public employees

PERS: The Defining ‘Hot-Button’ Issue in the Governor’s Race

There have been grand bargains, court judgments, work groups, dire warnings, threats and inflated claims. Now there is a gubernatorial race that might turn on frustration over how to reform the Public Employees Retirement System. [Illustration Credit: Joan McGuire/Oregon Business]

There have been grand bargains, court judgments, work groups, dire warnings, threats and inflated claims. Now there is a gubernatorial race that might turn on frustration over how to reform the Public Employees Retirement System. [Illustration Credit: Joan McGuire/Oregon Business]

Ted Sickinger of The Oregonian has written a series of revealing articles about the Public Employees Retirement System (PERS), which his latest story calls the “defining issue” of the 2018 Oregon gubernatorial race.

Ted Sickinger is a long-time member of The Oregonian’s investigative team who has written extensively about the Oregon Public Employees Retirement Fund, from its arcane actuarial realities to the political firestorms it has ignited.  https://muckrack.com/ted-sickinger/articles .

Ted Sickinger is a long-time member of The Oregonian’s investigative team who has written extensively about the Oregon Public Employees Retirement Fund, from its arcane actuarial realities to the political firestorms it has ignited. https://muckrack.com/ted-sickinger/articles.

“Perhaps few issues more starkly delineate the views of Kate Brown and Knute Buehler in this fall’s gubernatorial election than Oregon’s public pension system,” Sickinger wrote. 

“Though PERS has been a hot-button issue in the state for decades, the political pressure may never have been higher,” he continued. “Schools, municipalities and government agencies are panicking as their required PERS contributions spiral to historic highs to help dig the system out of its $22 billion unfunded liability. There is no rescue in sight, and contribution rates are slated to jump again in July, pulling another $550 million a year out of public budgets statewide.”

Republican challenger Buehler has used the issue as a political club to criticize Governor Brown’s leadership. Brown has searched for ways to buy down the unfunded PERS liability and insists she won’t punish hardworking public employees. 

As Sickinger describes it, Buehler has promoted a set of PERS reforms closely paralleling those backed by Oregon’s business community. Brown dismisses Buehler’s “threats and bluster” and says she will concentrate on “actual solutions that solve the problem.” 

In reality, the window of possible changes isn’t very wide. “There is a limited menu of changes to the pension system considered economically meaningful and legally viable in light of past decisions by the Oregonian Supreme Court,” Sickinger says. “None would erase the pension deficit, though it is possible to make cost reductions that would help [public] employers.”

Sickinger walks through ideas on the table – public employee cost-sharing, which Oregon public employees already do, a $100,000 salary cap to limit large pension payouts and a transition to a 401(k) plan. 

Sickinger’s article touches on incentives and investments, including Brown-backed legislation to entice public employers to make an extra contribution to PERS and have the contributions matched by 25 cents on the dollar. Buehler calls the idea “political theater” with minimal impact on the unfunded liability.

Brown touts professional changes in the state treasurer’s office to achieve a higher rate of return. Buehler dismisses this, claiming the Oregon PERS portfolio has been one of the best performing funds in the nation.

Regardless of your politics or gubernatorial preference, Sickinger’s reporting on a major state issue is informative and cast illumination on claims, counter-claims and outright inaccuracies. 

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For starters, there were 145,963 Oregon PERS retirees through December 2017 – 127,687 of whom are considered Tier 1, the group with the most court-tested retirement benefits. Another 67,840 Oregon public employees are eligible to retire – 22,300 of whom are in Tier 1.

For the rest of the story, read Sickinger’s story, including a YouTube video on how Oregon got $22 billion in the hole.

 

Political Pot Continues to Boil

The September 15 deadline is creeping up for Governor Kitzhaber to decide whether to move forward with a legislative special session to consider further cuts to public employee pensions, business tax cuts and an Oregon-led approach to building a replacement I-5 Columbia River bridge.

The path to all three is littered with political obstacles. One thing is clear, however. If there is a special session, it will be by September 30, the date that Oregon's offer expires to share the state costs on the bridge with Washington.

The Kitzhaber camp isn't saying whether he has lined up the votes for the grand bargain or bridge funding. The pieces may not fall into place – or fall apart – until Treasurer Ted Wheeler releases his financial analysis of the risks involved in Oregon leading the way on replacing the Columbia River bridge. When the Oregon-in-the-lead strategy was unveiled last month, Wheeler questioned whether there was enough time for an analysis before a special session would be called. Now he has until September 15.

Bridge financing is not a new subject for Wheeler, the former Multnomah County chair who pieced together the bucks to replace the aging Sellwood Bridge, which is now under construction. But the timing of the Columbia River bridge financial analysis couldn't have occurred at a stickier time for Wheeler, who might be the odds-on favorite to succeed Kitzhaber as governor if he decides not to seek re-election.

As it turns out, Kitzhaber is fundraising, presumably for his yet-to-be-announced 2014 gubernatorial re-election campaign. The three-term governor also showed his political flag at a Labor Day union function, declaring firm opposition to an initiative that would ban mandatory payments by public employees to public unions. The Oregonian speculated his comments – which caused Oregon AFL-CIO President Tom Chamberlain to quip: 'Damn, Governor, you sounded like the president of the AFL-CIO" – were aimed at politically defusing political opposition caused by his continued support for deeper cuts in public employee pensions.

The $1 Billion Elephant in the Room

Rep. Shawn Lindsay, R-Hillsboro, tweeted about it and coffee shop conversations clucked about it. Oregon public employers will have to cough up an additional $1 billion per biennium to keep up with financial demands of the Public Employee Retirement System (PERS). That will mean fewer teachers, firefighters and health care workers.

Ted Sickinger's account in The Oregonian reminded voters, public workers and policymakers that rising contributions to an underfunded PERS is the biggest single factor squeezing public budgets. According to Sickinger's report, PERS controlled $54.7 billion in assets in 2011, but that only covers 73 percent of its liabilities.

James Dalton, who chairs the PERS board, told Sickinger: "We have a $16 billion unfunded liability. The question isn't if you're going to pay. The question is when you're going to pay."

It isn't hard to see a connection between rising pension payments, along with spiraling health insurance premiums, as reasons for a declining public workforce. Data indicates nearly 250,000 public sector jobs were axed in 2011, with more cuts expected this year. Almost half of the public employment losses in 2011 were laid-off teachers.

There are 656,000 fewer public sector jobs than in pre-recession 2008. Economists say shrinking public payrolls create a drag on U.S. economic recovery by negating private-sector job gains.

The Oregon legislature has tried to curb public pension liabilities, but some of its legislative remedies have been struck down in court for effectively breaking the contract with public employees by changing terms of their retirement. Public employees say they gave up pay increases many times in return for longer-term pension benefits

That strategy, which was pursued in most states and at the federal level, now may be coming home to roost. Forest Grove School District Business Manager Mike Schofield estimated 30 percent of the district's budget goes to retirement benefits. Sickinger's story suggested the additional PERS burden amounts to $700 per household.