2B ❚ WEDNESDAY, FEBRUARY 14, 2018 ❚ APPEAL TRIBUNE
Gov. Kate Brown outlines education proposals
Connor Radnovich
Salem Statesman Journal
USA TODAY NETWORK
Oregon Gov. Kate Brown announced
a series of education and business pro-
posals and priority shifts during her
State of the State address Feb. 5, outlin-
ing the ways she believes the state can
expand economic prosperity to all
through education programs.
At the heart of her address is “Future
Ready Oregon,” her new five-step agen-
da to refocus education on graduating
students from high school by preparing
them for open jobs in technical careers
and putting $300 million toward those
classes in the next budget.
These efforts will be especially di-
rected toward rural areas and communi-
ties of color, including Oregon’s Native
American tribes.
“For too many in Oregon, the Amer-
ican Dream has become the Impossible
Dream,” Brown said. “It seems no matter
how much you work, it’s very hard to get
ahead.”
Brown laid out for the joint legislative
session and assembled guests the situa-
tion she has seen in the state: Families
are struggling to make ends meet with
low-paying jobs, while technical job cre-
ators want to hire more people into well-
paying careers but are forced to look out
of state for employees.
This skills gap in the state is the “op-
portunity” Brown wants to take advan-
tage of.
She noted that 86 percent of high
schoolers in Oregon who had hands-on
education, including career technical
courses, graduated high school 10 points
above the state’s overall rate.
Oregon has one of the lowest gradua-
tion rates in the country, though it has
Gov. Kate Brown delivers the State of the State address on Monday, Feb. 5, 2018,
at the Oregon State Capitol in Salem. MOLLY J. SMITH / STATESMAN JOURNAL
seen growth in recent years: 5 percent-
age points higher overall since Brown
became governor and 7 points higher
among Hispanic or Latino students.
As a particular success story, Brown
pointed to Salem’s Career and Technical
Education Center, which boasts a 98
percent graduation rate. Its programs
include construction, auto-body, video
and game design, and robotics.
A high school degree or equivalent is
the focus because the occupations driv-
ing economic growth are jobs that don’t
require a college degree: advanced man-
ufacturing, renewable energy, health-
care, bioscience and IT services.
Brown laid out a five-pronged plan to
achieve her goal: Create high-tech ap-
prenticeships, incentivize rural con-
struction, build more homes in rural
communities so people can live near
those new jobs, focus growth on often
overlooked communities and align edu-
cation with entry-level job qualifica-
tions.
The only bill that addresses any of
these goals during this 35-day session is
House Bill 4144. The bill, one of five from
the governor this year, would lower bar-
riers for mid-career construction pro-
fessionals to start their own businesses
and create grants for training new work-
ings and construction of rural housing
projects.
“By working together, we can ensure
that economic prosperity reaches every
single corner of the state,” Brown said,
one of her speech’s handful of applause
lines.
In a statement, House Republicans
seemed more concerned about the
problems Brown didn’t bring up. They
criticized her for not mentioning the
millions of misspent dollars by the Ore-
gon Health Authority, for not providing
a plan on how to fix the state’s foster
care system and for only giving passing
reference to the massive PERS unfund-
ed liability.
“It’s hard to appreciate Gov. Brown’s
future aspirations for our state when
she has failed to address so many prob-
lems here in the present,” House Repub-
lican Leader Mike McLane, R-Powell
Butte, said in a statement.
House Democrats, meanwhile, were
complimentary of the speech, saying
Brown’s intent to expand economic op-
portunity in the state matched their var-
ious legislative goals for this session.
“I stand with Gov. Kate Brown and
her vision for an Oregon where every-
one, regardless of where they live, has
the ability to succeed and thrive,” House
Democratic Leader Jennifer William-
son, D-Portland, said in a statement.
“We must continue to capitalize on our
success and make progress for Oregon’s
future.”
Toward the end of her address,
Brown offered a strong rebuke of some
policies coming out of Washington, D.C.
She promised to protect Oregon’s immi-
grants and Dreamers, maintain health
care coverage in the state and preserve
public lands, all of which were targeted
during the first year of the Trump Ad-
ministration.
“As we come together this session, let
us commit to keeping our promise to Or-
egonians, to take responsibility for mov-
ing Oregon forward,” Brown said.
Reporter Natalie Pate contributed to
this report.
Contact the reporter at cradnov-
ich@statesmanjournal.com or 503-
399-6864, or follow him on Twitter at
@CDRadnovich
Public pension system exceeds return expectation for 2017
Ted Sickinger
The Oregonian/OregonLive
PORTLAND, Ore. – Thanks to a red-
hot stock market, Oregon’s public pen-
sion system investment portfolio gener-
ated a 15.3 percent return last year, more
than double what was expected and
sufficient to lop $3 billion or so off the
system’s $25 billion unfunded liability.
But it wasn’t enough to head off an-
other painful round of pension cost in-
creases slated to hit government bud-
gets in 2019.
The Legislature will probably delay
any serious conversation about changes
to benefits, as it has for the past three
years. Gov. Kate Brown, for one, says
she’s not ready to talk about the main
benefit reform idea in circulation – rein-
stituting some level of employee contri-
butions to the pension fund – until 2019.
12 MONTH
SPECIAL OFFER
Subscribe for about
99
¢
PER
WEEK! *
BILLED MONTHLY
LOCK IN THIS
SPECIAL RATE!
