS to cease individual retirement counseling sessions for members. To ensure that members had the information they needed to make sound retirement decisions, PERS:
— made five videos to explain retirement considerations;
– created a new call center, complete with a new phone system, to respond to member inquiries;
— used video conferencing; and
– revamped its website to keep members informed of any changes to the system.
Additionally, during retirement spikes the agency also held Turn-In-Forms Sessions during evening hours in which staff helped ensure retirement forms were filled out correctly.
By 2007, retirement counselors also began holding Retirement Application Assistance Sessions in which members within one year of retirement could meet one-on-one with a retirement counselor to ensure retirement applications were filled out correctly.
Oregon Savings Growth Plan
OSGP, an optional deferred comp plan for all state and some local governments, benefitted from stock market increases during these 10 years. As of June 30, 1997, the fair value of investments was $388.7. As of June 30, 2007, the fair value of investments was $910.9.
HB 2020: The Oregon Public Service Retirement Plan (OPSRP)OPSRP is a hybrid (defined contribution/defined benefit) pension plan with two components: the Pension Program (defined benefit) and the Individual Account Program (defined contribution).
Beginning January 1, 2004, member contributions (including Tier One and Tier Two contributions) were placed in the Individual Account Program (IAP). PERS members retained their existing Tier One and Tier Two accounts, but those accounts would not receive any additional contributions. Tier One accounts would continue to earn the assumed rate annually (8 percent) and Tier Two accounts would continue to be credited with earnings or losses.
This portion of OPSRP would provide a life pension funded by employer contributions.
Depending on whether a member is a general service or police and fire member, benefits would be calculated with specific formulas for members who attain normal retirement age.
Individual Account Program (IAP)
OPSRP, Tier One, and Tier Two members contribute 6 percent of salary to the IAP, and employers may agree to pay the 6 percent contribution.
Accounts are credited with earnings or losses annually. Administrative costs of the plan are charged to these accounts.
The Board composition changed twice during PERS’ sixth decade. It was increased to 12 members in 2001, then reduced to five members in 2003.
Paul Bland, Public Justice
The people who would like to see large banks unleashed, without any meaningful regulation, want Donald Trump to fire Rich Cordray, the terrific director of the Consumer Financial Protection Bureau, or CFPB. Under the law, Trump could only remove Cordray for “inefficiency, neglect of duty, or malfeasance in office.” Banking lobbyists, who are leading the campaign to oust Cordray, say Trump would have reason to do so.
The actual reason Wall Street wants Cordray gone is pretty transparent: Under his strong leadership, the CFPB has been incredibly effective at stopping banks from cheating American consumers, and at making them give back money when they’ve taken it illegally.
As a result, Wall Street is pushing back with a well-funded campaign that hasn’t been seen since the “Swiftboat” attacks of 2004. They are pressuring conservatives in Congress, who receive tons of industry money and have no career history of working on or caring about civil rights issues, to push strained allegations that Cordray is supposedly racist. This attack against a man who has effectively enforced the Fair Housing laws, and who is strongly defended by every major civil rights group in the country, reverses the actual facts.
And while it may fly in the echo chamber of people who love banks and hate every public servant who would regulate them, it’s not going to fly with the public. Such blatant lies will not lend any air of respectability to any industry-driven take down of Cordray or his agency.
But that hasn’t stopped lobbyists from taking an infamous page from a corrupt President’s playbook.
In the weeks following the election, there has been much talk about how some of Trump’s policies and proposals, if implemented, would be “unprecedented.” But if Trump caves to pressure from banking lawyers and lobbyists — and right wing columnists — and fires Cordray, there is precedence for such a move: Richard Nixon’s firing of Archibald Cox.
For those of you who weren’t around in the 1970s and haven’t read this history, Richard Nixon was embroiled in severe scandals involving gross corruption and illegal conduct. Archibald Cox had been appointed as an Independent Special Prosecutor to look into Nixon’s illegal actions, and he was unraveling Nixon’s lies and getting to the bottom of the scandal at a rapid pace. (I had the good fortune of having Cox as a professor many years ago, and he was an incredibly smart, honest and tough man. It’s not at all surprising that he was extremely effective in pursuing Nixon’s corrupt actions.)
Faced with a watchdog who was doing his job and doing it well, on October 20 1973, President Nixon fired Cox, in an act that became famously known as the Saturday Night Massacre.
Firing Cox for effectively rooting out corruption didn’t work too well for Nixon. If President-elect Trump follows the advice of bank lobbyists and similarly fires Rich Cordray for being too effective, this illegal abuse of power won’t go well for Trump, either.
Now, some of you might be thinking, “well, the Watergate Special Prosecutor was an incredibly big deal, but I’ve never even heard of the CFPB.” So let me give a little more background.
Throughout the 2000s, a mixture of massive fraud by banks and lousy and coopted federal regulators combined to trigger a huge financial crisis that crashed the U.S. economy. In response, and over the objections of lobbyists and Congressional supporters of the big banks, Congress passed the Dodd-Frank Act, which put some badly needed limits on a system that encouraged and rewarded wide-scale fraud.
As I’ve explained before, if Donald Trump were to repeal Dodd-Frank, it would betray his promise to voters that he would side with regular Americans against Wall Street lobbyists.
The part of Dodd-Frank that has worked out most successfully has been the creation of the Consumer Financial Protection Bureau. In its first five years of operation, the CFPB has recovered more than $11.7 billion for consumers who were cheated by banks or other lenders, and has brought enforcement actions that have stopped illegal scams. It was the CFPB, for example, that put an end to Wells Fargo opening two million phony accounts for consumers without their consent.
Repealing Dodd-Frank is going to be a heavy lift. It is nearly certain that every Democratic member of Congress will fiercely fight any attempt to do so, and a number of Republicans in the House and Senate don’t want to cast a vote that blatantly sides with big banks and against consumers. While getting rid of the CFPB is very popular among large banks and their lawyers and lobbyists, it is not even slightly popular among actual Republican voters. Last week, a survey of Trump voters found that only 7% of them want the CFPB eliminated.
This statistic shouldn’t be a surprise. A whole lot of people who cast votes for Donald Trump did so because he promised that he was going to fight against banks and other lenders who cheat or overcharge consumers. In fact, on the same day that South Dakota voters overwhelmingly voted for Donald Trump, 75% also voted to ban payday lending. Few of the people who voted for Donald Trump also wanted him to let banks and payday lenders run wild.
So bank lobbyists have come up with a Plan B: Fire Rich Cordray and replace him with someone who will stop fighting to keep banks honest. After all, Trump’ has proposed putting a guy in charge of the Environmental Protection Agency who is completely in the pocket of oil companies. So why can’t Wall Street also have a regulator who will do what they want and look the other way when banks like Wells Fargo engage in massive fraud?
The suggestion that Trump should fire Cordray mirrors Nixon’s Saturday Night Massacre, and is just as dumb. The only real grounds banks have for firing Cordray is that he has been too effective, too tough and too honest, and he’s making it uncomfortable for people who want to cheat consumers. If Donald Trump jumps at the command of the banking industry lobbyists and fires one of the best public servants America has seen, he will be making a huge mistake.
Not only would such a move be plainly illegal, it would also send the same signal as trying to repeal Dodd-Frank: Trump is putting the wishes of the big banks ahead of the best interests of voters — including Republicans like those who voted to reign in payday lending in South Dakota — who oppose gutting the CFPB.
The betting here is that Trump is too smart to make this huge mistake. But if he isn’t, every American who cares about consumer protection, and opposes having co-opted and corrupted agencies side with huge corporations, needs to raise their voice loudly and clearly.
Firing Archibald Cox went pretty badly for Richard Nixon, and any dishonest move against Rich Cordray should produce a similar firestorm.
Reprinted with kind permission of the author; originally published in Daily Kos.
