A local news segment about state budget problems droned out of the radio last week as we passed a sign that read, "0 Moose Killed On This Highway Since July 1."
"Another year, another budget deficit," my friend said as he kept an eye on the road to avoid changing the number on the moose sign.
We weren't in Oregon anymore, Toto, as evidenced by the moose sign. It was Alaska, and while there are obvious differences between the two states, the talk of budget shortfalls and deficits sounded eerily familiar.
The Oregon Legislature just went through some financial gymnastics to close a $1.4 million budget "shortfall." Meanwhile, Alaska's Legislature, according to the Alaska Dispatch News, took "no significant steps to fix the state's $2.5 billion budget gap and instead plugg(ed) it with cash from the state savings account like the past two years."
At the root of both states' issues with paying their bills lies a familiar bogeyman: public employee retirement systems. There's even some symmetry, with Alaska's pension fund deficit running at $11 billion and Oregon's at twice that level, $22 billion — although there's talk Oregon's could jump to as much as $50 billion when new estimates come in.
There's also a common thread of financial miscalculation woven into the tattered budgets.
Despite having half of Oregon's deficit, Alaska's pension problem is worse for a basic reason: a population of less than 750,000, compared with Oregon's 3.5 million. Adding fuel to Alaska's fire is the major downturn in gas and oil revenues, which once paid for 90 percent of state functions.
Oregon's political leaders set up much of our state's problems by combining generous benefits with overly optimistic projections of investment returns. Alaska did that, too, but got an extra shove as it went over the cliff. In the early 2000s, an actuarial consulting firm hired by the state apparently forgot to change the batteries in its handheld calculator, resulting in projections that greatly understated the state's problem. The state says the New York firm tried to cover up its error by knowingly providing false data the following year.
In the end, the mistake and/or crime cost Alaska $2.5 billion while the resulting lawsuit brought in a measly $500 million. The lawyers did OK, but the state's hole just got deeper by more than $2 billion.
Oregon can't blame its problems on New Yorkers. Its pension fund injuries were self-inflicted. A very short history: In the midst of a recession that foreclosed the possibility of raises, the Oregon Legislature in 1981 kicked the can down the road by adding a guaranteed return of 8 percent to public employee accounts. Through the next two decades, account earnings skyrocketed to the point that longtime employees retiring in 2000 had pensions equaling or exceeding their final salaries.
Alaska took the drastic step in 2006 of eliminating its pension plan and shifting public employees to a 401(k) program. That helped cut into its one-time $12 billion pension fund deficit, but certainly was no cure-all. In a recent ranking of the worst state pension fund situations, Forbes ranked Alaska at 50, dead last.
Oregon repeatedly has reduced benefits to new hires, but the old pension plan remains an anchor around its ankles — and the ankles of the state's school districts and local governments. The 2017 Oregon Legislature again kicked the can down the road, with little real attempt to rein in costs. Makes you wonder whether they realize that one day the can is going to run into an immovable object.
And it won't be a moose.
— Bob Hunter is associate editor of the Mail Tribune.