Back to Parish & Company Home Page

February 22,2003  6:00 pm Pacific Time

SOURCE:  Parish & Company.

Oregon Public Employee Pension System (PERS) and Corporate Governance Reform Implications: Governor Kulongowski, Oregon Investment Council, Portland City Club, State Economist Tom Potiowsky and Oregon Senators Ron Wyden and Gordon Smith

PORTLAND, Ore., Feb. 22 /PRNewswire/ -- Today Parish & Company, a strong
supporter of the Securities and Exchange Commission and global leader in
advancing key corporate governance and financial reporting reforms, summarizes
related proposals made to the Oregon Investment Council (OIC) at its monthly
meeting on January 29, 2003.

Parish & Company conducted an extensive national review of public pension
plans in 1999 which received little coverage in the business press. This work
is now gaining considerable attention since many states, including Oregon, now
struggle with underfunded plans. This update focuses upon California,
New York, New Jersey, Michigan, Ohio and Florida, each with plan assets in
excess of $45 billion.

The fastest growing expense for many states is pension expense and
therefore these expenses are now resulting in significant layoffs. Oregon is
indeed in the most significant financial crisis in 25 years in which Portland
Public Schools Superintendent Jim Scherzinger has already cut 24 days from the
school year. Teachers are now considering a strike. Other public officials are
making similar cuts to public safety, including releasing large numbers of
prison inmates and mental health patients.

Parish & Company advocates providing an excellent pension plan to public
employees and strongly opposes privatization. In most states the majority of
participants in such plans are teachers and health care workers, the bedrock
service providers for a sound economy.

In Oregon the Oregon Investment Council (OIC) selects and monitors
investment managers. Total plan assets at one point were almost $40 billion or
three times the entire annual state budget. Current OIC members include
Gerard Drummond, Diana Goldschmidt, Mark Gardiner and Jerry Bidwell, all
appointed by the Governor, in addition to State Treasurer Randall Edwards and
analyst James Voytko. The appointments are unpaid positions, represent a
diverse mix of skills and appear to be free of the conflicts of interest that
appear to exist in many other states.

Now is the time for the Oregon Education Association (OEA), the Portland
Association of Teachers (PAT) and the Service Employees Industry Union (SEIU)
to lead the effort in fixing PERS in addition to becoming more active on
corporate governance issues. Indeed, the newly designated leader of Calpers, a
$150 billion public pension, is Sean Harrigan, a union leader. Parish
& Company strongly supports these organizations yet there failure to act on
PERS reform has clearly impaired the publics confidence.

Some of the PERS and corporate governance reforms advocated by Parish
& Company involving Oregon's plan include the following:

    1. Making PERS less "top heavy." PERS benefits are often too heavily
       weighted toward high paid administrative positions and influenced by
       overtime wages. The IRS and related ERISA guidelines have adopted
       numerous discrimination testing rules for private pension plans yet
       these rules were never adopted in PERS. The focus of PERS, as with
       private plans, should be fairness and providing a good retirement to
       ordinary  workers.

    2. Parish & Company therefore advocates new guidelines that would make
       PERS contributions on qualifying salary up to $60,000 and index this
       salary amount for inflation going forward. Additional tax deferred
       vehicles would be available for contributions in excess of $60,000.

    3. Such a reform will be difficult because those crafting new rules are
       mostly higher paid administrative employees, most directly impacted by
       such a reform, yet this gesture of fairness will help  restore
       the publics confidence and ensure the systems long term viability. It
       should also be the cornerstone of Governor Kulongowski's plan.

    4. Guaranteed rates of return should be market based, not arbitrary such
       as the 8 percent rate guaranteed to all pre 1996 Tier I participants.
       Parish & Company advocates guaranteeing the rate on the 10 year
       Treasury bond, adjusted semiannually and matched to contributions made
       by employees, with no mark to market adjustments. Participants deserve
       a guaranteed rate option yet it must be a trusted market rate that will
       change over time.

       The current guaranteed 8 percent rate has actually pushed the OIC to be
       more aggressive in its investment policy. It now maintains a target
       allocation of 70 percent stocks and 30 percent fixed income. As a
       result, staggering additional losses have been incurred, contributing
       further to the deficit.

       Parish & Company advocates an asset allocation in which stocks and real
       estate would not exceed 50 percent with the remaining 50 percent being
       a time laddered portfolio of fixed income securities. This should
       indeed be mandated by the Oregon Legislature to release the pressure on
       the OIC to jump an unrealistic "investment return bar."

    5. Given the significance of the OIC, Parish & Company also advocates
       making  these paid appointments at a salary of $60,000 per year with a
       maximum term of 6 years. It is absolutely ridiculous, given the direct
       significance of these  decisions to the state, to not make these most
       important appointments paid.

    6. Regarding corporate governance, Parish & Company supports new SEC rules
       requiring that key proxy merger votes be disclosed, preferably on the
       OIC's website. This is especially important given that one private
       company, Institutional Shareholder Services (ISS) is the only
       substantial advisor issuing opinions on such mergers to public pension

In Portland, Oregon on Sunday February 23rd at 4:00 on Cable Access
Television Station 11 these and numerous related issues will be examined on
Oregon Voters Digest, hosted by Bruce Broussard. Bill Parish will be the

If you are a public pension official, investment manager or journalist and
would like to invite Bill Parish to speak at your event, please see the
contact information below. Bill was the keynote speaker at a national
conference on accounting reform at Kent State University in 2002 and his work
is widely quoted in leading publications including Bloomberg, The New York
Times and USA Today.

His presentations are generally considered both entertaining and highly
useful, whether to large groups of money managers, teachers or public

This press release can be found in the PR Newswire archive at

Bill Parish
Parish & Company
10260 SW Greenburg Rd., Suite 400
Portland, OR  97223
Tel:  503-643-6999  Fax: 503-221-3161

Back to Parish & Company Home Page