Oregon Legislature

The House last week passed a controversial bill regarding Oregon's Public Employees Retirement System, but that's not nearly the last we'll hear about the state's PERS woes. 

The drama over Oregon's underfunded public pension plan may be over for this legislative session, but it likely will take another generation, or two, before this particular issue stops casting a gigantic shadow over the state's fiscal health.

And, in fact, some of the next developments in the state's ongoing drama with its Public Employees Retirement System may start coming into focus later this summer.

The Oregon House of Representatives last week passed Senate Bill 1049, which aims to keep escalating PERS pension costs from taking ever-bigger chunks out of the budgets of school districts, cities and other governmental entities. But the vote in the House to approve the measure was as narrow as it could be, 31-29. And that vote came 20 or so minutes after an earlier vote on the measure failed, 29-31. That vote prompted Speaker of the House Tina Kotek to leave the chamber, presumably to wrangle two other votes. When she returned, a pair of Democrats, Andrea Salinas and Mitch Greenlick, changed their votes from "nay" to "aye," sending the measure to Gov. Kate Brown, who is expected to approve it.

In all, seven Democrats voted against the bill. Among mid-valley legislators, the tally followed party lines: Democrats Dan Rayfield and Marty Wilde voted for it, and Republicans Mike Nearman, Sherrie Sprenger and Shelly Boshart Davis voted against it.

One legitimate argument against the bill was that it essentially does the same thing that previous legislative sessions have done with PERS: It kicks the pension system's $27 billion unfunded liability down the road. Some three-quarters of the estimated $1.2 billion to $1.8 billion the bill is estimated to save (beginning in the 2021-2023 budget cycle) comes from extending the minimum payment schedule for another eight years. 

But the big reason why this bill caused such angst in the Capitol is its cost-sharing provisions, which redirect a portion of the retirement contributions public employees now make into a supplemental 401(k)-like account into an account that would support pension benefits. Under the bill, some of those contributions (2.5% of pay for workers hired before Aug. 28, 2003 and 0.75% for employees hired after) would go into that new account.

As The Oregonian's Ted Sickinger has reported, a 30-year employee's overall retirement benefits would be reduced by 1% to 2% of pay. Oregon is one of two states that currently don't require employees to contribute to their pension benefits.

Public-employee unions were livid, vowing not only to challenge the measure in court but also to gain concessions at bargaining tables throughout the state to offset the losses. But union leaders also noted that the employee contributions called for in Senate Bill 1049 are considerably less than those sought in a looming ballot initiative being floated by business groups or even in an earlier plan suggested by the governor.

It also remains to be seen whether this legislation is sufficient to trigger an exodus of public workers eligible for retirement who are worried about potential losses in their retirement benefits; such an exodus has been a long-standing fear among state human resource officers. 

As for Gov. Brown, she issued a statement after the House vote saying that she "will not look to public employees for further contributions" to the unfunded liability, and pointed to other provisions of the bill, including a one-time $100 million contribution to an incentive fund that will provide a 25 percent match on any extra contributions employers make to the pension system and a provision directing any proceeds from Oregon Lottery's proposed sports betting to that fund.

The problem is that those measures amount to small potatoes when compared to a $27 billion liability. We may have heard the last of PERS reform from this year's legislative session, but the issue will continue to haunt Oregon for years to come.

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Originally published June 3 in the Corvallis Gazette-Times.