The message to Oregon legislators from Gov. Kate Brown’s staff last week was that PERS has an immediate problem.
Yet the solutions proposed by the governor are modest at best.
The problem is the Oregon Public Employees Retirement System has too little money to pay its projected pension benefits. That gap, whose size ranges from $15 billion to more than $20 billion depending on what assumptions are made, is PERS’ unfunded actuarial liability. And to fill that gap, schools, cities, counties and the state are spending increasingly larger shares of their budgets on PERS.
Each PERS employer, of which there are about 915, has its own unfunded liability. School districts generally are in the worst shape, with their unfunded liability averaging 176 percent of their payroll.
Brown will ask the 2018 Legislature, which convenes Feb. 5, to pull money from other sources and put it into an account to help school districts pay for PERS. Brown suggested that money could come from Oregonians’ unclaimed property, increased collections of debts owed to the state, lawsuit settlements, a potential tax amnesty program, higher-than-usual capital gains and estate taxes, and other sources. Revenue from new Oregon Lottery games also could help schools, along with community colleges and universities, pay for PERS.
The governor’s proposed legislation also would create — but not pay for — a matching fund to encourage employers to act faster, instead of letting their current budget needs overwhelm their eventual PERS obligations. For example, the state might match 25 cents for every dollar paid by a PERS employer. It would be up to the 2019 Legislature to fund that matching program.
Those are good ideas. As state Sen. Bill Hansell noted, it’s good that the governor recognizes immediate action is needed.
“At least we got them to a place where they’re admitting they have a problem,” Hansell told the East Oregonian Monday.
Still, it’s disappointing that this is all Brown could come up with from last year’s blue-ribbon task force on the PERS unfunded liability. And it’s even more discouraging that Brown won’t take up PERS benefits reforms. Not in this year’s legislative session; maybe not in next year’s, either.
Brown says she doesn’t want to try approaches that will be thrown out by the Oregon Supreme Court. Instead, she and the Legislature must recognize their Catch-22: The only way to know whether further reforms will pass legal muster is to enact them and have them tested in court.
Of course, that will require going toe-to-toe with the unions in an election year, and we’re not convinced Brown will do that, either.
Instead of shying from productive reforms, the governor and legislators should embrace them with the knowledge that they dare not count on the PERS savings until the subsequent litigation sends.
That would be a more courageous approach than Brown’s modest PERS proposals for the 2018 Legislature.