This year's short legislative session kicks off this week with two rarities.
First, legislators convene in Salem with a bit of good news about the state's beleaguered public pension system: Thanks to the boom in the stock market, the system's investments generated a 15.3 percent return last year. That's better than twice what was expected, and was enough to knock $3 billion or so off the system's $25 billion unfunded liability, The Oregonian reported. (Of course, the system still has a whopping $22 billion unfunded liability.)
Here's the second rarity: Legislators this session get a chance to examine a proposal for a small bit of reform in the Public Employees Retirement System that could afford a measure of relief for state schools, universities and community colleges.
This 35-day session won't be the place for major PERS reforms, and, in fact, it probably shouldn't be: These short legislative sessions are not the proper venues for major policy overhauls. Gov. Kate Brown has said that discussion of the main reform idea currently in play, reinstating some kind of employee contribution to the pension fund, will have to wait until 2019's longer session.
But that doesn't mean that a less-ambitious proposal shouldn't get some traction in the short session, so we noted with interest Brown's Senate Bill 1566, which will get its initial hearing on Wednesday before the Senate Committee on Workforce. (A copy of the bill is attached to the online version of this editorial.)
The bill attracted support last week from Sens. Kathleen Taylor and Tim Knopp, the chair and vice chair of that committee. More telling, perhaps, is the fact that Taylor is a Democrat from Portland and Knopp is a Republican from Bend. And Knopp has been one of the few legislators who's been active on the PERS front, and that has been lonely duty in recent sessions.
Senate Bill 1566 would:
• Create an Employer Incentive Fund, which would offer a state match to contributions made by employers willing to put unappropriated revenues toward reducing its PERS liability. The goal is to come up with $400 million in state money to match $1.6 billion in employer contributions. But a revenue source for the state money has yet to be identified, and it's not clear how many public employers have the money on hand to contribute to the fund.
• Create a side account for K-12 districts to offset future PERS rate increases through the use of nonappropriated funds. These funds could include increased proceeds from debt collection, above-average returns from capital gains and estate taxes (except, of course, when such returns cause a kicker) and other unanticipated revenue.
• Create a separate side account for community colleges, universities and K-12 districts using lottery revenue above projections. That revenue generally comes from new types of games, new users and unclaimed lottery prizes. The thinking is that this account would create a small measure of relief from PERS premium increases, and it wouldn't require any contributions from the schools.
No one is pretending that the these small reforms will fix all of the problems facing Oregon's public pension system. But even small reforms would represent a step forward, and could lend a bit of momentum that could carry over to the 2019 session.
Speaking of momentum, the banner year enjoyed by the stock market in 2017 cleared away $3 billion of the pension system's unfunded liability. But you might recall how system officials recently dialed down the estimated rate of return from the system's investments, and it would be crazy now to revisit that number. After all, part of the PERS problem is that state officials for years overestimated that rate of return. There's no need to repeat that mistake, and the market's performance last week offered everyone a vivid reminder that what goes up also can go down. (mm)