Opinion ID: 835784
Heading Depth: 3
Heading Rank: 4

Heading: Recent Fiscal Status of the Fund

Text: The fiscal status of the fund following poor investment performances in 2000, 2001, and 2002  together with significant growth in fund liabilities and employer contribution rates  was the primary motivator of the 2003 PERS legislation. See generally Or Laws 2003, ch 67 (preamble). Those considerations provided much of the focus of the parties' advocacy before the Special Master and this court. As context for the issues that we resolve in these cases, we set out the following brief discussion of the fund's financial status, which we take from the Special Master's report: For the 2001-03 biennium, the [S]tate of Oregon's general fund and lottery budget was approximately $11 billion. Oregon's local governments will collect approximately $17.8 billion in own-source revenues in fiscal year 2003-04. In comparison, at the end of 2002, the fund had a total UAL of more than $15 billion [based on the fair market value of fund assets]. In January 2003, the UAL reached $16.41 billion. During the 2003 legislative session, the UAL exceeded $17 billion, but it had declined to $12.7 billion by July 2003. Between 1991 and 2000, the nation experienced the longest sustained period of economic growth in its history. During that time, the average investment return on the fund was approximately 15 percent per year. However, over that same period, the system's funded ratio, which compares the value of fund assets to projected liabilities, declined. In 1991, the fund's value equaled the amount of its projected future liabilities. By 2001, the value of the fund's assets equaled 89 percent of its projected future liabilities. In 2002, based on then-current actuarial assumptions, the PERS actuary projected that PERS liabilities would increase from approximately $45 billion in 2001 to approximately $65 billion by 2007. In 2002, the actuary also projected that the funded ratio would remain below 80 percent until 2010 and that the funded ratio probably would not equal 100 percent until 2027. In early 2003, that ratio declined to 65.4 percent. (Footnote omitted.)