SENATE COMMITTEE ON JUDICIARY

 

 

July 24, 2003                                                                                                       Hearing Room 343

8:00 a.m.                                                                                                                     Tapes 191-193

 

MEMBERS PRESENT:         Sen. John Minnis, Chair

Sen. Ginny Burdick, Vice-Chair

Sen. Ted Ferrioli

Sen. Charlie Ringo

Sen. Charles Starr

Sen. Vicki Walker

 

GUEST MEMBERS:             Sen. Rick Metsger

                                                Rep. Patty Smith

                                                Rep. Laurie Monnes Anderson

 

STAFF PRESENT:                 Craig Prins, Counsel

Jane Bodenweiser, Committee Assistant

 

 

MEASURE/ISSUES HEARD:           HB 2278B Work Session

 

 

 

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/#

Speaker

Comments

TAPE 191, A

003

Chair Minnis

 

Calls the meeting to order at 8:10 a.m. and introduces Sen. Rick Metsger, Rep. Patty Smith and Rep. Laurie Monnes Anderson.  Opens a work session on HB 2278B.

HB 2278B WORK SESSION

021

Mark Ellsworth

Committee Services.  Submits written material and outlines the history of HB 2278B that provides consistent terminology for public bodies in laws relating to districts (EXHIBIT A).  Introduces the B8 and B9 amendments (EXHIBITS B & C).

057

Rep. Monnes Anderson

Asks if there was a contractual agreement to the rate increase with Public Employees Retirement System (PERS).

058

Ellsworth

Says there was no written contractual agreement.  Continues his presentation.  Says that originally PERS was not notified of any contract between the city of Portland and Fire District #10.

152

Rep. Smith

Asks if there was any discussion in 1984 of the unfunded level of PERS.

146

Ellsworth

Says this issue was not discussed.


 

167

Rep. Monnes Anderson

Asks for clarification of audits done.

170

Ellsworth

Refers to the packet of information provided to the committee.

176

Rep. Monnes Anderson

Asks about audits that might have been done by Fire District #10 addressing unfunded liability.

180

Ellsworth

Says there was an auditor from Coopers & Lybrand who was asked to look into the situation.

185

Chair Minnis

Asks how annexation plays in this retirement issue.

209

Ellsworth

Says liabilities have historically stayed with the districts.  Talks about the tax base that has funded the retirement bill.

220

Chair Minnis

Explains that the tax base has been eroded by annexations.

228

Ellsworth

Discusses the current budget in East Multnomah County.

241

Sen. Metsger

Asks if payment to employees is paid out of the tax base, or where it comes from.

269

Ellsworth

Says this is the complex piece that is missing.

289

Vice Chair Burdick

Asks if Fire District #10 was a pay-as-you-go plan.

296

Ellsworth

Says that it was when under contract with Connecticut General.

321

Sen. Walker

Asks if this is the only district that has the problem.

326

Chair Minnis

Says, no, there are others.

343

Jim Voytko

Executive Director, PERS.  Discusses where the money comes from, and says that the responsibility for paying the pension obligation was never put in writing.  Says the purpose of this hearing is to weed-out these problems.

430

Vice Chair Burdick

Asks if PERS has the ability to re-create the original plan.

435

Voytko

Says it would take a court order.

TAPE 192, A

011

Vice Chair Burdick

Asks what recourse is available to Fire District #10.

017

Voytko

Says that is a question for the legal community.

024

Rep. Monnes Anderson

Asks how unfunded liabilities are paid when an employee transfers from one PERS entity to another.

032

Voytko

Explains the procedure.

060

Rep. Monnes Anderson

Asks what happens to people who go from a PERS to a non-PERS retirement system.

065

Voytko

Explains that an employee has the option to remain in PERS for one year, but says the accounting is complicated.

089

Chair Minnis

Asks what the liability amount is based on.

099

Voytko

Explains that the actual liability is an unknown.

114

Chair Minnis

Asks about the estimates and assumptions used on how long an employee will live after retirement.

123

Voytko

Explains what is called “successive approximation.”

150

Chair Minnis

Asks about the lump sum of $40 million paid by the city of Portland.

154

Voytko

Says it was like a consolidated debt payment.

173

Sen. Ringo

Asks if there is any uncertainty about the obligation to pay.

178

Voytko

Explains that it is understood that these funds are due.

193

Sen. Walker

Asks about the $40 million paid by Portland and wonders if it was refunded when it was discovered that it should have gone to Fire District #10.

199

Voytko

Says no money has been refunded to Portland.

215

Sen. Walker

Questions the explanation given.

219

Voytko

Says if payment is made to a trust fund it is not refundable, except for administrative error.

250

Sen. Ferrioli

Asks when the $40 million payment was made, and what predicated the payment.

267

Voytko

Says he was not with PERS in 1999 and has not seen any documentation that might explain why the payment was made.

284

Chair Minnis

Explains his understanding of why that payment was made.

310

Dale Orr

PERS.  Explains why this payment was made by the city of Portland.

341

Sen. Ferrioli

Wonders about the chronology of this payment and the Fire District 10 issue.

348

Orr

Clarifies the events.

406

Sen. Ferrioli

Asks about the notifications of unfunded liability.

423

Orr

Explains unfunded liability.

444

Sen. Metsger

Asks about the ability to validate the actuarial liability.

466

Voytko

Explains that there may not be a clear paper trail.

