A PERS bill is moving in the Oregon legislature that is more patchwork than policy reform, but it may constitute all that can pass in the 2019 session. The fast-tracked legislation could reach the House and Senate floors as early as next week.
Senate Bill 1049 is unofficially, but politically tied to the Student Success Act, which generates an additional $1 billion per year to boost education funding and imposes a commercial activities tax on larger corporations. The critical 18th vote provided by Senator Betsy Johnson, D-Scappoose, was conditioned on legislative action this session on what she termed “substantive” reform of the Public Employees Retirement System. Johnson voted for SB 1049 in the Joint Ways and Means Committee.
The core provision in SB 1049 involves extending the minimum payment schedule for the $27 billion unfunded liability for another eight to 10 years, which accounts for the largest savings achieved by the legislation. Detractors called that another example of kicking the can down the road as opposed to actual reform.
“The bill does not meaningfully impact the system’s deficit or move Oregon any closer to solving its underlying pension problem,” writes The Oregonian’s Ted Sickinger, who closely tracks PERS issues.
SB 1049 includes a cost-sharing provision that would redirect a portion of employee pension contributions made to a supplemental savings plan that resembles a 401(k) plan. An amended version of the plan that was voted on left out an earlier provision that would have reduced the interest used to calculate the pension system’s money-match. The bill reverses a PERS decision and would give employees discretion on how to allocate investments in their own accounts.
Lawmakers added a provision to tap future net revenues from sports betting for an employer incentive fund to make lump sum payments to pay down liability. Lawmakers also tossed in a one-time $100 million contribution.
There was no mention of diverting personal income tax kicker rebates to reduce the PERS deficit.
Amendments to create a new tier of public employees who would receive a 401(k) plan in lieu of pension benefits didn’t pass in committee.
Like most bills dealing with PERS, no one was really happy. Public employee union officials indicated they would explore a court challenge to cost-sharing provisions. Business advocates and some public employers didn’t think the measure went far enough. Legislators fretted over having to vote on the bill, fearing political consequences down the road.
“Not a single lawmaker questioned or expressed any apprehension about further underfunding the pension system and extending the deficit for another decade,” Sickinger reported. “That’s the bill’s main thrust – a strategy that could lead to further destabilization of the pension fund and land the issue back in lawmakers’ laps if investment returns don’t live up to expectations.”
In an even harsher judgment, Sickinger wrote, “Several committee members repeated the myth that greedy Wall Street bankers and the 2008 recession are to blame for PERS problems, rather than misguided and financially self-interested decisions by earlier legislatures and PERS boards that actually created the system’s structural deficit.”
Governor Brown’s task force failed to coalesce around major proposals to reduce the PERS unfunded liability. Trial balloons on ideas such as raiding SAIF reserve funds didn’t gain any political traction.
The PERS unfunded liability has continued to grow despite a strong economy and in the face of stock market volatility.