PERS General Electric?

Two big decisions this week: Tuesday the supreme court upholds part of the changes to PERS (whether they're "reforms" depends on whether you're a payor or a beneficiary), and today the Public Utility Commission rejects the request of Texas Pacific to buy Portland General Electric from the bankrupt shell of Enron.

Buried in the Oregonian's discussion of PERS was the tantalizing fact that PERS holds assets in the $15 billion range, about equal to the state's biennial budget.  Texas Pacific had agree to pay about $2.35 billion for PGE.

I'm not ordinarily fond of government incest, but it seems to me that PERS might reasonably lend the metro-area governments some of the money necessary to buy PGE.  PGE's earnings could then go in part, through interest or some sort of participation, to bolster the PERS fund and reduce the contributions that state and local governments throughout Oregon will have to make to PERS over the coming years.

The PERS board was willing to invest in Texas Pacific's takeover bid; it should be just as willing to invest in municipal power.

Comments

[andrew kaza]

Isaac:

Interesting proposal - of course, it's likely far too interesting (and sensible) to be taken onboard by our lame Legislature and/or city council (other than the always surprising Mr. Sten). Stiill, let's hope this resounding defeat for a bad takeover may once again galvanize supporters of a sound socialization (i.e. PUD for PGE).

nice blog - keep up the good work!

ak

[Isaac Laquedem]

Thank you!

I think I should have been more exact: the Oregon Investment Council is what made the decision to invest in the Texas Pacific purchase of PGE, but the OIC invests the state's money, including, I believe, the funds of PERS. It certainly wouldn't hurt if the PERS board asked the OIC to invest in a municipal buyout of PGE, and of course OIC could come up with this idea on its own.

[ron ledbury]

The local governments already have money entrusted to the PERB that is in turn entrusted to the OIC for investment. The TPG deal offered more profit potential than does the alternative, on behalf of the state and local government investors (via PERS bond proceeds) so as to defray future “employer contributions.” The public is squarely at risk of both gain and loss on that investment, quite independent of anything the court says must be paid to PERS beneficiaries. The cancellation of TPG deal, and its projected profits, nixes one hoped-for profit deal to cover future employer costs.

The state treasure just sort of commingles all the funds, both the PERS beneficiary accounts and the various PERS related employer accounts into one big blob. He doesn't have to sweat the nuances of variable fiduciary obligations that might not necessarily be the same for all parties. They escape the clear prohibition of public ownership of private enterprise too, as referred to in Sprague v. Straub, via the commingling. Part of the confusion in PERS is intentional so as to launder the differing rights and responsibilities into a legally incoherent mess.

The OIC and PERB could enable the local governments to buy PGE merely by returning the employer accounts to them. (That is, withhold the PERB demand for employer contributions until the PERS beneficiaries actually need to be paid over time and the funds are not otherwise payable from investment accounts; over the next 20 plus years.) The Portland Public Schools account, all by its lonesome, had 400 million dollars from two bond issuances, one in 2002 and the other 2003. The OIC wants that money to play with, and I don't think they could stomach having to return it, particularly after they lost the PGE deal.