One of the most thoughtful bloggers OregonPEN has had the pleasure to discover is a Washington State rural physician, Katherine Ottaway, M.D., who says of herself “I am a rural family practice doctor in a town of 9000. My patients range from newborns to 104 years old and I have been delivering babies for 18 years.” KO shares poetry, outrage, photography, and family history, and unfailingly good advice prolifically at her online outlet, “KO Rural Mad as Hell Blog.“
KO kindly granted permission to reprint this important piece for those with children and grandchildren, neices, nephews, or neighbor kids in their lives:
I am a rural family physician and my recommendation: before age 9.
Before third grade.
(Your eyes are popping out of your head in horror, but my recommendation comes from surveying my patients. For years.)
The biggest drug killer is tobacco.
However, it takes 30 years to kill people. It is very effective at taking twenty years off someone’s life, destroying their lungs, causing lung cancer, heart disease, mouth cancer, breast cancer, uterine cancer, stomach cancer, emphysema, heart disease, etc.
I ask older smokers what age they started smoking. This is informal. This is not scientific. But most of my male older smokers say that they first tried cigarettes at age 9. I think parents need to be talking to their children about cigarettes by age 9.
And then start talking about alcohol and illegal drugs and the terrible dangers of pills.
“My innocent child would never . . . .“
Unfortunately, my daughter said that as a senior in high school in our small town, there were 4-5 kids out of the 120+ that were not trying alcohol and marijuana. But there are kids trying far worse substances. We have methamphetamines here, and heroin, and pain pills sold on the street.
The perception that pills are safe is wrong too.
Heroin is made from the opium poppy and it’s rather an expensive process, not to mention illegal and has to be imported from dangerous places. But teens take oxycodone and hydrocodone, bought on the street, to get high. And now drug sellers are making FAKE oxycodone and hydrocodone and selling that on the street. It contains fentanyl, which is much much stronger. If the dealer gets the mix wrong, the buyer can overdose and die.
Talk to your children young! “NEVER take a pill from a friend, never take someone else’s medicine, never take a pill to party! YOU COULD DIE! And if you have a friend that is not making sense, that you can’t wake up, DON’T LEAVE THEM! Call an ambulance. Your friend may have used something illegal, and may not want you to call an ambulance. But if you think they are too sleepy . . . . Don’t take a chance. People can get so sleepy, so sedated, that they stop breathing.”
And parents, you are the ones that have to set a good example.
Don’t drink alcohol every night.
Don’t use pot every night.
Take as few pills as possible.
(Pills aren’t necessarily safe because they are “supplements” or “natural” — hey, opium and heroin are plant based!)
Stop using tobacco and if you have a hard time doing it, tell your children you are struggling. (It takes an average of eight tries to quit smoking. Get help.)
Lastly, we talk about childhood innocence, but we let kids babysit at age 11. That is the Red Cross youngest age. My daughter took a babysitting course at age 11 and babysat. If we think they are responsible enough to do CPR, call 911 and do the heimlich maneuver, shouldn’t we also be talking to them about addictive substances by that age?
Talk to your children about addiction young . . . so that they can avoid it.
Policy thinkers have come to describe the worst sort of situations as “wicked problems.” These are not just harder problems — they are harder in ways that make them nearly intractable to solutions in the same way that rapidly mutating viruses can be all but impossible to contain.
A wicked problem is a social or cultural problem that is difficult or impossible to solve for as many as four reasons: incomplete or contradictory knowledge, the number of people and opinions involved, the large economic burden, and the interconnected nature of these problems with other problems. Poverty is linked with education, nutrition with poverty, the economy with nutrition, and so on.
These problems are typically offloaded to policy makers, or are written off as being too cumbersome to handle en masse. Yet these are the problems—poverty, sustainability, equality, and health and wellness—that plague our cities and our world and that touch each and every one of us. These problems can be mitigated through the process of design, which is an intellectual approach that emphasizes empathy, abductive reasoning, and rapid prototyping.
[The website for an Oroville, California community college, Butte College describes abductive reasoning as “taking your best shot:” “Abductive reasoning typically begins with an incomplete set of observations and proceeds to the likeliest possible explanation for the set. Abductive reasoning yields the kind of daily decision-making that does its best with the information at hand, which often is incomplete.”]
Horst Rittel, one of the first to formalize a theory of wicked problems, cites ten characteristics of these complicated social issues:
- Wicked problems have no definitive formulation. The problem of poverty in Texas is grossly similar but discretely different from poverty in Nairobi, so no practical characteristics describe “poverty.”
- It’s hard, maybe impossible, to measure or claim success with wicked problems because they bleed into one another, unlike the boundaries of traditional design problems that can be articulated or defined.
- Solutions to wicked problems can be only good or bad, not true or false. There is no idealized end state to arrive at, and so approaches to wicked problems should be tractable ways to improve a situation rather than solve it.
- There is no template to follow when tackling a wicked problem, although history may provide a guide. Teams that approach wicked problems must literally make things up as they go along.
- There is always more than one explanation for a wicked problem, with the appropriateness of the explanation depending greatly on the individual perspective of the designer.
- Every wicked problem is a symptom of another problem. The interconnected quality of socio-economic political systems illustrates how, for example, a change in education will cause new behavior in nutrition.
- No mitigation strategy for a wicked problem has a definitive scientific test because humans invented wicked problems and science exists to understand natural phenomena.
- Offering a “solution” to a wicked problem frequently is a “one shot” design effort because a significant intervention changes the design space enough to minimize the ability for trial and error.
- Every wicked problem is unique.
- Designers attempting to address a wicked problem must be fully responsible for their actions.
2010 report published by PERS
Emergence of pension plans in the U.S.
Pension programs were essentially unheard of when pioneers embarked on their arduous journeys across the Oregon Trail in the mid-1800s. Perhaps some were aware of early U.S. fraternal organizations that provided actuarially based life insurance plans. Maybe a few recalled a controversial pamphlet Thomas Paine published in 1795 calling for the establishment of a public system of economic security that would pay annual benefits to every person over age 50.
It is more likely, however, that pioneers had more immediate concerns as they took their families on a perilous trip to the magnificent Oregon Country.
Ironically, these same pioneers were part of the sociological changes that would increase the necessity of pension plans. As the traditional extended family broke down into the smaller nuclear family unit, the population became more mobile, and it was no longer safe to assume family members would live close enough to each other to care for elderly parents or grandparents.
As villages and small cities crept across the Oregon landscape, opportunities for businesses lured young men and women away from traditional homesteads. Dependant on wages rather than on self-sufficiency, the economic security of many Oregonians could now be threatened by recessions, layoffs, injuries, and old age.
The idea of a pension plan was no longer a peripheral concern, and retirement programs were mentioned with increasing frequency.
First pension plans
In 1857 the New York City police established the United States’ first municipal benefit plan. Within a decade, the Civil War veterans and their families were receiving pensions. In 1869 New York City teachers had a voluntary retirement system plan, and in 1895, the first compulsory teachers’ retirement systems were formed in San Francisco and St. Louis. The concepts of retirement and disability funds were now more then speculation.
Perhaps the single, most important event that forced the nation to realize the necessity of pension plans for economic security was the Great Depression. As the 1930s rolled in, millions of people were unemployed, banks and businesses had failed, an estimated two million men wandered the country hoping to find work, and the majority of the elderly in America were living in poverty. Clearly, something had to be done.
U.S. Senator Huey Long, a radical populist, introduced a program in 1932 called Share Our Wealth. Included in his proposed solution to the nation’s economic crisis was the concept that everyone over the age of 60 would receive an old-age pension.
