January 21, 2003   Hearing Room E

3:00 p.m.      Tapes 5 - 6


MEMBERS PRESENT:            Rep. Tim Knopp, Chair

Rep. Alan Brown, Vice-Chair

Rep. Deborah Kafoury, Vice Chair

Rep. Greg Macpherson

Rep. Mary Nolan

Rep. Dennis Richardson


MEMBER EXCUSED:            Rep. Wayne Scott


STAFF PRESENT:                  Cara Filsinger, Administrator

Annetta Mullins, Committee Assistant


MEASURE/ISSUES HEARD:            Public Hearing and Work Session

                                                            HB 2001

                                                Public Hearing

                                                            HB 2004

                                                            HB 2005


These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.





Tape 5, A


Chair Knopp

Calls meeting to order at 3:09 p.m. and opens a public hearing on HB 2001.



Mark Johnson

Actuary for the Public Employees’ Retirement System (PERS).  Advises members that he was asked to look at HB 2001 with the hard cap. 



Explains they are predicting the benefits and trying to finance it.



Advises that the issue is how big the account will be when employees retiree.  Assumption is accounts will be credited at 8.5 percent.  Understands that a question of the committee was what would cause him not to predict 8 percent. Explains the concept was one that appears in the amendment in paragraph (c).  Explains that as long as the system has an unfunded liability, interest of not less than eight percent would be credited to Tier I accounts.



Explains that they amortize the deficit over 26 years.  Alternatives to paragraph (c) would need to provide an extreme level of confidence that the Board was going to fund the goal in paragraph (b)—that is to set aside enough money.  The board has moved toward its goals. 



If this committee is not comfortable with paragraph (c), paragraph (b), should be strengthened so it is clear the Board can take the approach of funding the deficit.


Rep. Macpherson

Asks if the reserve dollars need to be held in those years when earnings are under 8 percent.



Suggests language in paragraph (b) should be stronger. 


Rep. Nolan

Comments that the shrinking principal raises a question because the liabilities are not shrinking.  Asks for clarification on the calculations.



Explains that the statute requires eight percent earnings.  Explains the difference in earnings at a rate lower than eight percent and the eight percent statutorily requirement depletes the reserve and the reserve is now a deficit reserve.  Explains when a Tier I member might expect to receive more than the eight percent return.


Rep. Richardson

Recaps history of guaranteed rates and earnings in PERS.  Asks if there could be a time when the four year average could be less than 8 percent.



Explains that the projection is always looking forward.  Explains the reserve set aside for retirees. 


Rep. Macpherson

Asks if there will be another witness to answer a question on the Fiscal Impact Statement (EXHIBIT A).


Chair Knopp

Responds that the statement was prepared by Legislative Fiscal and the committee can have them respond to the statement.


Rep. Macpherson

Asks Johnson to comment on the savings shown on the Fiscal Impact Statement (EXHIBIT A).



Explains the Fiscal Impact Statement.  States that the employers are financing the excess over eight percent that is credited.


Chair Knopp

Closes the public hearing and opens a work session on HB 2001 to discuss the amendment to paragraph (b) of the measure.



Chair Knopp

Comments he would like to find out how to strengthen paragraph (b) and still achieve the same objective.


Greg Hartman

Attorney, representing the PERS Coalition, consisting of the public sector unions in the state.  Explains that he met with Mark Johnson and Dave Heynderickx to discuss the HB 2001-1 amendments (EXHIBIT B) and whether they can deal with paragraph (b) to strengthen it and to also eliminate the need for paragraph (c).   Expresses concern about paragraph (c).  Suggests that if paragraph (b) can be made stronger to assure that the amount of the fund is sufficient to make sure it is an adequate reserve, and to make it clear that the Board has no discretion to make any distribution over and above the eight percent, or whatever the assumed rate happens to be, unless and until that amount is fully funded.  States that Johnson indicated, tentatively, that he thinks that would be sufficient to allow him to make the change in the assumption without crediting member accounts from the current eight and one-half percent to eight percent. 



States the PERS coalition is on board with the concept and with the goal.  Believes they can word-smith the language where everyone will feel comfortable that they have achieved the goal. 


Dave Heynderickx

Explains PERS Board policy on paying into reserve.  The Board only sets the goal.  Explains language in paragraph (b).



Speaks in favor of Heynderickx suggestions and explains their understanding of how it would work.


Rep. Nolan

Asks how the negative growth impacts the considerations they are looking at.



Comments on establishment of the reserve and using assumptions on how the fund will perform. 



Chair Knopp

Asks if paragraph (c) potentially draws litigation based on the fact that it appears to be using employee money for what could be an employer responsibility. 



States that HB 2001 as drafted sets inconsistent goals.  Explains his statement. 


Chair Knopp

Asks if (b) is strengthened, whether paragraph (c) could be deleted.



Responds affirmatively.


Chair Knopp

Asks that the parties work together to correct the amendments.


Chair Knopp

Closes the work session on HB 2001 and opens a public hearing on HB 2005.



Cara Filsinger

Administrator.  Explains HB 2005.


Rep. Bob Ackerman

Speaks in favor of HB 2005 (EXHIBIT C).


Mary Botkin

AFSCME and PERS Coalition.  Speaks not in support of or in opposition to HB 2005.  Gives history of make up of PERS Board.   Asks that the board, regardless of the number of members, be responsible and representative of its members.


Rep. Macpherson

Asks if the language in the bill would prohibit anyone who is or has been a member of the system or beneficiaries from serving on the Board.



Agrees that Rep. Macpherson’s reading is correct.


Rep. Richardson

Asks what proportion of Oregonians would be precluded from service on the PERS Board.



Responds that one out of 10 would not be allowed to serve.


Rep. Richardson

Questions why a five-member board might make a different decision that a 12-member board if the board has the same mandate.


Rich Peppers

Service Employees Nation Union, Local 503 (OPEU).  Comments they appreciate the intent of the bill; their concern is there is no involvement by participants.  Comments on survey by NEA around the country related to membership of plans. 


Chair Knopp

Asks if they would be satisfied with one participant on the board.



Responds one would be appreciated and two would make them more comfortable but the coalition has not discussed a number.


Rep. Macpherson

Asks what the rate of attendance of board members has been.



Responds positively to attendance of members.



Comments on persons who would qualify to serve on the board.


Chair Knopp

Comments on qualifications in the bill.


Chair Knopp

Asks for clarification of expenses.


Steve Delaney

PERS staff.  Explains per diem and expenses for members of the PERS Board.


Chair Knopp

Asks how many of the terms of the Board members have expired.



Responds that nine of the 12 terms have expired.


Chair Knopp

Asks Delaney to provide a roster of PERS Board members, including the expiration dates of the three unexpired terms.


Chair Knopp

Closes the public hearing on HB 2005 and opens a public hearing on HB 2004.




Chair Knopp

Comments that Greg Hartman wants to testify on HB 2004 but is not here today.  Advises that HB 2004 will be rescheduled.  Asks that Steve Delaney request Jim Voytko to testify.


Chair Knopp

Closes the public hearing on HB 2004.


Chair Knopp

Adjourns meeting at 4:13 p.m.




A – HB 2001, Legislative Fiscal Statement, staff, 2 pp

B – HB 2001, HB 2001-1 amendments, Rep. Knopp, 1 p

C – HB 2004, prepared statement, Rep. Ackerman, 5 pp