TAPE 191, B

041

Leslie Roberts

Attorney for Fire District #10.  Speaks about the contract that District #10 formed with the city of Portland with regard to payments to retirees of the district.

099

Vice Chair Burdick

Asks about the legality of transferring responsibility for liability.

103

Roberts

Says, yes it is legal within municipalities.

128

Chair Minnis

Describes the move by the City towards an aggressive annexation.

153

Roberts

Confirms Sen. Minnis’ comments.  Continues her testimony addressing the concepts of a funded system versus pay-as-you-go.

210

Sen. Ringo

Asks for clarification of the 1984 agreement with Portland.

217

Roberts

Says the committee has a copy of the written agreement between the city of Portland and Fire District #10 in their packet of information provided by Mark Ellsworth.

311

Sen. Walker

Asks if minutes were taken at the board meeting.

319

Roberts

Says she will provide the committee with those minutes.

322

Sen. Metsger

Asks when it was discovered that there may be an unfunded liability attributed to Fire District #10.

330

Roberts

Says it was in 1997.  Discusses the Connecticut General fund that came before PERS.

368

Sen. Metsger

Asks if there were understandings with regard to liability in 1994 when Wood Village and other municipalities withdrew from Fire District #10 to form its own tax base.

387

Roberts

Explains how the withdrawal of the municipalities was accomplished.

431

Sen. Ringo

Refers to the contract between Fire District #10 and the city of Portland and asks if article 11 is what is being relied on.

442

Roberts

Says that article 11 sweeps up everything else.

451

Chair Minnis

Interjects his understanding of underlying assumptions.  Refers to article 7, subsection 3.

TAPE 192, B

030

Sen. Ringo

Says that he disagrees with the interpretation of article 11.

035

Roberts

Explains that at the time of the contract there was no liability. 

063

Vice Chair Burdick

Declares that she has a potential conflict of interest because of her position as a citizen trustee on the Fire and Police Pension/Disability Board.  Asks why the employees would continue with PERS instead of being included in the Fire and Policy Pension/Disability Board.

058

Chair Minnis

Says that article 7, section 3 allows this so long as a medical evaluation is passed.

071

Roberts

Clarifies that this is on an employee-by-employee basis.

079

Steve Manton

City of Portland.  Provides a brief chronological history.  Disputes Fire District #10’s liability obligation.

147

Chair Minnis

Asks if the $257 million included the obligation disputed.

156

Manton

Explains that it was paid but there is nothing in writing that says there was a dispute. Continues testimony.

236

Sen. Walker

Asks if there was an obligation to notify PERS of the transfer under the contract between Portland and Fire District #10.

243

Manton

Says that PERS was notified.

267

Sen. Metsger

Asks if part of Fire District #10’s tax base became part of the city of Portland’s tax base.

284

Manton

Says 65% of the tax base was transferred to city of Portland.

306

Terry McCall

City of Gresham.  Contends that PERS created the problem and that they should be liable.

378

Paul Snider

Association of Oregon Counties.  Testifies in opposition to the B8 and B9 amendments.

395

Chair Minnis

Wonders about the contractual obligation.

410

Snider

Believes that we’re looking for an equitable solution to a very sticky problem.  Suggests looking at who was benefited by the employment of these folks.

TAPE 193, A

017

Maria Keltner

Association of Oregon Counties. Offers to help work on resolving the issue.

035

Hasina Squires

Special Districts Association of Oregon.  Testifies in support of the B8 and B9 amendments.

057

Sen. Walker

Believes that the city of Portland knew the liability existed even though they had not been billed for 13 years.

063

Vice Chair Burdick

Contends that it was believed the liability had been taken care of in the existing rate structure.

070

Chair Minnis

Explains that he would like to assign a group to work on this issue.

083

Voytko

Says that the decision by PERS not to bill anyone for 13 years was not proper or actuarially sound.  Explains that PERS wants to clean up the books. 

173

Chair Minnis

Asks if it assumed that all debt is collectable.

175

Voytko

Says, yes.

185

Rep. Monnes-Anderson

Asks about the contingency fund.

188

Voytko

Says the fund currently contains $0.  Explains what uses were planned for a contingency fund.

219

Dave Heynderickx

Legislative Counsel.  Talks about the contingency fund.  Discusses the possibility of an unfunded mandate.

264

Rep. Monnes Anderson

Asks about funds that come from investments and if they should not go into the contingency fund.

280

Heynderickx

Says that PERS operates under a fiduciary responsibility and that tax law limits their ability to do some of the things that private companies do.

326

Chair Minnis

Contends that because of the way the transfer took place, it would be assumed that all other obligations would go along with the transfer.

332

Heynderickx

Disagrees.

338

Chair Minnis

Says he is appointing Sen. Walker and Sen. Ferrioli to lead a work group to work on this problem.  Believes that there are pathways to resolving this issue already in place.

397

Sen. Ferrioli

Asks that there be a clear set of parameters to address.

411

Bob Livingston

Oregon State Firefighters.  Asks to be included in the work group.

459

Chair Minnis

Closes the work session on HB 2278B and adjourns the meeting at 10:30 a.m.

 

 

EXHIBIT SUMMARY

 

A – HB 2278B, written material submitted by Mark Ellsworth, 125 pp

B – HB 2278B, -B8 amendments submitted by staff, 8 pp

C – HB 2278B, -B9 amendments submitted by staff, 8 pp