Brown’s PERS plan not sufficient by itself

For several years, I have been trying to encourage a better conversation about the cost of Oregon’s Public Employee Retirement System and its impact on public services in the state. 

Guest Writer

Guest writer McMinnville City Councilor Sal Peralta boasts a long record of public sector activism and serving, most recently agreeing to serve as interim director of PERS Solutions for Public Services. The organization is working to advance cost-sharing reforms to the state’s pension system. Its goals are reducing the impact of PERS on taxpayers, ensuring competitive retirement benefits and working conditions for public workers, and preserving and enhancing vital public services in Oregon. See www.perssolutions.org for additional details.

It’s a difficult conversation to have, because when we talk about PERS, we are discussing the retirement benefits of public employees — including police officers, firefighters, teachers, librarians and road workers — who contribute mightily to the health and vitality of our community.

The conversation becomes even more difficult in our divided and polarized political climate. But it’s one that we need to have, because doing nothing is no longer an option.

Here are the facts:

PERS rates will soon amount to 25 percent of government payrolls in Oregon, up from a historic average of 12 percent. PERS costs have more than doubled in the last 10 years, and are expected to rise to 33.3 percent of payroll by 2023.

Over the next eight  years, these higher rates will cost units of Oregon government an additional $10.2 billion in taxpayer money, over and above current obligations. That doesn’t count the system’s worrisome shortfall burden, which has to be made up with general fund dollars. 

Already, we are seeing a significant impact on public services.

Last month, Chemeketa Community College announced elimination of 31 staff positions, along with a 5 percent tuition increase. Several other Oregon community colleges have made similar reductions, and about half the costs associated with those layoffs are attributable to PERS.

The city of Portland recently announced 56 layoffs in its parks department. Again, PERS accounted for about half the costs. And the list goes on.

For the city of McMinnville, PERS obligations will cost approximately $9.2 million in the 2019-21 biennium, accounting for roughly 25 percent of its total payroll, and are projected to rise an additional $2.4 million the following biennium. Yet during the last two annual budget cycles, property tax assessments for the city, its main source of general fund revenue, increased only $1.1 million and $1.2 million, respectively. 

On top of those PERS costs, the city must account for employee health care, step increases and other rising costs of doing business.

In practical terms, the city is facing the possibility of laying off personnel and reducing services, and/or imposing new cost-recovery fees for services previously offered for little or no charge. What I have described for McMinnville is true for nearly every city, county, special district, four-year college and community college in the state.

It’s maddening, because none of this is subject to local control. Only the Legislature, or the electorate through the initiative process, can do something about it.

All of this has been playing out at a time when we have had a strong economy generating solid investment returns. The situation will get worse if there is any kind of downturn.

By itself, the slight market downturn late last year added more than $3.5 billion to the system’s total unfunded liability, leaving it at $26.6 billion. That’s more than $15,900 for each man, woman and child in Oregon.

Unfortunately, to this point, the measures Gov. Kate Brown has unveiled in response focus exclusively on the K-12 school system.

She is proposing redirection of $1.6 billion in state revenue to the PERS fund over the next 14 years, plus an additional $683 million from temporary fee and license increases, corporate tax repatriation and fund transfers from the State Accident Insurance Fund and Oregon State Lottery. She is also suggesting a measure of employee cost-sharing, based on proposals developed by PERS Solutions, which would save about 15 percent of the unfunded liability going forward — provided it is applied to all public workers.

Protecting education is a worthy goal, but only a partial solution. The governor’s package would leave most of Oregon’s 800 government entities liable for most of the ballooning costs associated with PERS.

At PERS Solutions, where I am currently serving as acting director, we were encouraged by public comments suggesting legislative leaders were committed to doing more. I’d like to conclude by sharing two other reforms we are hoping legislators will endorse:

The first, which we are currently pursuing at the Legislature, is a so-called “workback/payback plan.” It would allow public employers to solve critical staffing shortages over the next five years by allowing them to tap retirees, but require both the employer and employee to contribute to paying down the jurisdiction’s unfunded PERS liability in exchange.

This would reduce PERS costs by more than $500 million over the next eight years. It has garnered bipartisan support, so we are optimistic it will be passed into law during the current session.

We have also filed two ballot measures to address the issue.

One of them, IP 20, would reduce employer costs going forward by a third or more. It would protect retirement benefits, but require employees to contribute 2.8 to 6 percent toward reduction of system liability in order to make that possible.

This measure would partially re-balance the 2004 decision to prevent Oregon public employees from contributing 6 percent to their own pensions — money now being used to purchase additional retirement benefits. Oregon is currently one of only two states in which employees make no contribution to their own defined-benefits pension plan. 

None of these proposals promise a complete solution. But they represent actions we can take that willsuit the courts, reduce costs going forward and help protect both the services we rely on and the retirement benefits of public employees.



Pers will sink Oregon. The unions are so embedded in the state and local government that they are like a tic that you can’t get out and it’s not likely to change with continuous and ever increasing democratic/liberal/socialist control of the state.

I know a gentleman, a good man and good family man, who has served the county since his twenties. In a few years he will retire at 55 with a million dollar pension making more retired than when he was working. How is this right? Some would say good for him he’s earned it. He’s earned a retirement plan not a lottery ticket. And what happens to retirees like him when they hit 65 or70 and the state defaults on pers? It will happen, it will default. As more and more taxes and fees are imposed, quality of life goes down enough from growing homeless problems, violence against people who don’t agree with a certain political affiliation and general culture and morals swirling down the bowl, people will leave the state. Look at what is happening in New York, wealthy business owners are leaving and taking their money with them.

This state is bankrupt. It’s only getting worse. Who wants to go halfsies on a u-haul?

Don Dix

Only in Oregon (plus one other state) can a public employee begin and enjoy a retirement plan without making any personal contributions. As Bigfoot states, these retirement packages should never have turned into a winning lottery ticket, but it has. Why?

When the public employee unions 'elect' candidates (and they do elect our state officials), it is guaranteed nothing will change. State officials, the courts, and the legislature are all recipients of the retirement system, so it's understandable there is no action, however questionable.

What cause such a shortfall? -- rules. No contribution by recipients. Allowing the use of accrued sick leave, comp time, and built up vacation when determining total salary is crucial. The monthly payments are based on the average of the last 3 years of employment. Adding those extras to the salary skews the reality of true compensation.

Enter retiring Portland legislator Margaret Carter. She was appointed to a newly created, high paying job at DHS (at age 72). Her state pay went from $21,600 to $121,800 (since reduced to $102K). 3 years later, her retirement package ballooned to $92,700 yearly. Is that a reflection of her actual work, or a reward for protecting PERS while a lawmaker? The answer is obvious!

At some point, Oregon will run out of other people's money to pay these costly packages. What happens when that occurs is anybody's guess, but it won't be pretty!

Web Design and Web Development by Buildable