That same year, Dr. Francis E. Townsend, a California doctor who found himself unemployed without savings, took up the battle for the elderly and drafted the Townsend Old Age Revolving Pension Plan. Under this plan, the government would provide a monthly pension of $200 to every citizen over 60 years old. Funded by a two-percent national sales tax, the three eligibility requirements were that the person had to be retired, the person could not have a criminal record, and the pension had to be spent in the United States within 30 days of receipt of the funds. His plan was published in a newspaper in 1932, and within two years there were more than two million people actively promoting the Townsend Plan.
Upton Sinclair was yet another person to propose a pension plan. Called End Poverty in California, he wanted the state to give $50 a month to every unemployed person over age 60.
While none of these plans came to fruition, the support they received made it clear the time for a pension plan had come. Indeed, the United States was somewhat slow in getting such a plan off the ground. England had started its first program in 1834, and 34 other European countries had some form of government-provided, old- age insurance by 1937. Canada had passed its first old-age pension program in 1927.
In June 1934, President Franklin D. Roosevelt appointed Frances Perkins as head of the Committee of Economic Security. He provided her with a 23-member advisory council represented by labor, industry, and the general public to look into a plan to protect the unemployed and the elderly against financial destitution. Despite Perkins’ fears that her revolutionary bill for the establishment of such a program would not survive, it passed both houses. Roosevelt signed the Social Security Act into law in August 1935.
For many, fears and worries about old age were eased. Unfortunately, Social Security was not available to most government employees, and Oregon public employees were among those not covered by the act. This was a matter of serous importance to thousand of Oregon’s state and local employees, and interested parties began to look for solutions.
Oregon’s old-age pension trials and triumphs (pre-PERS)
Early retirement plans
Oregonians were not idle while other states looked into pension programs for their public employees. In 1911 Oregon teachers organized a statewide pension fund, The Fireman’s Relief and Pension Fund started in 1913, and the Policeman’s Fund began in 1918. However, while these funds marked a beginning of retirement plans for public employees in the state, it did not signal the beginning of a trend, and numerous other proposed retirement plans failed to pass.
In 1933 the Oregon Legislature passed the Old Age Pension Act establishing a pension program for all Oregonians over the age of 70. Each county was in control of its own residents, and the pension fund was available to anyone who met very specific criteria. Employees from both the public and private sector could qualify. Payments were low, however, and the program was short-lived.
When Social Security was signed into law in August 1935, many employees in private industry breathed a sigh of relief. But since it excluded public employees, there was still much work to be done to provide economic security to all elderly.
The need for a retirement system for state and local government employees was no longer contested. While the demand for a pension program was concentrated in Portland and Multnomah County, it was widely believed that a retirement system would both improve the quality of life for retirees and contribute to the well being of government organizations.
Momentum for statewide retirement plan
Herman Kehrli, executive director of the League of Oregon Cities, had been concerned about pensions for some time. In 1934, he addressed the Portland City Council, saying, “The need for an orderly retirement program in the city service has grown more and more acute and the financial insolvency of the existing system has become obvious.”
Expressing his concern over the declining reserves in the existing police and firefighters’ funds, Kehrli stressed the need for actuarially sound principles as a foundation for a single system for all municipal employees.
The retirement issue became increasingly significant over the next five years, involving public employees at the state, country, and municipal levels. Discussions moved beyond the Portland City Council and were taken up by the state legislature. A number of pension-related measures came up during this period, but all were defeated.
Governor Sprague appointed a committee of 25 state and local government representatives in 1939 to study the feasibility of a retirement program
in Oregon. The committee prepared a majority report recommending the establishment of a single pension system to cover all state and local employees not already members of an established plan. A bill was drawn up, but it contained a number of compromises that were not satisfactory to many who had actively supported pension legislation for public employees. The bill was not even introduced during the 1941 session.
Governor Sprague did, however, address the legislature about his committee’s findings. “This committee has studied annuity systems and prepared a plan which is entirely sound from an actuarial standpoint. I realize there is much opposition to a retirement system for public employees; but, as federal Social Security is extended to cover more and more groups of citizens, the state and local units of government must move to set up suitable retirement plans for their employees.”
Momentum was now stronger than ever and a group of dedicated individuals, led by Kehrli, doubled their efforts to come up with a solution. Their findings revealed that according to the January 1942 U.S. Bureau of the Census report, only 7.6 percent of the public employees in Oregon were covered by some retirement system, while 46 percent of state and local employees of other states were covered.
Addressing members of the Oregon Finance Officers’ Association and the League of Oregon Cities, Kehrli summed up the problems Oregon and its public employees were facing.
“Too little attention is given to the loss of efficiency and to the cost involved in the ‘hidden pensions’ that are being paid in the form of salaries to superannuated employees. Most public agencies follow the practice of keeping their employees on the payroll just as long as they are able to report to their place of work. At least two of them in Oregon, however, have recognized the policy of paying ‘hidden pension’ salaries on a full-time basis and have made provisions for carrying superannuated employees on a special payroll. The City of Portland has for some years been paying superannuated employees who are not members of a retirement system a pension from $1 a day to $100 per month. The employee makes no contribution toward this pension and has no guarantee that it will continue to be paid. The State Board of Higher Education has also adopted the policy of providing a part-time job at half-salary to employees who reached the retirement age of 70. These two agencies are spending over $100,000 per year for this pension payroll. Where a definite policy of this type exists, it is perhaps easier to see just what is happening and what the price. But it is a fact that the same thing is happening and the cost is greater in these departments and in those cities and counties that have not established a retirement age but continue their employees on at full salary. A planned retirement system would do in an orderly way what is now being done in a most haphazard and expensive way.”
Attracting qualified employees to civil service was another major factor in setting up a retirement system. An article by I.A. DeFrance of the League of Oregon Cities that appeared in the August 7, 1944 issue of Welfare of State and Local Employees addressed this issue. “The state and local governmental service is in competition with the Armed Services, war production, and private industry and is losing the contest to the more attractive wages, Social Security, and retirement benefits offered by private industry. There is a serious shortage of competent help, and if the state and local governmental agencies are to secure and retain their fair share of the trained and skilled personnel of the nation, they must make their service more attractive by providing social security and retirement benefits equal to this offered by private industry. The welfare of the state and its future for decades depends upon the type of personnel attracted to the public service after the war.”
Nearing the finish line
The problem gained increased public attention. Kehrli, DeFrances, and scores of municipal and state organizations worked around the clock to gather material to convince legislators and voters that it was imperative to establish a pension system for public employees. Telegrams, memos, and letters were passed back and forth between Kehrli and administrators of retirement plans in states across the country. Insurance companies were solicited for actuarial estimates, and figures and charts piled up in Kehrli’s office. Finally, in the winter of 1945, House Bill 344 began to take shape.
The 1940s: PERS early years
House Bill 344 was introduced to the 1945 Oregon Legislature with considerable support and high hopes. The Oregon Statesman ran an editorial by former Oregon
Governor Sprague on February 9, 1945, in support of the bill. “If at all possible, a general retirement system ought to be established at this session of the legislature. Perhaps it should be done even if it doesn’t seem to be ‘possible’ because there will always be reasons for postponing it and if it is ever to come, it will only be by taking the leap — just as business had to do with unemployment compensation.”
After discussing the bill and its supporters, the writer continued, “The legislature ought not to turn these bills down, but should make every effort to enact them at this session. They will promote stability in employment, end fears of political reprisals, and standardize employee relations for the state. If these measures are not adopted, there is the danger that more radical efforts may be made or more radical organizations attempted. The Employees Association has presented bills with real merit, which ought to be approved now.”
Distinguishing features of the bill were:
The new system would be integrated with existing public employee retirement systems.
The system would be open to all public employees except employees of political subdivisions that opted not to participate, public employees in other pre-existing systems, and employees working for a public employer with fewer than five full-time employees.
All members would have separate accounts showing contributions, interest earnings, and deductions.
The state treasurer would act as custodian and supervise annual audits and an actuarial valuation at least every four years.
There would be both retirement and disability provisions.
