PERS: Someone Must Take Control of the Helm

Oregon Needs a Leader to Steer the Ship

The Oregon Supreme Court set off a fiscal crisis last April when it ruled on PERS (Public Employee Retirement System) and cut annual cost-of-living adjustments on public pension benefits already earned by its members. Governor Kate Brown’s response that day was that she’d have her lawyers analyze the decision. Oregonians are still waiting for Governor Brown to report back on what her lawyers concluded, and more importantly, what she plans to do about the fiscal tsunami set to wash over Oregon.

The PERS Board has reported that statewide public pension costs could go up by $2.6 billion each biennium as a result of a $9.5 billion increase in the PERS system’s unfunded liability. More than half of this unfunded liability increase is the result of last April’s Supreme Court decision and Governor Brown’s lack of leadership to act in the face of the looming PERS crisis.

What does all this mean for working Oregonians? Oregon’s school districts and public universities, county and city governments, and our state government will face far higher costs to fund PERS pensions. That means they’ll have far less money to support better schools, improve safety, and provide quality health care and critical services—an estimated $800 million less per biennium starting in July 2017, another $860 million less in 2019, and an additional $930 million less in 2021, thanks to increased PERS rates.

The cost to Oregon school districts for the increased PERS rates in 2017 is estimated to be the equivalent of hiring and paying 1450 teachers or cutting seven days of school. At the University of Oregon, 40% of the average 5.5% annual increase in tuition (or two percentage points) will go to pay these rising pension costs.

Bud Pierce will do something. He is committed to adding teachers to reduce class sizes across the state, cutting higher education costs for working Oregonians and making government more cost-efficient. 

Kate Brown—not so much. She’s done nothing for months. 

Today, Oregon will be cutting teachers and school days, increasing higher education costs, and paying more for less government if we follow Kate Brown’s do-nothing path to the PERS crisis. Business groups, editorial boards, and former labor union officials have been crying out for leadership on PERS. But she’s not listening. 

Bud Pierce will lead. Upon election, he’ll convene a bipartisan group of state leaders to make recommendations on PERS policy options and actions for the 2017 legislative session, with everything not specifically ruled unconstitutional by the Supreme Court on the table. Bud Pierce’s own list of options includes:

  • Reduce the interest rates PERS used to calculate member benefits under the money match formula.
  • Require some or all of the 6% contributions that PERS employees are supposed to make to PERS pay for pension costs (many public employers now pick up this cost for their workers). This could cut the PERS deficit by up to $1.2 billion each biennium. That’s money that could be spent on more teachers, longer school years, and other vital services. The 6% contribution currently goes into a separate, employee-owned, supplementary account. This does not pay for PERS pension costs, and this makes Oregon one of the few states where PERS-covered employees make no contribution toward their pensions.
  • Create a 401k-type retirement for all new public employees.
  • Consider a total compensation approach as used by Linn County.

These are all possible solutions, and Bud Pierce is open to others in order to achieve his overarching goal of fixing PERS once and for all. Oregon is not without options on PERS. We are without leadership from the governor’s office. That’s something we can change before the financial tsunami sinks the state.