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Our view: A multipronged approach is right course on pension reform

Task force looking at good steps, but more needs to be done

Published on July 27, 2017 12:01AM

When it comes to reforming Oregon’s Public Employees Retirement System, state leaders need to avoid taking one step forward and two steps back.

As the Legislature recently sputtered on pension reform, Gov. Kate Brown appointed a seven-member, public-private task force to scrutinize ways to make the most of state assets to reduce the system’s $22 billion pension liability.

Brown gave the task force a goal of reducing the liability by $5 billion and suggested selling state assets, although not certain properties, such as prisons and state parks. Sales could include properties such as “buffer zones” around state prisons or youth correctional facilities. It’s also possible the state could enter public-private partnerships or cut costs in other ways, such as by moving certain state offices to lower-rent areas.

Those are good steps and should be taken, but many would generate one-time-only savings and none address the real root of the PERS problem – the system’s structure and the benefits themselves. Public employee unions have vigorously fought any reduction of benefits and the unions exert heavy political clout. Brown and other lawmakers acknowledged near the end of the legislative session that any structural or benefit reform would have to be tackled at the next full session in 2019, thereby kicking the can down the road once again. In this past session, a bill that would have required a 1 percent salary contribution toward PERS died in committee.

A multipronged approach is the right course to take. Legislators, for their part, can only make changes to the system going forward. The task force, though, isn’t addressing the benefits issue. Its mission is finding ways the state can pay down a chunk of what it expects to owe. It’s also looking at whether dedicating specific revenue streams to help reduce the obligation makes sense.

In its first meeting Monday, the task force agreed to focus its work — expected to culminate in a report due to the governor by Nov. 1 — on big-ticket items that can get to the $5 billion figure.

Meanwhile, the board overseeing PERS is scheduled to vote Friday on whether to downgrade assumptions about how much return the system will get on its investments. Changing the assumptions about returns on the investments could greatly increase the pension’s unfunded liability, which would mean state agencies and school districts would have to put even more money into the system in the coming years.

The governor and lawmakers need to be advocates for system changes to reduce the financial threat the liability poses to the state’s future well-being. Until those issues are addressed, the liability will continue to grow, public employers will have to increase the amount they pay into PERS for employee benefits and the task force’s work will provide only short-term help.


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