PERS will swallow much of the $2 billion that the Oregon Legislature is trying to raise for public schools. Even the Legislature’s Democratic leadership concedes this.
And here’s another catch: To net that $2 billion in additional revenue — primarily by substantially increasing business taxes — the Legislature might have to pass a tax increase of $3 billion or more for the next two years.
Business groups agree that schools need more money, which is why they are raising the PERS alarm.
“Looming in the background of any revenue increase are even larger increases in payments that schools, universities, state agencies and local governments will have to make into the Public Employees Retirement System,” leaders of the Oregon Business Plan said in a recent report.
In fact, PERS costs are a key reason why the Legislature expects to trim non-educational programs in the upcoming two-year budget. State agencies, schools and colleges will face a combined $680 million increase in PERS costs for 2019-21, with an additional $1 billion required during 2021-23.
Those costs weigh even heavier on schools and local governments in rural Oregon, which lack the capacity to boost local taxes or fees to pay for PERS. The overall burden for Oregon schools, colleges, local governments and state agencies is projected to more than double over the next eight years, eventually topping $9.18 billion in 2033 before tailing off.
Outside the Oregon Capitol, momentum for long-term solutions is growing. The business leaders calling for PERS reforms are joined by such Democratic stalwarts as former Gov. Ted Kulongoski and former Rep. Betty Komp, who now chairs the Western Oregon University Board of Trustees. They are joined by such educational leaders as InterMountain ESD Superintendent Mark Mulvihill and Kelly Bissinger, vice chair of that ESD Board.
But inside the Capitol, the response from Gov. Kate Brown and the legislative leadership has been tepid.
Sensible PERS bills have received too little discussion in the 2019 Legislature. They include:
• Requiring public employees to pay their own share of PERS contributions, as most states require and which Oregon judges already do.
• Basing future pensions on the final five years of average salary instead of three.
• Giving employees a choice of either PERS or a 401(k)-style defined contribution plan, a system that is working well at Oregon Health and Science University.
• Allowing employees to “retire” but continue to work for several years, enabling them to get both PERS and their salary while saving money overall for the employer.
In contrast, Brown apparently is considering such ironic ideas as raiding the state workers’ compensation program to pay for the state pension program. This is despite her supposed reluctance to make any PERS changes that could draw court challenges, which — obviously — a raid on SAIF would.
The last time a governor and the Legislature looted SAIF, it not only was declared illegal — forcing the Legislature to repay the money nearly three times over — but it also sent the State Accident Insurance Fund into a tailspin. That was in 1982. The Legislature, in its lack of wisdom, subsequently changed the law to legalize such raids.
SAIF eventually rebounded. It now has over 53,000 clients, retains 99.2 percent of its customers from year to year and handles more than half the workers’ compensation market in Oregon. It would irrational to penalize SAIF for being fiscally efficient, setting aside adequate reserves — unlike PERS — and helping Oregon achieve some of the lowest workers’ compensation rates in the nation.
“While recent Secretary of State audits reveal many agencies are prone to waste, SAIF has built enviable reserves, annually returning dividends to clients and covering thousands of claims,” the Oregon House Republican Caucus said after word spread of Brown’s potential plan. “Ironically, cash reserves built on years of workplace safety and sound fiscal practice are viewed as easy pickings to shovel into the ever-deepening PERS pit.”
Besides hurting Oregon businesses, that would be only a short-term solution and would do nothing to put PERS on stable ground.
Good ideas await legislative action. Senate President Peter Courtney, House Speaker Tina Kotek and Gov. Brown should embrace them so the PERS problems can finally be solved.