Funds would not be subject to taxes or to bankruptcy.
Suspense built as the 1945 legislators held their longest session in the state’s history. Finally, on the second-to- last day of the session, Friday, March 17, 1945, the bill passed.
After nearly half a century of struggle, PERS was official March 26, 1945, when Governor Snell signed it into law. While it was a major victory for Oregon public employees, another victory was far more staggering and grabbed the headlines
of the Oregon Journal: “German Licked, Ike Says,” and “Patton Halfway Across Germany.” A column in small print listing bills the governor had signed the previous day appeared on the front page, but the PERS legislation had been omitted. The Oregonian was more thorough, with a headline in section two reading, “Retirement Bill Becomes Law with Snell Signature.”
The legislation became effective July 1, 1946. Oregon had benefitted by the experiences of existing public employee pension systems and quickly earned a reputation for developing one of the best retirement programs in the country.
The 1950s: settling-in years
Early concerns and problems
Less than five years into the program, PERS members began to grumble that retirement benefits were inadequate. Indeed, inflation between 1939-1952 was staggering, and the cost of living had doubled. With World War II behind it, the country was beginning to focus on the future, which put retirement issues on the front line.
Resistance to retirement was still strong and many employees of retirement age resented being forced out of the workplace. Worse, their retirement funds did not cover even their most essential needs.
In 1950, the state only had to match payments on the first $3,000 of an employee’s annual salary. This set the maximum amount of retirement at $125 a month for an employee who retired after 30 years of service. While this amount was considered an adequate pension when the retirement law was passed, under existing economic conditions, it clearly was not sufficient. In reality, very few retirees were receiving as much as $50 a month pension. With room and board on a small room costing
$12-16 a week, the average pension check simply did not stretch far enough.
According to an Oregon State Employee Association (OSEA) publication, state employees, teachers, and city and county employees pressured the legislature for a repeal of PERS during the first part of the decade. “Those who were interested in keeping PERS were strangely silent during 1952 and into the middle of the 1953 legislative session. Therefore, many members of the legislature were thinking in terms of scrapping PERS altogether. But when the cry to cave [sic] PERS (led by the OSEA) become loud enough, thinking began to change in direct proportion to ‘the sound and the fury.’”
Social Security integration
Since the implementation of Social Security in 1935, the Social Security board had recommended it would like to see Social Security extended to state and local employees. For the first 15 years of the national system, there was considerable debate whether to admit public employees. In 1951, a state could elect Social Security coverage on a restricted basis. In Oregon, PERS set up a division to collect the funds from those political subdivisions who elected this option. The vast majority of Oregon public employees were still not able to participate in Social Security, however.
New hope came in 1953 when President Eisenhower announced during his State of the Union Address that “the provision of the Old Age and Survivors Insurance (OASI) law should promptly be extended to cover million of citizens who have been shut out of the Social Security System. No less important is the encouragement of privately sponsored pension plans.”
Eisenhower’s message generated immediate interest in assessing options to integrate PERS and the OASI. Governor McKay appointed a special committee, headed by Henry Kehrli, to investigate the possibility of integrating PERS with OASI.
In his methodical way, Kehrli began an exhaustive study of other state pension plans. He organized comparative studies, spent hours analyzing existing programs, and wrote countless letters to authorities in the pension field to ask advice about PERS.
Not only was the issue of combining state and federal legislation complex, it also aroused a certain degree of suspicion. Forrest Stewart, executive secretary of OSEA, wrote to Herman Kehrli on November 26, 1952, “Once the State of Oregon signs a contract with the Federal Social Security Board, it is signing away certain of its own rights and many of the rights of employees thereof for all time to come… once we are under OASI the federal government could and probably would set standards of employment as they have done and are doing in Public Welfare, UCC, and Public Health… The Republicans are in power now and we may have nothing to fear, but we have no assurance that some future congress or chief executive may have even more socialistic views than we have experienced in the past.”
Stewart’s views were not shared by many of the state employees he represented. In fact, the major problem from the standpoint of the employee appears to have been who was going to pay the cost of the OASI.
The governor’s committee found that many states had already found ways to supplement public retirement funds with OASI. The committee also found that to take advantage of Social Security’s 1951 start day, they would have to add OASI in 1953 or employees would lose two-and-a-half years of OASI coverage because the federal law would not be retroactive after 1953.
The committee unanimously opposed ending PERS and substituting it with OASI. “In our opinion, Old Age and Survivors Insurance was never intended, nor has it been represented, to be a complete solution to the problem of retirement. Because of its inadequate retirement benefits, we believe that future sessions of the legislature would be plagued by employee groups until this retirement problem is solved by the enactment of a supplemental plan. We therefore cannot advise the substitution of Old Age and Survivors Insurance for the present plan.”
Supplementing PERS with OASI seemed the most logical remedy. However, state employees could not be covered under OASI if they were already covered under an existing state plan. This hurdle was not insurmountable and, with ingenuity, it was cleared. A bill was submitted to the legislature to repeal PERS for long enough to adopt Social Security.
On March 19, 1953, the Oregon Joint Committee on Ways and Means introduced Senate Bill 396 to the 47th Legislative Assembly. The Public Employee Retirement Act of 1945 was repealed and replaced by the Public Employee Retirement Act of 1953. The existing plan was repealed, Social Security was adopted, and a new state retirement plan was put into place. For one day, PERS did not exist to enable public employees to fall under Social Security.
This change brought badly needed relief, but problems still existed with the PERS plan. Many retirees in the higher income brackets were not getting adequate coverage. Retirees who had not been in the system for long were slipping through the cracks, and disability was inadequately addressed. PERS members still wanted employers to match more than $3,000 of their annual individual salaries. Retirement age was still a major issue, and many employees of retirement age resented that some state employees over 65 continued to work while others were not allowed to.
At the request of the OSEA and other public employee groups, the 1953 legislature directed a committee to study the whole program and to bring back recommendations to the 1955 session.
Based on the recommendations, further laws were enacted, and PERS emerged with a new look. Changes included liberalization of disability benefits, more equitable coverage for police and firefighters, and improved status for people remaining in employment.
In 1956, Max Manchester, PERS’ executive secretary, wrote in a guest editorial in the OSEA Sentinel, “With the new Public Retirement System Retirement Law in effect and with coverage under the Federal Old Age and Survivors Insurance program, the public employees of Oregon are in an enviable position compared to public employees throughout the U.S. It is true that some of the old, well-established retirement systems have broader benefits. However, in many instances the members of such systems do not have Social Security coverage. This coverage, especially for the younger employees who have minor children, is completely beyond that which most of us could afford through private insurance.”
As the decade rolled to a close, PERS was still intact, having faced and survived some serious threats. PERS had clearly established that it would meet problems head-on, would not hide from controversy, was willing to examine itself honestly, and would make whatever changes were necessary to build a strong retirement system. These traits would all be needed in the coming years.
The 1960s: years of change
The 1960s were a time of rapid change in the U.S. Civil rights, women’s rights, war protests, and demonstrations made the news daily. People were examining long-held beliefs and demanding a say in events that shaped their lives. Retirement issues may not have had the drama of some of the social changes in the country, but they did not escape examination.
The Oregon State Employees Association had been active in pension issues from the onset of PERS and began a retirement education program to better inform state employees about PERS. Simultaneously, it began publishing a regular retirement-issue column in its monthly newsletter.
These two communication efforts focused a great deal of attention on PERS, and many public employees began to worry that their pension checks were going to prove inadequate.
Need for increase in funding
Despite the fact that net earnings for 1961 were the highest ever (3.28 percent), there was growing concern that the system needed more funds. Suggestions to correct this included making employees contribute at the maximum rate available and raising the rate for prior service.
