Public employees' anger is misplaced
The Democratic-controlled Legislature finally stood up to the public employee unions, and the unions are furious. They shouldn’t be.
Lawmakers last week passed Senate Bill 1049, a package of reforms to the under-funded Public Employee Retirement System that include requiring employees to contribute a small amount toward the pension system itself rather than to their personal retirement accounts. From the howls of outrage, you would think the Legislature had canceled public pensions entirely. Far from it.
The Oregon Supreme Court has ruled that pension payments to those already retired cannot be touched. Neither can pension benefits already earned by those still working.
Here’s what SB 1049 did:
Going forward, employees will contribute to the pension fund a portion of the 6% of income they currently pay into their 401(k)-style personal retirement accounts, ranging from 0.75% of pay for workers hired after August 2003 to 2.5% for those hired before.
As a result, employees will see their personal retirement accounts — separate from their pensions — grow a bit more slowly. Ending balances in employees’ personal accounts will be smaller, reducing a 30-year employee’s overall retirement benefit by 1 to 2% of pay. That’s hardly catastrophic. And the contributions diverted to the pension fund will help reduce the premiums employers such as school districts, cities and counties must pay every year. That frees up money that can be used for other things — such as hiring more teachers, or increasing pay.
Also under SB 1049, the outrageously large pensions earned by a few extremely well-paid state employees such as former University of Oregon football coach Mike Bellotti will be a thing of the past; SB 1049 caps ending salaries eligible for pensions at $195,000 going forward. That’s more symbolic than substantive, because so few state employees earn more than that. But it should help with public perception of PERS.
Finally, the bill lengthens the repayment schedule by eight years, reducing the amount that must be paid against the PERS deficit each year. That accounts for about three-quarters of the savings of $1.2 billion to $1.8 billion per biennium, and critics are saying it’s kicking the can down the road. That’s true enough, but it’s not much different from a distressed homeowner refinancing from a 15-year mortgage to a 30-year note to lower payments.
Oregon is one of only two states that does not require employees to contribute to their own pension benefits. Even the 6% contribution to the personal accounts is picked up by many public employers under the terms of union contracts, so the diversion of money into the pension fund won’t affect those workers’ monthly income.
It’s difficult for the public at large to feel much sympathy for public employees being asked to contribute a small amount to their pensions — a benefit few private-sector workers have.
Public employees are treated well in Oregon, and it’s not unreasonable that they are asked to help in a small way to stabilize the pension system that benefits them.