PERS Task Force Ideas Fall Short of Brown’s Goal

The task force appointed by Governor Brown will submit its suggestions soon to shrink the Oregon PERS unfunded liability, but during the time the task force met the liability hole grew bigger. Photo Credit: The Oregonian

The task force appointed by Governor Brown will submit its suggestions soon to shrink the Oregon PERS unfunded liability, but during the time the task force met the liability hole grew bigger.

Photo Credit: The Oregonian

The task force named last May by Governor Brown to identify ways to slice the unfunded liability of PERS will soon submit its ideas, but don’t expect them to be easy to implement or add up to the $5 billion goal Brown set.

One of the most promising concepts floated by the task force emerged at its last meeting and doesn’t have anything to do with selling surplus state property or imposing fees here and there. That idea involves an incentive structure to the 900 or so PERS employers to increase their contributions to pay down the unfunded liability.

None of the ideas coming from the task force could be described as a slam dunk.

  • Imposing an additional tax on PERS retirees receiving more than $60,000 annually in benefits (likely to face an uphill court battle);
  • Increasing permit and fee prices (likely politically feasible, but the amount of money it raises would be minimal); and
  • Transferring some of the $1.6 billion surplus in the State Accident Insurance Fund (a possibility, but it is unclear how much of the surplus could be transferred without adversely affecting SAIF).

Complicating the exercise, the PERS board in July lowered the assumed rate of return on investments, which had the effect of increasing the unfunded liability by another $2.4 billion to almost $25 billion. Business interests pushing for PERS reforms said the investment rate change “unmasked the severity of the problem.” PERS employers, which include school districts, will be expected to pay an additional $900 million over the next two years.

As reported by The Oregonian’s Ted Sickinger, Brown’s 7-member task force, which has met four times, looked under state seat cushions for spare change to shrink the PERS unfunded liability without directly addressing PERS benefits. The search included selling surplus properties, privatizing state agencies and putting a surcharge on liquor sales. None of those ideas gained much traction in task force deliberations.

In the absence of a silver bullet idea, task force members privately said the sum total of their ideas might only reach around $1 billion, far short of Brown’s goal. Even $1 billion may be difficult to achieve since the task force is submitting suggestions, not recommendations by its November 1 deadline. The suggested incentive to PERS employers to increase contributions to qualify for some sort of state matching funds may wind up attracting the most interest, though it would require lawmakers to scratch together the state revenue to provide matching funds.

There is little doubt the PERS unfunded liability will be a major issue in the 2018 gubernatorial election. GOP frontrunner Knute Buehler regularly criticizes Brown for her failure to offer ideas on how to address the PERS liability and put state budgeting on a sustainable basis.

Majority legislative Democrats, supported by Brown, appear poised to push cap-and-invest legislation in the short 2018 session that begins in February, which could generate an additional $1.4 billion in state revenue. Legislative Counsel has opined that the cap-and-invest measure is not a tax and therefore doesn’t require of a three-fifths majority to pass in the House and Senate.

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Zack Reeves is a state affairs associate who represents CFM clients in the Oregon legislature. He began working as a legislative staffer in 2011 and has developed a wide range of contacts and experience on a broad spectrum of legislation. Before politics, Zack worked as a reporter and copy editor.