The most controversial suggestion, one that was met with serious doubts and resistance, was to write legislation that would permit investment of 50 percent of PERS’ funds in the three highest grades of corporate securities and in federal government-insured mortgages. To invest state funds in something as unpredictable as the stock market was considered revolutionary by some, but it was an idea whose time had come, and by early 1962, bankers, representatives of investment firms, and the staff of the Legislative Fiscal Committee all favored allowing stock purchases. They believed that this alone could increase the yield of investments by at least one percent, which would increase annual benefits by 25 percent.
The American Association of University Professors (AAUP) evaluated PERS in the early part of the decade and issued a statement expressing some degree of dissatisfaction with the system. “We think OPERS can be classified as an above-average state retirement plan, but it falls short of our AAUP principles under the
important items of immediate vesting, adequacy of benefits and protection of purchasing power. OPERS was initiated as a minimum subsistence retirement program and with Social Security it serves that purpose. In 1946 it was a major improvement over the absence of a state-wide retirement system for public employees. Today increased expectations of retirement pay aggravated by reduced buying power of the dollar and misguided attacks of salespeople promoting private funds focus upon shortcomings of OPERS.”
Investing in stocks became an increasingly popular concept and was part of the platform for state treasurer candidates. Robert W. Straub and Howard Belton both were interviewed at length in the OSEA September 1964 newsletter. Straub supported investment in stocks. “If I were State Treasurer, I would have supported the principle of the State Investment Council. Benefits would accrue both to the State of Oregon and to employees covered under PERS. A senior, professionally trained financial specialist could earn far in excess the cost of his salary and operation of his small staff. Such large sums of money are involved that increasing earning on this money by a percentage of one percent can produce several million dollars more income per year.”
Belton was far more conservative in his view and felt investing up to 50 percent in stocks was far too risky. Straub won the election and was a strong advocate for PERS’ right to invest in stocks.
Dissatisfaction with retirement benefits continued, and Judge Lloyd Le Master wrote an article in the Corvallis Gazette-Times in December 1964 calling for several changes. He pointed out that PERS was established to provide the retiree with half of his last five years’ average salary at age 65, after 30 years of service, with an effective maximum benefit of $100 per month. Under this plan, a distinguished dean at Oregon State College could retire on $52.65 a month.
“Well, here we are 20 years later, and the system is 20 years older but we retired a distinguished and ranking scholar last year at the age of 70 under PERS on $97 a month. Yes, retirement pay went up from $52.65 to $97 in 20 years, while a carpenter’s pay went up from $6 per day to $24 and inflation jacked the price of everything comparably in the same 20 years. In reality, in real wages (purchasing power) the $97 becomes $24 of the kind that were used to retire the dean 20 years ago.”
Much to the dismay of the many people who had worked for change in the existing system, the 1965 legislature enacted only one minor retirement bill. Jerry Liebertz, OSEA retirement committee chairman, came down hard on the legislators, writing in the OSEA newsletter, “Let’s face it—this was not a good legislative session insofar as retirement was concerned. It is interesting to note that the legislature passed many bills that were favorable to state employees such as the salary increases, the private card mileage bill, the parking facility for the State Office Building in Portland, etc., but seemed determined not to pass any bill that would improve our retirement program. The treatment of this bill … is an example of the complete apathy that most lawmakers show toward our retirement program. The same senators and representatives who keep saying how the program should be improved seemingly would not do any improving.”
Perhaps legislators did not deserve such harsh condemnation. The reason they gave for failure to pass new PERS legislation was that the approach was “patchwork” and needed to be deferred until a comprehensive study was done and reform coordinated. The legislative fiscal committee received $10,000 to make an up-to- date study of the retirement law. One of the major objectives would be to consider liberalizing the investment of funds.
Campaign to improve PERS
For the next year interested parties worked around the clock to make sure PERS would not be ignored when legislators met again in 1967. The OSEA planned a day-long conference in October on improving PERS, urging all members to participate. Over 200 interested representatives throughout the state attended. The three major areas of concern were finding a method to ensure employees contributed maximum amounts to their funds, designing legislation to permit investment in common stocks, and finding a way to help people who had been in the system for many years but whose contributions were limited by legislation and low salaries.
Under the direction of Liebertz, the OSEA’s retirement committee completed an extensive study of retirement systems in other states. As reported in the April 1966 OSEA newsletter, “The committee’s conclusions that Oregon’s system could best be improved by going to a guaranteed benefits formula in place of the present money-purchase system became the basis of a proposal which was accepted by the conference steering committee and referred to participating organizations.” To ensure legislators would heed the need for change in the next session, Liebertz and his committee set up a series of local retirement conferences participated in by state, county, city, special-district employees, and public officials.
The subcommittee created to study PERS improvement came to the Legislative Fiscal Committee with a number of recommendations. By a four-to-four vote, the Legislative Fiscal Committee turned down the recommendations in July 1966.
However, in October of the same year, the same committee reconsidered its decision and voted to accept the recommendations after all. It prepared legislation to submit a bill to make basic changes in the retirement system to the 1967 legislature. Proposed changes included:
Retirement benefits would be based on a combination of Social Security, employee annuity, and employer formula pension equal to 50 percent of the final average salary after 30 years of service.
The employee annuity portion of the retirement benefit would be based on mandatory employee contributions of 3.5 percent of the first $6,600 in salary, and 7 percent in excess of that amount.
The employer portion of the retirement benefit would be based on a formula.
There would be no change in prior service benefits, but the formula for current services would be provided for all employees retiring after the effective date of change.
Disability retirement would be permitted at any time up to normal retirement age, based on a more stringent definition of disability.
Funds would be liberalized for investment in stock.
PERS members became involved in ways they never had before. Retirement meetings were organized and packed with employees wanting to hear what this new legislation would mean. Activists thought of unique ways to gain support. One state employee, George H. Dow, spent three of his lunch hours walking around the Capitol mall wearing a hand-painted sandwich sign that read, “State Employees Your Retirement System is NOT ADEQUATE! Do something about it! Attend the retirement meeting 7:30 P.M. Wed. Nov. 19.”
Governor Tom McCall supported the legislation. “We are in a time of inflation and high employment. I have personal experience with the difficulty of recruiting top quality people at the available salaries and personal knowledge of the real sacrifices made by some who have accepted positions in my administration … At all levels our state employment has shown heavy turnover. This requires expensive recruiting and training programs and threatens a real loss of competency if not checked … It seems unwise to start this new benefit (a $2 contribution by the state toward the payment of employee medical-hospital insurance premiums) before providing adequately for the major fringe benefit now offered. I am speaking, of course, of retirement. The Legislative Fiscal Committee has just compiled an extensive review in this area. I endorse its recommendations for a major revision and improvement in the state retirement plan.”
The tremendous efforts of the Oregon State Employees Association (OSEA), the Oregon School Employees Association, Oregon Education Association, PERS, and other organizations paid off and on May 12, 1967, a bill with numerous changes to PERS sailed through the house without a dissenting vote. It was sent on to the Senate Financial Affaires Committee where it was amended to include retirement benefits for legislators. The bill was signed into law and became effective January 1, 1968. Many applauded this bill as overhauling the system.
In addition to a change from “money purchase” to a guaranteed pension computed by formula and a change in employee contribution rates, a far-reaching change was made — the Oregon Investment Council was created to invest a portion of the fund in stocks.
No time was wasted protesting the change of investment policy and Marion County Circuit Judge Val D. Sloper declared the law creating the Oregon Investment Council unconstitutional on July 29, 1968.
A “friendly” suit to contest the law was filed by former Governor Charles A. Sprague and Fred H. Paulus. Defendants were State Treasurer Robert W. Straub and members of the Oregon Investment Council—Straub, Max Manchester, W.P. Stalnaker, Howell Appling, Jr., and Don Ellis.
Sloper concluded that the law violated a constitutional provision against the state having an interest in the stock of any company. He also ruled that the act violated the constitution in that it required the Oregon Supreme Court to rule on the validity of each investment that, he said, would require the court to exercise and execute rather than to act in a judicial function.
