When PERS is an opportunity then it is certain to be used as an excuse for something.

PERS troubles fuel Oregon's debt burden

BY CHARLES E. BEGGS
The Associated Press

August 28, 2005

The state's debt has jumped in recent years, mainly because of problems in the deficit-plagued public-employee pension fund, giving Oregon the 11th-largest debt burden in the nation, financial officials say.

It seems they forgot to include local government and school district bonds who's proceeds are placed into the stock market, and which are effectively guaranteed by the state.

Never mind that the link to PERS is no more than an excuse to borrow, where the curious twist and invitation to issue the bonds was rosy assumptions on speculative gains and that the PERS-link was useful only because PERS can invest in stocks whereas the government cannot. (Which I think are wholly unlawful unless, of course, under one scenario, where both the beneficial interest and principal are fully and irrevocably transferred to the "independent" PERF as some sort of payment for some sort of "liability" – and this is key -- without the possibility of return in the event of legislative termination of PERS.)

Our Orrick outhouse PERB counsel invented the Pension Obligation Bond scheme, or at least they claim that they invented it.

Oops, they forgot that the crediting adjustment for 1999 is aimed full steam ahead, Captain of the Titanic style, right at the iceberg of the SC; at least for the folks that did not work for one of the employers that were a party in the Lipscomb City of Eugene case.

And why is this stuff important? If I was the US Attorney for the district of Oregon I would be rummaging through all manner of communications by government officials making a case for intentional deception of bond creditors. Yes, jail time, my folks, jail time.

One possible reason that Ted and the PERB must go full steam ahead is because they must put on a brave face to their leader, the bond credit rating folks. The bond rating folks though are not innocent lambs themselves but skillful masters of timing of upgrades and and downgrades to maximize coupons. (This would be routine crap in the international context for twisting Argentina or Brazil or Mexico into a financial knot.)

Imagine the transparency of the bond rating game if the state of Oregon was downgraded (which they were) to encourage the state to borrow (or strategically timed in advance of the borrowing) and later got a downgrade because they had borrowed too much.

Let's not forget that Orrick the PERB outhouse counsel is trying to break into the Oregon government bond counsel business, a seemingly endless supply of rubber stamping for big dollar bonds. I wonder how Orrick (or one of their companion bond counsel sisters and brothers) would care to characterize the iceberg that awaits PERB's demand for return of a billion or so dollars. Don't let that nose grow too long now!

I'd say make a play for the POB stuff as it either means possible jail time for deception of the bond market or there was indeed a liability and an out-of-court "settlement" that involved irrevocable transfer to the PERF. The legislature tried to clarify during the 2005 session that the transfer was not indeed fully a transfer, well not really, just a transparent transfer; so the government can borrow and invest in stocks in its own name and on its own account and starkly in violation of the Oregon Constitution.

I hope that is not too much to digest on a Sunday morning. It is the near equivalent of blasphemy in the legal community for any one of the knowledgeable and powerful bond counsel firms in Portland, or outside Portland, to boldly assert unlawful intention on the part of one's peers as it would invite a lifetime of blackball of access to any of the stuff that gets considered protected by attorney client privilege. Except here, where the client is the public, they can go fly a kite for all I care. My target "is" the bar and the misuse of the privilege of the status of membership in the bar and the purpose underlying that privilege that it is in the public interest.

Just think of the criminal law implications if the advocates of the POB scheme belatedly saying oops, we did intend to deceive, from the outset, and the bonds are invalid and must be canceled. They can't do that now can they?

I would be demanding a full list of all the
-- Pension Obligation Bond issuances
-- Details on when and where they were invested
-- How much was gained in profits from investment in private equities

And finally I would note that no employer may gain from investment in private equities, nothing above zero profits.

The "employer contribution" calculation is quite independent of the investment of employer lump sum accounts.

Ask Mr. Ted K. who will get the employer lump sum accounts when Mannix or Saxton becomes governor and fully terminates PERS.

Don't ask him politely to be "fair" for fair is a matter of perspective.

Demand the entirety of the principal balance of the POB proceeds and all the gains from them since their issuance as they were part of the "settlement" over UALs.

The fund is too small now to cover future obligations if one uses conservative investment choices rather than rosy assumptions. The assumptions were the primary issue for the bankruptcy judge to decide in the United Airlines case. The lower assumptions on returns translated directly to a larger upfront demand upon United Airlines, an inverse relation to the assumed future rate of return on the fund.

Don't ask him to be nice. Tell him that if he wants to keep his ass out of jail that he should comply with the rule of law, in particular to comply with the prohibition on the public ownership interest in private equities. He can extract himself, today, only belatedly, by giving up any beneficial ownership interest in the proceeds of the Pension Obligation Bonds.

I would be protesting here:
Mark O Hatfield United States Courthouse
1000 SW 3rd Ave
Portland, OR 97204
(503) 326-8000

With special attention paid to
UNITED STATES ATTORNEY KARIN J. IMMERGUT

Filling the PERB meeting with a bunch of hapless folks demanding fairness will get you no where but on the front page of the paper so that Ted can claim to be a moderate. Look . . . see how I have pissed off the PERS folks . . now vote for me . . . ?

You can poke him with something that will at least make him lose a few nights of sleep.

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There is a planned issuance of 200 million dollars in bonds scheduled for September 13, 2005. I do not see the official statement yet, where they will characterize pending law suits and such. It is a pool of local government bonding needs. It is named as a "liability," you know, as in Underfunded Actuarial Liability. Yet it will go into accounts held by local governments for their own benefit where profits, if there be any, will go toward covering future expenses to reduce "employer contributions," that would otherwise show up more clearly in the local budgets.

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UPDATE HighNoon Monday: There appears to be a PersInfoLanche, sort of like an InstaLanche, by folks hungry for PERSInfo. I am just picking at the bones like a puppy with a teething problem.