In 1984, Stephen Krohn left private practice to work for the Oregon Department of Justice.
By 2001, when the Oregon State Bar conducted its most-recent member compensation survey, he was making $14,035 a year less than the average Oregon lawyer in private practice.
Krohn, who is 54, hoped to make up the difference in pension benefits. But in 2003, the Oregon Legislature made sweeping changes to the Public Employees Retirement System that, if upheld, will reduce his anticipated pension by 30 percent.
So Krohn joined one of the numerous lawsuits that have been filed to block the changes.
The litigation, which is pending before the Oregon Supreme Court, has Oregonians on the horns of a dilemma. If the changes are upheld, thousands of government employees — including the 14 percent of OSB members who work as government lawyers — may believe that their contractual rights were violated. But if the changes are struck down, a House task force on PERS1 has predicted "massive cuts" to public employment that will affect public services.
Meanwhile, government legal employers are worried about another possible outcome: A decline in their ability to attract and retain good lawyers.
"I think it will go down like a rock," predicts Jack Sollis, a retired DOJ lawyer who is actively involved in the court fight against the changes. "This applies to doctors, nurses, all sorts of employees. The only ones who are going to want to work for government are the ones who can’t get jobs anyplace else."
But others are more optimistic.
"From the perspective of people outside government, I haven’t heard much about PERS," says Shari Gregory, a lawyer who conducts career workshops around the state for the Oregon Attorney Assistance Program. "Anecdotally, lawyers still see government as a place with good benefits, compared to some of the firms that offer no retirement at all."
How did PERS get into this mess in the first place?
Simply put, it — like numerous other pension plans2 — has promised its members more money than it currently has: In the case of PERS, a peak gap of $17 billion more in 2003.
Government employers, who had been expecting steep increases in their required contributions to PERS’ funding if the 2003 legislation had not been passed, greeted the changes with relief.
"The way the system was running itself was asinine and destructive," says former Clackamas County Counsel James Coleman. "An overall public good will come from the changes. They were long overdue."
But some present and former government employees did not share their employers’ relief, filing their first lawsuits before the legislative session had even ended.
A fact-finding hearing on the since-consolidated lawsuits was held before a special master, Oregon Court of Appeals Justice David Brewer, in February: The Oregon Supreme Court, which has original jurisdiction over the case, heard oral arguments in July.
But, despite an Oregonian editorial calling for a ruling by year’s end, former DOJ lawyer Sollis, and others, believe that it will come no time soon.
Meanwhile, government legal employers are grappling with what to tell applicants about PERS.
"PERS benefits are (were) an important part of the DOJ recruitment package," says DOJ spokesman Kevin Neely. "In many instances, we were asking attorneys to take a smaller salary than they could make in the private sector. We have long said that the trade-off is the interesting and compelling workload — and the long-term security provided by the PERS system."
How much smaller government salaries actually are than private practice compensation is spelled out in the bar’s 2002 Economic Survey.
According to the survey, in 2001, the average Oregon attorney earned $102,643. But government lawyers averaged only $68,512, or 33 percent less. (The Oregon State Bar 2002 Economic Survey, published in September 2002, is available online at www.osbar.org/ surveys_research/econsurv02/ econsurvey02.html.)
In fact, the average compensation of government lawyers was less than any major category except private non-profit lawyers, who averaged only $50,000.
Since the survey was taken, the gap — even without the changes to PERS — appears to have widened.
For example, attorneys at one of Portland’s larger law firms, Miller Nash, now start at $90,000, plus profit sharing and 401(k) benefits.
By comparison, the current entry-level salary step at the state’s largest government law firm, DOJ, is $44,196. And DOJ’s public defender counterpart, the Office of Public Defense Services, pays its entry-level attorneys only $39,840.
"As you can see, the salary range for the majority of the attorneys in this office is modest," says OPDS Chief Defender Peter Gartlan, whose management-level attorneys top out at $90,768, almost exactly where Miller Nash’s attorneys start. "(But) in the past, we would explain to applicants that the PERS retirement system helped to compensate for the comparatively low salary."
