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Move ahead on PERS overhaul

Editorial

State employees say it's unfair, but protecting state services is paramount

We understand why public employees are unhappy with a legislative bill that would dramatically change their retirement program. But we encourage our state officials to move ahead with the change, because ultimately, protecting state services is the greater issue.

Oregon's financial crisis has been described by one local legislator as the perfect storm. If that's the case, the Public Employees Retirement System may the shoal upon which our ship of state founders.

As Oregon suffers through a prolonged recession, declining tax revenues have pulled the rug out from under education, public safety and human services. And looming on the horizon is a shortfall in the PERS system approaching &

36;17 billion.

To put that number in perspective, the entire state general fund proposed for the 2003-04 biennium is &

36;11.6 billion. To cover the PERS shortfall, legislators would have to shut down every function of the government ' K-12 schools, universities, state police, all health services, land-use planning, prisons and on and on ' for three years.

That scenario, which obviously is not going to happen, would get us back to even. Even then, if the existing system were not changed, the next recession would put us back in the hole.

— House Bill 2003 seeks to change that. Public employees union representatives say that change will happen over their dead bodies.

The PERS system was developed at a time when public employees were not well-paid and legislators sweetened the pot with a strong package of benefits. The sweet deal included a guarantee of 8 percent annual growth in accounts for retirees hired before 1996. That was fine in the '90s, when investment markets boomed, but as investments went into a tailspin in this dark decade, the 8 percent guarantee became the fund's undoing.

HB 2003 would eliminate that guarantee and tie the return to the performance of the PERS fund. It also would invest a 6 percent contribution usually paid by the employer into a 401(k)-type fund instead of into the general PERS fund. And it would eliminate a 2 percent cost-of-living increase for workers who retired between 2000 and 2004. That is intended to offset in part the 21 percent returns put into retirees' accounts in 1999.

In all, the bill would shave the PERS shortfall by almost &

36;7 billion. Those savings would free up money for state services to the tune of &

36;270 million in the next biennium and would provide an additional &

36;400 million in desperately needed savings to school districts, cities, counties and other public bodies across Oregon.

Public employees say it's not fair to try to solve the state's financial crisis on their backs. Well, this bill doesn't do that. What it does is try to solve the PERS financial crisis, which must be solved.

We do worry that the bill faces an uncertain future in the courts. With that in mind, perhaps the Legislature should craft the language so that portions could be saved and implemented, even if the courts threw out other parts.

We sympathize with public employees who feel the rules are being changed midstream. But we also sympathize with the kids whose school years have been shortened, the seniors who no longer qualify for health care, the laid-off state troopers and the citizens of this state who are seeing services cut everywhere and their state's reputation ruined. Current state employees also should understand that changing the system now makes it more likely that it will be around when they retire.

The PERS system must be fixed and it must be fixed in a big way, rather than by nibbling at the edges. HB 2003 may need refining before it's adopted, but it looks like a good start to us.