Two years later, the Supreme Court overturned the lower court’s decision and finally, nearly two years after the 1967 legislature passed laws creating the Oregon Investment Council (OIC) and authorizing it to invest a portion of PERS in common stock, the investment program was underway. The OIC was made up of the state treasurer, two representatives of PERS, and two persons appointed by the governor.
The first firms chosen by State Treasurer Robert W. Straub to oversee the funds were Trans-america Counselors, Inc., of Los Angeles; Capitol Guardian Trust Company of Los Angeles; and Fayez Sorofim Company of Houston. Initial investment was $42 million, 10 percent of the fund.
PERS members had the option of investing part of their funds in this variable annuity program. Initially, once a member opted to do this, the election was irrevocable. While early figures show that members did not leap on this opportunity, they were nevertheless excited about it.
As the decade came to a close, there was significant support from an ad hoc committee organized in Salem for proposed legislation to help some career state employees who withdrew their retirement contributions in 1953. According to Don Parker, chief counsel for the Department of Agriculture, “The 1968 retirement law, however unintentionally, seriously hurt employees who were between 35 and 50 years of age in 1953 and who have prior service credit, or any retirement credit for years worked prior to 1953.” This, as well as other concerns, would be addressed in the immediate future.
The 1970s: years of growth
What would become a major PERS development emerged in 1970 out of inadequate wages paid to state workers: the concept of employer pick up.
The social changes and political upheavals of the 60s continued into the 70s, exacerbated by Watergate and ensuing mistrust of government. The media blasted the public with images of young people demonstrating and stories of the drug culture and the sexual revolution, but middle America was still conservative and wanted secure jobs and financial stability.
Oregon state employees were frustrated by high inflation and low wages. They held rallies to draw attention to their demands for higher pay and better working conditions. With the recent overhaul of PERS, retirement issues took a back seat for a while.
By January 1970, 5,388 PERS members had signed up for the variable annuity fund. In April of the same year, 9,000 people who retired before January 1, 1968, received pension checks three times the normal monthly check as a result of the revised PERS retirement formula. Otherwise, things were relatively quiet on the retirement front.
James L. McGoffin became the PERS’ executive secretary in 1970 and promptly sought ways to improve the retirement system. He promised that PERS would break with tradition and become “proposer” of retirement improvement changes rather than to be mere administrator of the system. Months later, McGoffin announced that PERS earnings for 1970 were the highest ever.
What would become a major PERS development emerged in 1970 out of inadequate wages paid to state workers: the concept of employer pick up. Employees and employers alike began to consider the idea of employer pick up, a concept in which employers would pay employees’ retirement contributions in lieu of an increase in wages.
A second idea bubbled up as a result of member confusion over their benefits. Some PERS members found the changes and options confusing and talk of pre-retirement counseling was heard with increasing frequency.
The Oregon Education Association, the Oregon State Employees Association, and Oregon School Employees Association again formed a consortium to review provisions and benefits of PERS and made recommendations to the PERS board and the 1971 legislature. The five major areas were:
• Employer pension formula would be changed to increase average benefits of retirees.
• Employees would have an annual option to discontinue their contributions in the variable annuity program.
• There would be more liberal death benefit provisions.
• Cost-of-living adjustment would be tied into pension benefits.
• The conference would support legislation to help those currently retired.
The bill passed, much to the delight of PERS employees. State employees would get bigger pensions because of the change in the benefit formula. Changes to beneficiaries were also made, and an OSEA spokesman called the PERS death benefits “one of the greatest and most unpublicized fringe benefits granted to state employees by the 71 legislature.”
The new law also established a basis for a cost-of-living adjustment for retirees. The adjustment was limited to 1.5 percent with the stipulation that in the event of a decrease, pension checks would never drop below the original amount awarded to each retiree.
A bill allowing the state to invest 25 percent of the fund was also introduced and passed. Two New York firms, Jennison Associates and B.E.A. Association, Rosenberg Capitol Management of California. and Columbia Management Company of Portland were selected to handle an additional $90 million in trust fund money. State Treasurer Straub announced the only guideline for investment would be growth and that “investments must be in conformity to those which men of prudence, discretion, and intelligence would make with their own funds.”
This guideline would be significant for many years to come. In August 1971, the PERS fund was valued at $430 million and earned an average interest rate of 5.67 percent.
Encouraged by the changes, the Oregon PERS Conference Steering Committee, organized under OSEA leadership in 1966, began studying proposals for further PERS improvements to be submitted to the next legislature. One of the ideas the conference intended to pass on to the legislature was the idea of using unused sick-pay in calculating benefits. Changes in retirement age were also a concern.
A new law passed 1973 achieved a number of these goals:
It increased the percentage factor used in computing retirement benefits.
It permitted employees to retire at age 60 after 30 years of service, or at 62 after 25 years; or at age 57 after 20 years.
It increased the cost-of-living adjustment from 1.5 to 2 percent.
It granted a 25 percent increase in benefits to employees who retired before 1968.
Public employees received these changes with enthusiasm. Early in 1974, the PERS Board convinced the legislature of the need for pre-retirement counseling, and a series of seminars was set up to cover such topics as retirement benefits and the available options, disability benefits, Social Security benefits, Medicare, and other issues related to retirement. PERS set up three satellite offices for counseling aid—one in Salem, one in Eugene, and one in Pendleton.
All seemed to be well. But the economy of the country was in turmoil and, with funds invested in stocks, PERS was bound to be affected. In 1974 PERS lost money as a result of poor stock market performance. Senate President Jason Boe (D-Reedsport) appointed a committee to review the state’s investment policies involving PERS funds after a report that none of the 87,000 public employees who were members of the retirement system earned any return on their accounts due to stock market losses. Despite the fact that Oregon’s stock investment program had a better yield than most in 1973, alarm spread quickly.
State Treasurer James A. Redden, a member of the Oregon Investment Council, was quick to point out that employees suffered only a “paper loss.” He predicted future market gains would replace the loss.
District meetings were held to explain PERS investment policies. The meetings confirmed that the average employee was not aware of how funds were invested nor what benefits were derived from the investments. However, after attending the meetings, the majority of employees felt no change should be made in investment policy.
Representative Sam Johnson (R-Redmond) was not convinced, and introduced a bill that would allow public employees to have none of their retirement contributions invested in common stocks. His bill proposed to create three separate funds: One would have no stock investments, one would contain up to 35 percent in stock investments, and the third would be completely invested in common stock. Public employees could pick the fund in which they wanted their money invested. The bill did not pass.
The 1975 legislature corrected the 1973 and 1974 stock losses by passing a bill that guaranteed employees at least a 5.5 percent annual return on their PERS accounts retroactive to 1974. The legislation did not apply to variable interest accounts. The issue quieted to barely a whisper when the stock market took a major upturn in July 1975, and the PERS fund showed a paper profit of more than $18 million.
In late 1976, high inflation raised concerns over the adequacy of funding, and the legislature set up a committee to investigate. Since the legislators themselves officially came under the system the following year, keen legislative interest in PERS was expected.
In the second half of the 70s, PERS received an infusion of energy from Wilma Hogle, a secretary with the Water Resources Department. Hogle and two other state employees incorporated as the Oregon Employees Retirement Investment Association to examine how the OIC was investing PERS money. Hogle served as president.
According to the January 4, 1978 edition of The Oregon Journal, “Her major aim was to get an independent evaluation of the PERS account. ‘We wanted reassurance that after 30 years with one actuary (Coates, Herford & England, San Francisco, California) the system was properly funded,’ she said.”
Hogle embarked on a mission to ensure the system was indeed properly funded.