VISIT StatesmanJournal.com/PPC
CALL 1-800-452-2511
*Offer expires 3/31/2018. Certain restrictions apply. For complete details, Call or visit website. Price per week is based on a
full access subscription including Sunday and Wednesday print delivery at $4.30 per month for the first 12 months.
ENT5211
P-PC
In the meantime, she has another
plan, or two plans actually. The first
would redirect a slice of state revenues
to offset the pension costs of K-12
schools, community colleges and uni-
versities. The second involves enticing
the 900 or so public employers who par-
ticipate in the system to shake their sofa
cushions, identify reserve resources
and deposit them in accounts at PERS.
In the process, they would be gambling
that the pension fund’s investments
will generate higher returns than the
low and largely risk-free returns those
dollars earn today in the short- and me-
dium-term funds managed by the Ore-
gon Treasury.
Historically, that’s been a good bet.
But it’s no sure thing.
The Public Employees Retirement
System paved the way this fall, relaxing
minimums and reducing fees on gov-
ernment employers, to make extra de-
posits. Those funds would go into “side
accounts” that are invested alongside
pension assets. Those account balances
are then drawn down gradually to re-
duce an employer’s annual pension
costs.
As the system’s actuary likes to say,
side accounts leverage, or amplify the
effects of the system’s investment re-
turns on employers’ pension costs. If re-
turns are good, the side account bal-
ances and the pension savings they
generate grow. But there is also the risk
of a stock market downturn depleting
the funds after they’re deposited, which
can turn the strategy into a loser.
To sweeten the pot and tilt the risk-
reward balance in employers’ favor, the
governor is looking to set up an incen-
tive fund that would match employer
deposits by 25 cents on the dollar. The
idea was hatched by the task force that
Brown appointed last year to look for
ways to reduce the pension deficit by $5
billion. Its success hinges on the state’s
ability to come up with the seed funds,
and employers’ finding the money to
take advantage of them.
Neither is assured. While the goal is
for the state to come up with $400 mil-
lion, which could match an additional
$1.6 billion in employer contributions,
no revenue source has been identified
yet.
If the state comes up with the dollars,
the plan is to prioritize employers with
the largest proportional liabilities. Em-
ployers would have to apply reserve
matching dollars from the funds by the
end of 2019, then they’d have another
3½ years to come up with the extra pen-
sion contributions.
“We expect to see some rate relief in
‘21-’23 and potentially even further rate
relief the following two biennia,” said
Elana Pirtle-Guiney, the governor’s
workforce and labor policy.
Scott Winkels, a lobbyist for the
League of Oregon Cities, said he wasn’t
sure how many cities have revenue
sources they could tap to put in side ac-
counts. Lawmakers, he said, should be
looking at benefit reforms, including
employee contributions, on top of this
effort.
“This isn’t the end all be all,” he said.
“It’s not going to solve the problem, but
it’s something we need to do. It’s the
right thing to do.”
The school funding, meanwhile,
would be a bulk side account funded
with a straight redirection of existing
state revenues and no contributions re-
quired from the schools, community
colleges or universities, said Pirtle-Gui-
ney.
The governor’s office is hoping law-
makers agree to capitalize that fund
with a “few hundred million” dollars,
she said. The legislative concept in-
cludes a number of potential revenue
sources, including a proposed tax am-
nesty program that would give delin-
quent taxpayers a break on their ac-
crued interest and penalties if they paid
all or a portion of their back taxes. The
state last offered such a program in
2009 and raised about $40 million,
about half of it unexpected revenue.
The other source of funds would be
one-time revenue streams and windfall
dollars. Those could include lawsuit set-
tlements and debt collections, as well as
tapping a set of standard revenues if
they come in above average, such as
capital gains taxes, estate taxes, beer
and wine taxes and lottery commis-
sions.
The pension cost offsets generated
by a bulk side account with several hun-
dred million dollars would likely be very
small at an individual school district
level. Still, it’s a no-risk plan for schools.
Participating in the incentive program
would be another matter, tapping the
reserves they’ve been husbanding to
cover budget shortfalls.
“Would it be more valuable to take
part of our rainy day fund and pay this
down versus saving it for a downturn
when we might need it?” asked Claire
Hertz, chief financial officer of Beaver-
ton School District. “Each district will
have to evaluate that. You look at the
trends and the history and make your
call.”
The consulting firm ECONorthwest
recently offered its take on the risks and
opportunities of side accounts at a
meeting organized by the Oregon
School Boards Association.
“If you had cash sitting around,
there’s a 99 percent chance you’d come
out on top,” said Ralph Mastromonaco, a
senior economist at ECONorthwest.
“The opportunity cost of holding cash is
pretty high. Over a 20-year period you
can expect (Oregon pension system) re-
turns to be substantially higher.”
Mastromonaco said a number of dis-
tricts have also expressed in interest in
borrowing more money to seed their
own side accounts by issuing pension
obligation bonds. The incentive pro-
gram won’t offer matching funds on bor-
rowed money, but districts have had
some success with the strategy in the
past, which is essentially gambling that
PERS returns will be higher than the in-
terest rate paid on the borrowed money.
ECONorthwest also analyzed the
probability of a positive outcome with
pension borrowing, given current mar-
ket conditions, and told schools it was
fairly high: 70 to 80 percent. But Mas-
tromonaco offered some caution:
“The timing of these returns matter,”
he said. “A lot of people are expecting a
correction in the stock market in the
short term. In 30 percent of the cases it’s
still a negative outcome. No one is
suggesting it’s a risk-free decision.”