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Wednesday, January 18, 2017 The Nugget Newspaper, Sisters, Oregon
Public pension debate returns to Oregon Legislature
By Ted Sickenger
The Oregonian/OregonLive
PORTLAND (AP) — Sen.
Tim Knopp, R-Bend, and
Jeff Kruse, R-Roseburg, teed
up what could be the most
contentious debate of the
upcoming legislative session
by introducing two bills to
make money-saving changes
to Oregon’s public employee
retirement system.
If, that is, Democrats allow
a hearing on either measure.
The pension changes
offered in the bills are a subset
of the list that Knopp and Sen.
Betsy Johnson, D-Scappoose,
put together last fall. They did
so after holding an informa-
tional meeting at the capitol
to explore ways to reduce the
fund’s $22 billion unfunded
liability and the budget-bust-
ing spike in required contribu-
tions from public employers.
The concepts also are
familiar to legislative lead-
ers, the governor, public
employees, their unions and
lawyers — all of whom have
been reluctant to discuss any
changes that would reduce
members’ pension benefits.
With voters’ rejection of
Measure 97’s tax increases
and the state facing a $1.7 bil-
lion budget deficit, however,
the debate may be back come
February.
Knopp said the propos-
als in his bills were selected
from the larger list because
they have a better chance for
broader, bipartisan support
and create the most savings.
“I’m confident we’re
going to have hearings on
PERS, and I think it will hap-
pen fairly early,” Knopp said.
“We’re going to have to deal
with these fundamental struc-
tural issues.”
Knopp said he was going
to be requesting hearings from
both Senate President Peter
Courtney, D-Salem, and Sen.
Kathleen Taylor, a Democrat
whose district stretches from
Southeast Portland to Lake
Oswego, who chairs the
Senate Workforce Committee.
Taylor could not be reached
for comment.
The proposals in Senate
Bills 559 and 560 include:
Redirecting employees’
required 6 percent retirement
contributions to support the
pension fund beginning Jan.
1, 2018. Those contributions
currently go into a supple-
mental investment account
that belongs to the employee,
making Oregon one of the
only states that requires no
pension contribution from
employees. Redirecting the
contributions would not
reduce pension liabilities, but
could offset as much as $600
million a year in contributions
from employers.
Capping a members’ final
average salary used in the cal-
culation of their benefits at
$100,000. The change would
apply prospectively, so the
only limit for service rendered
before Jan. 1, 2018, would be
a $265,000 federal limit that
applies to public employees
hired after 1995. The cap
would have little impact on
rank and file employees, but
would affect higher paid man-
agers, coaches and, in particu-
lar, doctors working at Oregon
Health & Science University.
PERS actuary, Milliman Inc.,
says this proposal would
reduce the pension system’s
total liabilities by $3.3 billion
and could lower required con-
tributions from employers by
about $285 million a year.
Finally, the bills would
change the calculation of
final average salary so it is the
average of five years of wages
instead of three years. The
change would reduce average
salaries used in the annuity
calculation and temper pen-
sion spiking by reducing the
impact of big pay raises or
heavy overtime in the final
years of employment. The
actuary said this measure
would reduce the system’s
total liabilities by $700 mil-
lion and cut required contri-
butions from employers by
about $65 million per year.
Greg Hartman, a lawyer
for the PERS coalition of pub-
lic employees who success-
fully challenged most of the
last round of pension changes,
said he wasn’t surprised to
see the smaller list of reform
ideas, as the others being dis-
cussed “were pretty clearly
illegal.”
He said he hadn’t seen the
bill, but was curious to see
how Knopp was proposing to
redirect employee contribu-
tions to support the pension
fund. “I think it’s very prob-
lematic to do this in a way
that’s legal.
Finally, Hartman contends
that the actuary’s estimate of
savings from limiting final
salaries in benefit calculations
was significantly overstated.
If lawmakers debate any
PERS changes, it would mark
a reversal from the last two
sessions. Gov. Kate Brown,
Courtney, and House Speaker
Tina Kotek have already indi-
cated their reluctance to take
on the issues, conscious that
their political benefactors in
the public employee unions
would take a dim view.
Brown said last fall that
her legal team had looked at
the list of fixes being circu-
lated and determined there
was nothing left that was
both legal and economically
significant. She plans to put
her weight behind a pro-
posal to restructure the state
Treasury’s investment man-
agement division and bring
more of the work in-house
to save on management fees.
Treasury estimates that the
proposal could save $1 billion
over 20 years, though law-
makers have been reluctant to
give the agency the additional
autonomy it is seeking.
“I look forward to the other
solutions to be proposed in the
months ahead,” Brown said
at her swearing-in ceremony
Monday. “As we consider our
next steps, let’s agree to keep
our promises to retirees. Let’s
ensure that no one can advan-
tage of the system. And let’s
seek solutions that are legally
viable, so that dead ends
aren’t left to languish in court
while the challenge of PERS
only continues to grow.”
It’s not clear whether that
signals more flexibility on
the issue, but public employ-
ees are almost certain to sue
to block changes that reduce
benefits or seek some com-
pensation at the bargaining
table.
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