Democrats in the Oregon Legislature are taking a small step to reform an unsustainable public pension system. They should get some credit for crossing public employee unions, a core constituency.
But it’s still only a small step.
Whether Oregon public pensions are too generous is a matter of opinion. There currently are 118,000 PERS beneficiaries. The average recipient worked for 22 years, retired at age 59, receives an annual pension of $32,064 and can look forward to automatic cost-of-living increases.
But the Public Employees Retirement System hasn’t become an issue because of benefits for rank-and-file workers. Nor has anti-union sentiment made PERS an issue.
The problem is that the stock market crash five years ago devastated pension funds and left a $14 billion shortfall. Making up that shortfall may require raising taxes, cutting government services and failing to restore education funding.
Look at the Roseburg School District, for example.
The school district faces a $2 million increase in PERS payments in the coming budget cycle. Higher pension payments threaten to soak up increases in state funding for education. Lawmakers can protect PERS or they can start restoring school district budgets. They can’t do both.
Plus, PERS has obvious flaws that give the entire system a bad name and threaten to weaken taxpayer support for public employee unions
“Money match” sounds like a lottery game, but it wasn’t much of a gamble for state retirees who benefited from a rising stock market in the 1980s and ’90s. Some hit the jackpot with pensions that are nearly as much or even exceed their final salary.
To keep PERS costs from exploding, Democrats are backing Senate Bill 822, which been advancing through committees on strictly party line votes. The plan would limit cost-of-living increases for retirees, saving $460 million in the 2013-15 budget cycle.
Democrats boast their plan saves $810 million, but that’s counting $350 million in delayed pension contributions. Kicking the can down the road is hardly bold reform.
Still, Democrats argue their plan is big enough to make a difference, but small enough to withstand legal challenges.
The plan may turn out to be big enough to be challenged by unions, but too small to allow the state to maintain public services and increase education funding in the long run.
In contrast, Gov. John Kitzhaber, a Democrat, proposed $865 million in direct savings by restricting COLAs and by not compensating out-of-state retirees for Oregon income taxes they don’t pay.
Republicans, a minority in the House and Senate, are behind Senate Bill 754, which would save more than $1 billion. The reforms would include eliminating the spiking of pensions by counting vacation pay and overtime in calculating benefits.
Public employee unions argue that pension cuts are unfair, and illegal, because their members were promised decent pensions in return for their years of labor.
That may be true. Nevertheless, PERS has become unsupportable. If it prevents adequately funding education and public services, it will become indefensible.