Katy Durant couldn’t have been more articulate in her Dec. 5 letter to Gov. Kate Brown last December about the financial disaster awaiting Oregon. The outgoing chair of the Oregon Investment Council warned that if leaders continue to ignore the colossal imbalance between public employers’ pension obligations and the money available to pay it, the state is headed for a “train wreck.”
Without some kind of structural change, “this ‘house of cards’ will quickly collapse, leaving Oregon in a fiscal crisis,” wrote Durant, a 12-year member of the council responsible for investing Oregon’s pension fund. She then listed ideas to help lessen the state’s pension woes and beseeched Brown to show “bold leadership.”
That’s not going to happen, though. The governor took nearly eight weeks to respond. When she did, she characterized the $22 billion unfunded liability as “concerning.” A better word would be alarming. She seemed unfazed by the big increases in contributions to the Public Employees Retirement System that school districts, state agencies and other public employers will have to make starting in July – or that it is the first of a parade of such increases projected for the next several biennia. And she deflected talk of what the state can do by offering puzzling platitudes about the dependence of the investment fund on strong markets, analysis as insightful as “buy low, sell high.”
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If anything, Brown’s letter revealed how deeply dedicated she is to living in a state of denial. Her lone solution is a thrice-proposed, thrice-failed idea to reduce fees associated with investing the PERS fund by bringing some of the activities handled by outside management firms in-house. Her spokesman said she is also “tracking” proposals with an eye to their legal viability, potential savings and fairness. In other words, not a whole lot.
Here’s why Oregonians can’t afford to waste any more time. Starting in July, public employers will see their contributions to PERS jump from a system-wide average of 10.6 percent of payroll to 14.2 percent. (Individual school districts and other employers could see higher amounts depending on how underfunded their pension funds are). That average is expected to go up to 18.9 percent and 25.2 percent in the biennia after. That’s a lot of taxpayer dollars going not to education or health care or social services but rather to benefits to employees who are long gone.
Here’s what those increases translate into. The Gresham-Barlow School District will have to pay $2.5 million more in the coming year for PERS. That’s roughly 25 teachers. For Hillsboro, it’s even bigger – a $5.3 million jump in required PERS contribution, about 53 teachers. The Salem-Keizer School District is looking at a $6.5 million increase next year, about 65 teachers. And the state as a whole isn’t in a position to give a lot more money than it did last biennium to K-12 education. Despite record general fund and lottery revenue, the state is facing a $1.8 billion deficit due to its Medicaid expansion, personnel costs and, of course, PERS.
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Oregonians’ best hope is in pressuring the Democratic legislative leadership to work with Republicans on a plan to ease the PERS burden and bring down future obligations. While Senate President Peter Courtney, D-Salem, and House Speaker Tina Kotek, D-Portland, have shown little enthusiasm for PERS reform, an issue that riles their public-employee union base, they at least appear to recognize the offensive incongruity of teacher layoffs at a time when the economy is booming and revenue is at an all-time high.
The difficulty ahead cannot be overstated. Certainly, Oregon is stuck with an enormous bill thanks to short-sighted and self-serving decisions made by policymakers in the past. The Oregon Supreme Court has made abundantly clear that those commitments for benefits already earned cannot be undone.
But the court was also clear that legislators can make changes in its pension plan for benefits that have yet to be earned. Legislators and others have proposed ideas that can ease employer contributions so that more taxpayer dollars are going to serve students, families and the public without shorting the pension fund. But this can only get done if our elected leaders live in our state of crisis and act with the urgency that it requires.
– The Oregonian/OregonLive Editorial Board
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