Public employees and union leaders packed a legislative hearing in Salem this week imploring lawmakers to avoid more reductions in benefits to bail out Oregon’s troubled public pension fund.
Workers urged members of the Senate Workforce Committee not to “raid” the retirement plans of newer employees to pay off a $22 billion deficit that is mostly attributable to the generous and unfunded benefits promised to retirees. They claimed such moves would be illegal, unfair and extreme, and exhorted the Oregon Legislature to focus instead on raising business taxes.
The legal, economic and political feasibility of any proposed pension changes remains to be seen. The Workforce Committee has pledged a transparent process to sift through the ramifications of all proposals that are submitted by the end of the month.
Monday’s testimony was centered around the specifics of first two reform bills being considered by the committee, both introduced by the panel’s vice chair, Sen. Tim Knopp, R-Bend. But it also filled in the emotional and rhetorical outlines of what is likely to be the most contentious debate in this year’s legislative session.
“I think it’s immoral that there are some that want to reduce the retirement benefits of people like me,” said Barbara Walsh, who has worked as an office specialist for the Child Welfare office in Medford for five years and contends she is barely scraping by as it is. “It’s immoral and, frankly, insulting. What we do is essential for our community. The private sector isn’t going to take care of these vulnerable children.”
Meanwhile, a smaller group of public employers, school board members and business groups signaled support for what they see as common sense pension reforms and shared sacrifice to head off spikes in their pension costs that would undermine public services of every stripe.
Cheri Helt, a Bend restaurant owner and member of the Bend-La Pine School Board, said the higher pension costs the district is being asked to absorb in the next two years alone would equal 54 teachers. Projected increases in the subsequent two budget cycles would add up to another 154 teachers.
“We can cut teachers, and we are still missing 25 teaching staff from the last recession,” she said. “We can cut days … Or we can cut programs. If we cut teachers every year or hold open vacant positions, I do not know how we will be able to educate out students.”
Knopp’s first proposal, Senate Bill 559, would redefine the final salary used to calculate a member’s benefits from a three-year average to five, which will tend to lower employee benefits.
Senate Bill 560 would redirect members’ required 6 percent contributions to support the pension fund, rather than depositing them in a supplemental retirement account that belongs to employees. That move could offset employer contributions to the fund and save as much as $1.2 billion per biennium.
Knopp said he was pushing hard for PERS reforms to avoid a “catastrophic collapse of the system.”
“It may not happen next year, but in three or four bienniums from now, the rates are going to be double what they are today” he said. “Our local districts and state agencies and school districts are already having trouble paying the PERS costs they have today.”
The public employees who testified Monday focused on the “fairness” of cutting benefits for newer public employees, who already have less generous retirement packages than their predecessors. They also suggested that cutting benefits would be “breaking the state’s promise” to public employees.
Melissa Unger, a lobbyist for the Service Employees International Union Local 503, claimed that Knopp’s proposals would reduce a recently hired employee’s retirement benefit by 30 to 40 percent. The union says it hired an actuary to do that analysis, though it has yet to submit those findings.
She also told lawmakers that the state’s 2016 salary survey found that a public employee’s total compensation is about 98 percent of what a private sector peer would command, including salary, health benefits and PERS. If you’re just talking salary, the percentage drops to 88 percent, she claimed.
That comparison, however, was between maximum compensation packages in the public and private sectors. On average, state employees were paid 104 percent of the private sector, with salaries at 93 percent of comparable jobs in the private sector.
Overall, the state survey found that state employees’ total compensation is 103.35 percent of the market, which comprises private sector, local government jurisdictions and public employees in neighboring states.
Nevertheless, a number of the employees who testified Monday insisted that they could be making more in the private sector, and that retirement security was one of the factors that kept them in public service.
Unger urged lawmakers to “do the right thing and reject these proposals that are illegal, unfair, and extreme, break the contracts you made with public workers and create other problems of either reduced services or increased costs.”
Tim Nesbitt, a consultant to the Oregon Business Council who testified Monday, suggested in an interview that based on the Oregon Supreme Court’s most recent decision on PERS, there is nothing that binds lawmakers to a specific set of benefits going forward. The court said accrued benefits were protected, but not those that have yet to be earned.
Nesbitt, a former union leader and adviser to Gov. Ted Kulongoski, says legacy costs are inherently unfair to everyone: employees, taxpayers, kids, anyone who uses public services.
“We have to manage the unfairness,” he said. “To say that none of its should fall on employees is to ignore the fact that the cost will fall entirely on state and local budgets, so there’s less money for staffing, for health benefits and raises. Employees are still going to absorb the impact.”
– Ted Sickinger
tsickinger@oregonian.com
503-221-8505; @tedsickinger
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