State agenda must begin with lasting PERS reform
We will see who stokes the PERS reform train's firebox and who straps themselves to the track to slow that engine down
The PERS reform train is picking up steam. Soon, we will see who stokes the firebox and who straps themselves to the track to slow that engine down.
It’s a $16 billion engine, as in $16 billion of unfunded liabilities in Oregon’s Public Employees Retirement System. It is barreling down the track toward Democrats who control the Oregon Legislature and whose political status depends on the largesse of public employee unions and their supporters.
Those Democrats, in 2013, must decide whether to stand pat with traditional politics or act in the interests of the entire state.
The PERS reform train must reach its destination if Oregonians want long-term government stability, but that destination cannot be the limited proposal by Gov. John Kitzhaber. He gets credit for taking the lead, but the list of system improvements must be expanded from his two recommendations.
Actually, the governor should be credited with just one recommendation, that being to limit cost-of-living increases to the first $24,000 of annual payments to PERS beneficiaries. Estimates indicate that change would save $800 million per biennium.
The governor’s other proposal hardly deserves mention in this discussion. It would eliminate the subsidy Oregon pays to out-of-state PERS beneficiaries specifically to offset Oregon income taxes they don’t pay. It’s an embarrassment of Oregon law; legislators should fix it in the first weeks of the session and eliminate that issue from future PERS debate.
It will be hard enough for Democrats to approve the governor’s recommendation, but Oregonians can’t stop there. Other major PERS reform measures are supported by the state’s largest business associations and newspapers, and by fiscal conservatives who are a majority in most of Oregon’s 36 counties.
Among those other reforms: Lower the excessive rate of return on investment that is built into PERS benefits; reduce or eliminate the mandatory “employee payments” — actually, mostly paid by government — that spike pension benefits; eliminate overtime and fringe benefits from the final salary numbers that establish long-term pensions.
Actually, there are other options. The Legislature could eliminate future PERS controversy by scrapping the program for new employees in favor of a defined-contribution plan, used by most in the private sector.
The importance of PERS reform cannot be overstated. Government cutbacks threaten the quality of education and public services, but talk of tax reforms will go nowhere until the states takes aggressive action to resolve its most serious spending problem. Barring that, Oregonians should reject new taxes while pursuing their own program of PERS reform through initiative petition.
It shouldn’t come to that. The leaders of the Democratic Party must recognize that the time for comprehensive, lasting PERS reform is 2013, and Oregonians must keep reminding them in the months ahead.
As we’ve written before, public employee retirement payments must be fair and sustainable, and changes to the system must withstand legal challenge. The best minds we have are working to ensure that PERS reforms meet those tests, but in politics, good minds can be trumped by bad votes.
Don’t let it happen this time.