The extent to which PERS has compensated for salary is debatable.
According to Special Master Brewer’s report, the average PERS employee who retired in 2000 with 30 years of service got a pension equal to 106 percent of his final average salary.
But that percentage does not tell the whole story.
First, it is based on employees who retired after a lengthy stock market boom had substantially inflated their PERS account balances.
By contrast, employees who retired just three years later — after several years of slumping stock market returns — received pensions averaging only 75 percent of final salary, according to a study by the Oregonian.3 For retirees who had worked 30 years or more, the average was 87 percent.
The "generally accepted" standard for an adequate pension, says Brewer’s report, is a salary/benefit ratio of 70-85 percent.
Second, the PERS litigation presents the salary/pension ratios of government employees in a vacuum.
As Brewer noted in his report, "The reasonableness of a particular (salary/pension) ratio may depend, in part, on the reasonableness of the salary that it replaces. If a public employee is especially well or poorly compensated in comparison to peer groups (from the public or private sector) who perform the same work, the reasonableness of a particular (salary/pension) ratio for that employee will be affected correspondingly."
For example, before the changes, petitioner Krohn expected to get 83 percent of his salary as pension benefits when he retires at age 58. But, over the course of his career as a government lawyer, he earned less than his counterparts in private practice: $14,035 less, in 2001, than the average private practitioner was making.
That’s $14,035 a year that Krohn’s private-practice counterpart could have invested in his own retirement, in addition to any retirement income or equity he may have received from his firm. (i.e., Schwabe Williamson & Wyatt attorneys, who now start at $84,100, also get a 7.5 percent employer-paid contribution to their retirement.)
So, were salary/PERS compensation packages for government lawyers like Krohn reasonable by comparison, or not?
According to Brewer, he received no peer group salary studies or other evidence that, in his opinion, would have enabled him to make that determination.
But public defender David Degner says he thought they were.
"I joined this office because I had put zero away for retirement," says Degner, who has been with the Office of Public Defense Services for 13 years. "And I didn’t see that I would be able to do that (in the future), with three children."
"The main thing is that I was hoping for this wonderful retirement," Degner says. "But now that hope has been pretty much shattered."
The extent to which the hopes of government employees like Degner have been affected by the changes to PERS is unclear.
According to Brewer’s report, "The governor’s policy team anticipated that, in general, the 2003 legislation would reduce the benefits of members approaching retirement by 5 to 10 percent."
But attorney Mark B. Williams, who until recently ran Metro’s facility-management arm, the quasi-governmental Metropolitan Exposition-Recreation Commission in Portland, says he got a figure far in excess of 5-10 percent when he crunched his own numbers.
"It looks like a 30 to 40 percent reduction over what the program was telling me (before the changes)," says Williams (now with Oregon Health and Science University).
"This subject, as you know, puts many of us in a difficult spot," adds Williams, who had dual roles as both a present PERS employer and a future PERS beneficiary. "As an administrator wrestling with a budget, I know we need relief from an overly expensive pension system. At the same time, as an employee, I feel the same way anyone else would about a 30 to 40 percent reduction in my pension benefits. It’s just human nature."
Some PERS employers say that such projected reductions have already affected their ability to attract good lawyers.
Says Associate Attorney General Leslie Kolisch, who negotiates salary with successful DOJ applicants, "The department simply is not seeing as many qualified applicants because of the PERS factor."
Kolisch says she also is worried about the effect of the changes on DOJ’s ability to retain mid-career range attorneys who "are looking at kids going to college and have some other employment options."
To illustrate her point, in 2002, 17 assistant attorneys general left the department for reasons other than retirement. Only one of them took a job in the private sector. But in 2003, 27 AAGs left for non-retirement reasons. At least seven of them went to the private sector, according to DOJ spokesman Neely.
"It could be other factors," says Neely, "but it appears that changes to PERS (some of which became effective in 2003), and the state salary freeze together have had an impact on retention at the department."
