Press Fails on PERS and Iraq

Why is it that reporters don't think to ask questions that regular people see as central?

In the last three days I have seen two stories, one national on Iraq casualties and one local on the PERS problem, that indicated that the writer understood some of the underlying issues but didn't care to look into them.

The PERS story was by an Oregonian reporter. The gist of the story is contained in the headline: Employers dodge jump in PERS rate.

Because the PERS board has changed its policy of spreading market gains/losses over a four year period to one that applies gains and losses immediately, public employers will pay much less than expected. This is because, though PERS lost four years ago, it has had great returns in the last three years.

That means the retirement system can begin charging employers as if it is making money instead of losing money. Investment returns the past three years average 16 percent, double the long-term average, according to executive director Paul Cleary.

Fine. But, later on in the article, reporter Betsy Hammond writes a paragraph on the key issue:

Oregon public employers pay some of the highest retirement benefit costs in the nation. That is due in large part to a quirk of Oregon's system -- which was phased out by the 2003 Legislature -- known as Money Match. It allowed employees to run up huge accounts -- and forced employers to match them.

The money match system is tied to the great investment management that PERS has had for many, many years. The pressing question that Hammond does not ask is: Why, if PERS is doing so well (an average 16% gain for each year during the last three years), is the system having problems? I mean, don't you wish your mutual funds, investment portfolio, or savings had averaged a 16% gain in 2003, 2004 and 2005? Compounded that's something like a 55% gain on one's original investment in just three years!

So, why is PERS in trouble? I happen to know the answer to this, and it's not due to a quirk or poor PERS management. The key phrase that Betsy Hammond does not expand upon is "allowed employees to run up huge accounts -- and forced employers to match them."

Employees had a deal with public employers that the employer would match what each employee put into their retirement fund. But, the public employer didn't really put that money in. What they did was spend the matching money at the time that the employee was putting in his/her share. So, if only PERS investment management had been the regular bumbling failure that most investment firms have been, everything would have been fine. There would have been no "huge accounts" run up. Or if the public employers had put their share in at the same time as the employee's share went in, they would have gotten a 55% return as well.

But, when you hide your money in a sock or spend it on other things (as public employers did) and your employee has first rate people doing their investing, there is trouble when it comes time to "match" their investment growth.

Unfortunately, the public employers didn't admit their failure and neither have the politicians. And reporters don't even ask the question as to why an organization that does so well in investing is portrayed as having to work to be "fairer to public employers and workers" (well actually, not to workers, but it sounds nice to link the two):

But actuaries and board members said they think rates set using the new methods will be steadier, easier to understand and fairer to public employers and workers over the next two decades.

The major problem with PERS is not quirky policies. It's the same problem social security has. Federal, state and local governments have spent the retirement money they were supposed to be putting into retirement accounts.

Then we have AP reporter Robert Reid write a story about casualties in Iraq: April Deadliest This Year for GIs in Iraq an AP story.

The report emphasizes that 69 U.S. troops were lost in April.

Although that figure is well below some of the bloodiest months of the Iraq conflict, it marks a sharp increase over March, when 31 American service members were killed. January's death toll stood at 62 and February's at 55. In December 2005, 68 Americans died.

Reasons behind the rising U.S. deaths were unclear, and U.S. military officials have cautioned not to interpret cyclical changes as the beginning of a trend. Some U.S. officers have suggested the increase could be due to better weather this month, making it easier for insurgents to launch attacks."
[emphasis mine]

It's strange that Robert Reid doesn't have any curiousity about why April of 2006 is "well below some of the bloodiest months of the Iraq conflict". Isn't the key question not "Why are April deaths higher than January, February and March deaths?" but "Why are 2006 deaths well below that of other years?"

If you are looking for a trend, isn't a reduction in casualties over a three year period more important than a slight increase in casualties in a four month period? Or one might even ask why March had so few casualties (31) compared with January, February and April. But Reid has no interest in those questions.

I happened to know something about the PERS situation so I could spot The Oregonian's error in not raising a key issue. AP's error became apparent in reading the story.

Why is there such a disconnect between what reporters think is important and what the reader would like to know?

I don't know. But, the disconnect in stories like these are what make me turn more and more for my news and analysis to alternative media for national/world stories and to people I know who are insiders for local stories.

The Press keeps shooting itself in the foot.