She persistently attended PERS meetings, lobbied state officials, and issued a newsletter that, according to a January 4, 1978 article in The Oregon Journal, “skirted the borderline of being honest and libelous,”
The PERS board ordered an independent study by Milliman & Robertson, Inc. The study pointed out potential underfunding of the system. Consequently, higher employer rates began as of July 1, 1978, and increased every year until 1981.
This pleased Hogle, who wrote in a November 1978 editorial, “The Retirement Board has been adamant that the system will be fully funded, and if future actuary studies determine that adjustments in the contributions rates must be initiated to achieve full funding, the board will adopt them. Thus, Oregon becomes one of the few public employee systems in the country to adhere to this high level of pension integrity for its public employees.”
In the late 70s unforeseen trouble arose when the IRS became involved in taxing contributions. The problems began in 1970 when the employer pick up began and Social Security taxes were not withheld from the retirement contributions the state paid on behalf of the employee.
In August 1979 the regional office of the Social Security Administration issued an informal ruling that PERS contributions paid by the employer are taxable income for Social Security purposes. This meant a cost to both the employee and the employer. Both had an interest in fighting the ruling, and both did. As a result, Oregon retirement benefits were not taxed at that time.
Two other changes in the 70s were the use of unisex annuity tables and expanded health insurance for retired members.
Although PERS had its share of turmoil in the 70s, it was a good decade. The fund, challenged by a declining stock market mid-decade, had emerged solid. Many changes were made that strengthened both the system and the financial security of its members.
“The Retirement Board has been adamant that the system will be fully funded, and if future actuary studies determine that adjustments in the contributions rates must be initiated to achieve full funding, the board will adopt them. Thus, Oregon becomes one of the few public employee systems in the country to adhere to this high level of pension integrity for its public employees.”
The 1980s: years of scrutiny
As the PERS fund grew and large numbers of PERS members approached
retirement age, PERS came under close scrutiny by both the public and private sectors. The generous spirit of the 60s and 70s was eroded by concern that taxes were too high. PERS became the target of various private groups on a mission to “cut the fat” from government spending.
Simultaneously, a considerable number of PERS members were discovering that they had not clearly understood the long-term results of decisions they had made years before and were seeking legislation that would allow them to change some of their decisions. Changes sought included prior service credit regulations, “buy back” of funds withdrawn, and qualification of certain employees as police and firefighters.
Jerry Liebertz says of this period of PERS history, “People did things to harm themselves financially, and it was coming back to haunt them. There was a big push to undo some of the damage they had done.”
During this decade, judges became members, and there were substantial additions and changes to health insurance. The Board increased to nine members.
The 1981 legislature passed a number of bills that improved the benefits for PERS members, including a switch to a full-formula method of computing benefits, a lowering of the full-benefit retirement age, and a two-year increase in benefits for retirees. But it was PERS investments, not benefits, that aroused the most interest.
Several PERS investments became highly controversial, and everyone of voting age seemed to have an opinion about how to invest PERS funds. What many people failed to take into account was that the fund belonged not to the state, not to the taxpayers, but to PERS members. OIC’s requirement was to invest the funds in accordance with the prudent person rule.
However, in a time of recession, the fund was seen as a way to save Oregon from financial problems. Some groups wanted the funds to be invested in Oregon businesses or Oregon real estate developments. When the OIC decided to participate in a New York investment firm’s purchase of Fred Meyer, Inc., however, it stimulated enough conflict to result in litigation. Never had the OIC invested so much money at once, and never before were so many people concerned with one of its investments.
A Portland union, a group of retail chains, small businesses, and individual retirees joined together and filed a suit claiming the investment caused a conflict of interest because the state, through the investment, owned a controlling interest. The suit was settled out of court, with the state agreeing that no employee, member, or representative of the state, the OIC, or PERS “will attempt to take part in the control of the business or the competitive affairs of Fred Meyer.”
Meanwhile, concern over PERS investments in South Africa began to grow.
Proponents defended such investments, saying they were sound under the prudent person rule. Others felt PERS should not invest in countries practicing apartheid. After years of heated debates, the Oregon Anti-Apartheid Act of 1987 was passed, and PERS began divestiture.
By the early 1980s, a rapidly increasing number of retirees, coupled with changes in the benefit plan, had increased the agency’s workload by 400 percent. The agency’s computer system was the primitive punch-card variety; benefit estimates had to be calculated by hand; correspondence was months behind; initial retirement checks were sometimes several months late; and complaints were pouring into the governor’s office. Budget constraints, however, did not permit an equivalent increase in staff.
Both members and staff were dissatisfied. It was apparent that the existing computer system could not be modified to meet the agency’s needs. An entirely new set of tools was needed. So, during a six-year period, the agency developed and installed the Retirement Information Management System (RIMS). The agency acted as its own contractor, and installed the system using inhouse and contracted staff and a third-party system monitor. Amazingly, RIMS not only came in on time and at its projected cost of $8.2 million, it actually performed better than expected. It was paid for from the return on investments, so no tax money was required.
PERS continued to thrive despite the scrutiny and the need for the adjustments brought on by legislation and technology. PERS stepped up its efforts to serve and inform its members. By the end of the decade, RIMS was fully operational, full-scale member counseling was underway, and circuit riders traveled throughout the state to keep members informed about the system. An informative video was produced, and desktop publishing made it easier to produce publications to help keep members aware of PERS benefits.
The 1990s: into the next century
The decade of the 1990s could be known as the decade of bills and ballot boxes. During no decade in its history to date, except perhaps for its earliest years, was PERS subject to more intense scrutiny than during the 1990s. Legislation, ballot measures, task force studies, and litigations kept PERS very much in the public eye.
The 90s were also years of rapid technological changes, which brought a new set of challenges to how PERS conducted daily business.
PERS benefits and their related costs have always been an issue of concern to social or tax activists as well as PERS members. That interest reached new heights in 1994 with analysis of PERS by three task forces.
The Governor’s Task Force on Employee Benefits convened on April 1, 1994. The task force reviewed more than just PERS, looking at all state employee benefits such as retirement, insurance, and paid time off. The purpose was to see if the total compensation of state employees was in line with the market. The task force concluded that total compensation was nearly equal, with benefits somewhat higher and salaries somewhat lower than those of equivalent private-sector worker.
The Governor’s Task Force on Retirement Funding was more narrowly focused. It reviewed the system’s level of funding to ensure it was no lower or higher than necessary to pay for retirement benefits. The task force concluded that funding was right on target.
The House Interim Task Force on PERS took a very broad look at the system, with an emphasis on the cost of the system to taxpayers. Probably the most significant result of the task force’s work was the creation of a second tier of PERS membership by the 1995 Oregon Legislature.
Partly because of the tremendous demand for data by the various task forces, PERS commissioned a comparative study of benefits and funding by The Wyatt Co., an actuarial and consulting firm. The study compared Oregon PERS with the systems of five other western states and 40 private firms. The study found that PERS compared favorably with most other systems, but was not the highest ranked of the systems studied.
In addition to the effort required by PERS staff to meet the data demands of these task forces, three other issues demanded substantial amounts of staff time and resources: State taxation of PERS benefits, a concerted effort to reduce PERS benefits, and compliance with Internal Revenue Code regulations on retirement benefits.
The issue of compliance with federal regulations stemmed from a restriction on benefits contained in Internal Revenue Code Section 415. Largely because of differences between Oregon statute and the IRS in the way final average salary was calculated, some PERS retirees exceeded the Section 415 limit.
This issue was largely resolved when President Clinton signed the Small Business Job Protection Act of 1996, popularly referred to as the “minimum-wage bill.” This bill repealed a section of IRC 415 for governmental plans, stating that a pension may not exceed 100 percent of a participant’s average taxable compensation for the highest three consecutive years. PERS’ Executive Director Fred McDonnal and others had lobbied members of Congress to make a change because IRC 415 was originally intended for private pension plans, not plans covering governmental employees.