But some government lawyers fear that it is too late for them to leave.
One such lawyer, now in his mid-50s, says that he feels the legislation is particularly unfair to employees who, like him, began working for government in their 30s and later made conscious decisions to stay.
"While I was in my early 40s, I considered that I really enjoyed the work," says the lawyer, who declined to be named for publication. "And, based on the projection the state gave me for retirement benefits, there was no reason to leave.
"Certainly there was no guarantee (then) of better positions or salary in the private sector," he continues. "But now I’m in a position where even the opportunity to try to improve (my situation) will never be the same. Even if I find something, at this point I can never make up for those lost years of building up a retirement income through higher salary. Instead, I will have to extend my work career at least eight years simply to ‘re-earn’ what has been taken away by the new law."
One later-career attorney who did leave government employment specifically because of the 2003 legislation is former Clackamas County Counsel Coleman.
"A lot of people have done what I’ve done," says Coleman, who retired at 56, 1 1/2 years early, then came back as a short-term contract employee. "One attraction of public law was the retirement system. I know people who factored that in. I factored that in.
"I’m a big believer in change," Coleman continues. "Change is good: By retiring old guys, you open up spots for new guys. But you lose continuity and experience. There’s a lot of history involved in the evolution of the law, and you lose that history."
But Williams, the former manager of the Metropolitan Exposition-Recreation Commission, and other public legal employers are not wholly pessimistic about the effect of the 2003 legislation on government’s ability to attract and retain good lawyers.
"If money is a significant factor, you’re not going to work for government in the first place," says Williams. "I don’t think they’re going to have trouble finding prosecutors. People are prosecutors because they are true believers: Same with public defenders."
There’s statistical evidence to back Williams up.
According to the bar survey, public prosecutors had the highest career satisfaction score of any practice area, even after a mid-’90s reduction to PERS benefits that Multnomah County District Attorney Michael Schrunk says "gutted most of the PERS’ advantages for newer (Tier Two) employees." Public defenders tied for second.
Meanwhile, private practice lawyers, who had the highest level of compensation, had the lowest level of career satisfaction of any of the five general types of employment.
"People work for public office for lots of reasons," suggests Ruth Spetter, who has been with the Portland city attorney’s office for 26 years. "They like the way it works. There’s a tremendous variety of issues, some of them cutting edge. There’s lots of client contact, (although) some people might not see that as a plus."
"A lot of people see government law as an opportunity for stability," says the Oregon Attorney Assistance Program’s Gregory, who says she hears many non-government lawyers complain about "too many billable hours creating heavy workloads, stress and an inability to have a balanced life.
"A lot of people see government law as an opportunity for 9-5," she adds. "That’s a perception, so it’s desirable." (Interestingly, government and private-practice lawyers who responded to the bar survey reported working exactly the same number of median hours each month: 180.)
Williams, who agrees with Spetter and Gregory about the attractions of government law, also has another, more-provocative theory: Risk avoidance.
"I think people do a calculation in their heads — they don’t even know they do it — and self-select for their appetite for risk," says Williams. "People in the public sector are risk adverse."
Whatever government law has to offer — the issues; the perceived workload; even, despite the changes to PERS, the compensation package — governmental legal employers hope it continues to be enough to draw and keep good lawyers.
"Government attorneys," says Gartlan, "play a vital role in our state’s well-being."
Endnotes
1. The Chairman’s Report from the House
Special Task Force on PERS Sustainability and Accountability dated Jan.
9, 2003.
2. See, for example, "The Benefits Trap," by Nanette Brynes, Business Week, July 19, 2004; "Pension Plans in Corporate Cross-Hairs," by Jack Rasmus, Z Magazine, September 2004.
3. "Some Pensions Near Pay," by Dave Hogan, the
Oregonian, April 27, 2004.
ABOUT THE AUTHOR
Janine Robben is a reporter and long-term member of the
Oregon State Bar. She worked for a PERS employer for 20 years.
© 2004 Janine Robben