Bridging the PERS divide

Facing 'PERS light' or scorched earth, lawmakers should seek middle ground

The Oregon Legislature didn't take long to revert to the partisan bickering that lawmakers put aside last session when the House was evenly split. Friday's party-line vote in the Joint Ways and Means Committee to advance the co-chairs' PERS bill is a case in point.

Before they can settle on a budget for the next two years, lawmakers must deal with rising payments to shore up the Public Employees Retirement System, which will take a $900 million bite out of state revenues in June to deal with the system's $14 billion deficit. An additional $700 million awaits in 2015 if nothing is done.

The PERS measure that passed Friday, Senate Bill 822, is the work of Ashland Rep. Peter Buckley and Sen. Richard Devlin of Tualatin, the Ways and Means co-chairmen. Republicans are calling the bill "PERS light," and they're not far off.

Buckley and Devlin's bill tinkers with reducing cost-of-living adjustments to PERS retirees, graduated so those with the largest pensions will give up the most. They also put off $350 million in scheduled contributions to the system until the next biennium.

That saves $805 million in the current budget cycle and relieves local school districts of about $200 million statewide in PERS contributions they would otherwise have to make. The savings are only half as much in the next biennium, when the deferred contributions come due.

At the other end of the spectrum is Senate Bill 754, sponsored by Republicans and backed by Stand for Children, The Oregon School Boards Association and the Oregon Business Association under the slogan "Fix PERS now." It would combine every possible adjustment its backers think could pass muster with the Supreme Court, including limiting COLAs, using a lower interest rate to calculate annuity earnings for retirees, and excluding overtime pay and unused sick leave and vacation when calculating a retiring employee's final pay and benefits.

Somewhere in between those two extremes is Gov. John Kitzhaber's PERS reform proposal. Like the co-chairs, he would limit COLAS — but his plan would save $865 million per biennium and does not rely on deferring contributions.

No one knows for sure whether any of these proposals would receive the blessing of the courts, which have ruled in the past that much of the PERS system is a contract between the state and its workers and cannot be altered unilaterally. Certainly the co-chairs' plan is more likely to pass muster than the Republicans' proposal.

The governor's middle-ground offer may be the best of less-than-perfect solutions. It also could attract a few Republican votes, which the co-chairs' plan so far has not.

Needless to say, the unions object to all these proposals — especially the Republicans' package — saying they balance the budget on the backs of public servants who accepted years of substandard salaries in exchange for a secure retirement.

There is something to that argument, and retirees receiving relatively modest payments should not have to bear undue hardship. But the system is not sustainable as it is, and some sacrifice is essential.

Certainly, Oregon's schoolchildren have sacrificed, bearing the brunt of the PERS deficit as districts divert money from classrooms to shore up the pension system. The unions seem oblivious to the fact that, as districts lay off teachers, the unions lose members. It cannot have escaped the notice of newly hired, first-fired teachers that their union is protecting retirees and those approaching retirement at their expense.

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