The fact that any PERS retirees exceeded IRC 415 limits, however, regardless of the reason, added credibility to a popular resentment of PERS benefits. During the middle of the decade, a growing anti-tax sentiment found expression not only in a ballot measure designed to roll back property taxes, but also in ballot measures designed to reduce PERS benefits.
The first of these measures was Ballot Measure 8, which voters narrowly approved in November 1994. This measure eliminated the 6 percent pick-up by employers of the employee contribution to PERS; eliminated the use of accumulated, unused sick leave to increase retirement benefits; and eliminated the guaranteed rate of return on PERS investments. The measure also prohibited any public body from contracting for a salary increase to compensate for the six percent employee contribution.
Although the measure was immediately challenged in court, the number of applications for retirement increased substantially. Many people who were close to retirement feared losing the value of their accumulated sick leave, so retired earlier than they had planned.
On June 21, 1996, the Oregon Supreme Court filed a ruling which overturned all three parts of the measure. In doing so, the court upheld the rulings of several lower courts, all of which had concluded that some or all of Measure 8 violated the contracts clause of the U.S. Constitution.
Another initiative petition targeting PERS benefits qualified for the ballot in November 1996. Ballot Measure 45 would have done the following: (1) raised the age for full retirement benefits to Social Security age for all public employees except police officers and firefighters, (2) eliminated any guaranteed level of benefits that exceeded 75 percent of final salary, (3) eliminated any guaranteed level of interest on retirement accounts, and (4) prevented employers from providing medical or hospital benefits for retirees except for disability. This measure was defeated.
State taxation of PERS benefits
In 1989 the U.S. Supreme Court ruled in a Michigan case that federal, state, and local retirement benefits had to receive equal treatment. This ruling conflicted with Oregon statute, which exempted PERS benefits from state income tax.
After several unsuccessful attempts to resolve this issue, the 1991 Oregon Legislature passed a law which subjected PERS benefits to state income tax, but also provided a small increase in benefits based on years of service. This law was challenged in court, and in 1992 the Oregon Supreme Court ruled that taxing the benefits prior to September 1991 was a breach of contract, but that the state could do that if it also provided a “remedy.” In the meantime, state income taxes were being collected on PERS benefits.
The 1995 Oregon Legislature passed House Bill 3349 in response to the court’s decision. This bill was also challenged, but the Oregon Supreme Court ruled in August 1996 that HB 3349 was an acceptable remedy for its earlier decision. HB 3349 provided a maximum benefit increase of 9.89 percent as compensation for taxes paid. In February 1997 PERS increased monthly benefits to eligible retires, and in September 1997 PERS mailed approximately $380 million in retroactive payments to cover the period between October 1991 and February 1997.
Although these legislative and judicial actions appear to have resolved the taxation issue, pending lawsuits by federal retirees created additional complications.
Technology exploded during the later part of the 90s. Cell phones, computer technology, DVDs, and the World Wide Web made communication easier than ever, and with that ease came a demand for the businesses and organizations to provide information faster and with more accuracy.
While PERS had been using RIMS, its computer system, for less than 20 years, it could no longer keep up with increased customer demands. Between hundreds of hours of programming necessary to deal with the tax remedy, an increased number of retirements due to a 21 percent distribution to member accounts in 1997, and the coming of age of baby boomers, PERS staff were facing backlogs in some areas, and the agency grew increasingly concerned about meeting members’ needs. It was not practical to double or triple the workforce to meet demands and so the agency turned to technology to mitigate the situation. As fiscal year 1997 drew to a close, a reengineering project was underway.
In the midst of all the studies, reengineering, and scrutiny, PERS also faced what was commonly known as the Y2K situation, a computer challenge few had anticipated.
When computer programs were initially designed, the practice of representing years with two digits was standard practice. However, when the year changed to “00,” computers would not know how to interpret this. Did it mean 1900 or 2000?
Recognizing that long-working systems could break down, some doomsayers predicted dire consequences—worldwide power failures, a total breakdown of the transportation infrastructure, banking catastrophes—others were sure the problems would be manageable. Regardless, companies and organizations around the world began to upgrade their computer systems. PERS, too, took a pro-active stance and hired contractors to upgrade our system to prevent possible interruption to service and distribution of benefits. At PERS, as in most of the rest of the world, January 1, 2000, came and went without a computer catastrophe.
PERS saw an unprecedented number of retirements beginning in 1997, primarily due to gains in the stock market, which were reflected in earnings credited to member accounts. In 1998, approximately 8,200 PERS members retired, more than twice the previous year.
The two main reasons for the retirement spike were account earnings and an increase in the number of people of retirement age.
Employees were allowed to direct as much as 75 percent of their retirement fund into U.S. stocks in what was called the variable account. At retirement, the
employer matched that total. This created an ideal financial situation for many retirees. Employers were not so happy with the situation since they were only allowed to invest in more conservative accounts, which generally earned less than the variable accounts. To make up for the difference, their rates were likely to increase. Employers also lost valuable staff members. Oregon school districts were hit particularly hard and the media was full of reports of teacher shortfalls. This reflected poorly on PERS.
A number of additional events of interest occurred in the 90s.
The 1997 Oregon Legislature passed a bill that allowed PERS to spell “employees” with two e’s at the end of the word rather that the single “e” it had used since its inception. (Note: only one e was used initially because at the time PERS was created, the state mandated that if there were alternate spellings for words, the shorter spelling must be used to save printing costs.)
The 1997 Oregon Legislature created two new trusts for PERS to administer: The Deferred Compensation Trust was created to provide trust protection for the State’s Internal Revenue Code (IRD) 457 program, and the Benefit Equalization Fund was created to serve as a vehicle for employers to meet contractual obligations to members for pension benefits that exceed IRC 415 limits and not eligible for payment under the PERS plan.
PERS moved into its own building in June 1997, which, it was anticipated, would save the system about $6 million in the following 20 years. The building was built in Tigard, right off the interstate highway, to ensure easy access to members.
Executive Director Fred McDonnal, who had served the agency for 15 years, retired December 1999. He had been the executive director since 1993.
To help ease high employer rates among local government agencies, the Board began considering a rule that would pool local government rates the way rates were already pooled for school districts and state agencies.
As the 90s came to a close, PERS was still very much in the public light. The system would soon have a new executive director, employers were very concerned about escalating employer rates, the public felt PERS was eating up too many tax dollars, the wave of baby boomers had begun to wash up on the PERS shore, and the system desperately needed to improve its technology. However, the system was still strong, well funded, and well-respected in public pension plan circles.
A look into PERS’ future
As PERS began its second 50 years, it also began preparations to manage a rapidly increasing workload. The baby boomers—people born between 1946-1964—in PERS’ member population were steadily nearing retirement. In 1997, nearly 54,000 active PERS members were within 10 years of eligible retirement age. As a result, PERS’ workload was expected to double by 2005 and nearly triple by 2010.
This demographic wave would affect every aspect of the agency’s work. To address it, the agency embarked on a plan to address as much of the workload increase as possible through improvements in technology and in work methods. Studies conducted in 1996 and 1997 assessed specific technology needs and work process improvements.
Based on the study results, PERS began plans to make major changes in these areas within the next few years, expecting the changes to likely include improved ways of doing business over the phone and across the Internet and faster access to information for agency employees, members, and employers.
PERS has enjoyed a reputation for outstanding customer service. The agency’s current management was committed to taking the steps necessary to maintain this status throughout the retirement of the baby boomers and beyond, and by doing so continue to achieve PERS’ mission “to provide the highest quality services so that each member has the opportunity for a successful retirement.”
The House Interim Task Force on PERS took a very broad look at the system, with an emphasis on the cost of the system to taxpayers. Probably the most significant result of the task force’s work was the creation of a second tier of PERS membership by the 1995 Oregon Legislature.