By Associated Press • 

Court strikes down big chunk of Oregon public-employee pension cuts

Updated at 12:40 p.m. Thursday

SALEM - The Oregon Supreme Court ruled Thursday that some of the 2013 cuts to public-employee retirement benefits are unconstitutional, wiping out much of the savings lawmakers were aiming for and likely raising pension costs for state and local governments.

The justices said workers were promised an annual inflation increase of up to 2 percent, and the Legislature can't scale it back retroactively.

Cities and school districts said they're disappointed in the ruling and warned it will lead to larger class sizes and diminished government services. They called on the Legislature to find new Public Employees Retirement System cuts that might pass muster with the court.

“These reforms represented a reasonable means for government employers to manage expensive PERS obligations while still providing an adequate level of desired services to citizens,” said Mike McCauley, director of the League of Oregon Cities.

After the Great Recession took a massive bite out of the pension system's investments, state and local governments faced a big hike in their employee pension costs. Former Gov. John Kitzhaber brokered a deal to cut benefits while raising taxes on mostly wealthy taxpayers and cutting them for certain businesses.

The pension cuts reduced the cost-of-living adjustment, or COLA, from a maximum of 2 percent to 1.25 percent on the first $60,000 in retirement payments and 0.15 percent on anything higher. Retirees living outside Oregon lost a supplemental payment intended to help cover income taxes.

The justices ruled the supplemental tax payment was not a contractual guarantee so the Legislature was free to take it away. But the COLA could not be reduced for any work done before Oct. 8, 2013, when the law took effect.


Don Dix

People who are PERS beneficiaries making legal decisions about reducing their personal retirement accounts? Try that anywhere but government! No conflict of interest here, move along!


Don, in this case they did in fact reduce their own retirement benefits when they retire...They loose on COLA for all work done after Oct. 8, 2013 and they loose if they retire to a location out of state. So, you are correct, no conflict here.

On the other hand, how about the COLA for Federal Retiree's and Social Security recipients?

Don Dix

The difference between PERS and SS -- SS recipients have contributed with every paycheck received. Most PERS members do not/did not contribute anything. And PERS retirement accounts are 'spiked' ( using sick leave, personal days, vacation, etc. ) towards the end of service to increase the monthly benefit. PERS is allowed to operate as they choose, mostly because they 'own' nearly every decision maker on one side of the isle. Filing suit is simple when the outcome is easily predicted.

Since the state has wasted $$$ on Cover Oregon ( which will still cost more to litigate ) and the CRC, the expected savings are already spent.

The state will cry and manipulate for more $$$, so just where does that final bill rest? But when you pay the extra, remember, 'it's for the kids'! BS!


I know several SS recipients who are receiving SSI because of someone else and they didn't put a penny into it. I have a relative who is receiving Social Security Disability and has never put anything into Social Security...My folks have outlived their "balances" and drawn way more SSI than they ever put into the program...According to my own personal figures from the SS Administration, I will exceed the employer / employee combined contributions in 5 years. So based on your reasoning, my folks should not get a COLA, and in 5 years I should not get a SS COLA because I have exceeded anything I put into it.

On the other hand, I know a PERS retiree that tells me for the first 10 years of his total 30 years of service, he contributed 6% from his paycheck to his PERS retirement account. It was only after his employer came to them and offered to pickup the 6%, ($55.00+/- around 1978) if they would forgo the $75.00 pay raise they were supposed to get - so even after that agreement he was contributing by way of his employer. That was his pay raise he "redirected"...And he says his employer didn't participate in the sick time contribution. He says he retired under an option that doesn't include sick time even if his employer had participated in it.

When he explained it to me it made sense as when I left a private company, I was cashed out for 400 hours of PTO, combined sick and vacation time. My private employer paid 6% of that figure into my 401k.

But to tell any retiree from any job, State-Federal-RRA- that the CPI is going to be flat line and they don't deserve or need a COLA, after they had been contractually promised one, is a tad disingenuous.

I think the court got it right, especially when they cut the extra tax compensation to those living out of state, not paying Oregon Income Tax. Extra compensation that was brought about by Federal Employee's suing the state.

Don Dix

Seabiscuit, examples abound that make the case for either too much or too little. SS would be much better off if Reagan would have kept Congress out of the till. Money just laying around is too tempting for a government to leave alone.

The 6% pickup was put into a biennial contract to take the place of salary increase during that 2 years. But remember, that was a 2 year contract, 1979-80, I believe. The 'pickup' became permanent as if salary raises no longer existed from that time forward.

In the 90's, the money match was put before the court, and deemed untouchable. The program, passed by the legislature, 'matched' the account at retirement, which included the 'spiking tactic', adding millions to individual accounts.

Those two 'acts' put PERS retirement packages in a category most private accounts could never imagine. And many never contributed anything.

And I can sight several instances of PERS retirees being paid nearly double their payscale. Coach Belloti's package is the poster child ( $490K/year ), and the exception to the rule. But at 2% yearly, the increase is approx. $820/month. Simply foolish!

I don't begrudge anyone their due, but as we see, many PERS accounts are bloated and grossly overfunded, partly because every decision is made by recipients of the program.

In the private sector, the boss ( read owner, board, CEO ) makes those decisions, usually based on performance, company and employee. And the employees contributions are usually not 'doubled' at retirement. With PERS, we, the 'boss', really have no say.

The PERS program costs many public entities 15-25% of total funds available ( and due to increase ). That's a ridiculous amount, and a basic reason the infrastructure around the state is in disrepair.

I may not witness it, but at some point, given the ever increasing financial burden, the bubble will burst. What then?


Don, you are absolutely correct in that the former version (Tier 1)of PERS was unsustainable. Reforms made (about 15 years ago) that created Tier 2, and later the Individual Account Program (IAP), scaled back that unsustainability. With these reforms, I think it is unlikely that "the bubble will burst" any time soon, especially as the remaining Tier 1 beneficiaries age out. Even so, PERS is an incredibly expensive hit on the public coffers, and will continue to remain so for a long time. The reforms made in 2013 were a good start, but now they have been rejected and there is no political will to take them back up.

Asking public employees to give up the 6% pick-up, and make their own contribution to their own retirement, is an entirely reasonable step that could save the state and local governments hundreds of millions of dollars. That wouldn't take legislative action, because it is a collective bargaining issue, but we all know ugly those picket lines would get if anybody pushed for that.


spongebob,that is the problem.

You said, ".... it is a collective bargaining issue, but we all know (how) ugly those picket lines would get if anybody pushed for that."

Collectively the school boards across Oregon have caved to the demands of OEA over the last three decades. We now have the greatest spread of all states in k-12 teacher compensation and student academic success. At the same time the teacher contracts are among the shortest of all states. The symbiotic relationship between public sector unions and the Oregon Democratic Party has been economically disastrous for Oregon. But, that appears to be what Oregon's lethargic voting public desires.

The rest of the public sector has public employees deciding compensation for other public employees. How has that worked? The answer is "very well" if you are a public employee.

Oregon is now one of the "poorer" states, now ranked 33rd in per capita income. This ranking has slipped steadily from two decades ago when Oregon was ranked 26th. Poor political leadership with economically incestuous relationships has been a problem that most people in Oregon do not care to understand.

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