The Public Employees Retirement System's $24.5 billion unfunded liability is a pair of cement overshoes on Oregon's future. Keeping the state's pension promises to public employees will require higher taxes, reduced public services or both for a generation. Reducing that liability is an urgent assignment — otherwise, resources for essential projects such as improving Oregon's schools will be lacking. Sound ideas for tackling that assignment, however, are hard to find, as can be seen in recommendations from a task force appointed by Gov. Kate Brown.
Brown asked the task force to find ways to reduce the unfunded liability by $5 billion, which would be a good start. The task force offered a list of options for consideration Monday, ranging from consolidating Oregon's four smaller universities to squeezing more profits from state-controlled liquor sales. These ideas shed light on the magnitude of the problem the state faces: The question isn't whether consolidation would improve higher education in Oregon, or whether the benefits of a public monopoly on liquor sales are being maximized, but whether money for PERS can be shaken from those pockets.
A couple of the task force's ideas are politically or legally questionable. It has its eyes on a $1.6 billion reserve maintained by the State Accident Insurance Fund, Oregon's state-chartered workers' compensation insurance company. The reserve was built up by premiums paid by Oregon employers, who have a moral, and perhaps legal, argument that if the money is not needed to cover future claims, it should be returned to them in the form of reduced premiums or dividend payments.
SAIF has been targeted before. In 1982, Gov. Vic Atiyeh and the state Legislature closed a budget shortfall in part with $81 million taken from SAIF. The courts eventually ordered that the money be repaid, with interest. Brown would want to be certain of being on solid legal ground before proposing another such raid on SAIF, and also that the financial strength of Oregon's workers' compensation system would not be impaired. Even then, the fairness of tapping this source of funds would need a persuasive defense.
The task force also suggests paying down the PERS liability with between $100 million and $500 million from the state's own reserve funds. About $1 billion has accumulated in these funds. The money has been set aside to provide a cushion against budget cuts during the next economic downturn. Oregon should be building these funds up, not draining them at the crest of an economic cycle. The money they contain today is the result of financial discipline that might be hard to find in the future if reserves become pipelines to PERS.
These objections illustrate the difficulty of reducing the PERS burden. What will be required is a broad consensus that the unfunded liability is a burden to be borne by everyone — a consensus that has not yet formed.