Public pension systems looming problem

Reforming Oregon's pension program for public employees is the most contentious and important issue facing state and local government. Without fundamental changes to the system known as PERS, cuts in funding to schools and other basic public services will accelerate.

More than 40 bills to reform PERS have been introduced in the Oregon Legislature, the bulk of which are political statements that will fall by the legislative wayside. The real action will come from proposals put forward by Gov. John Kitzhaber and party leaders.

The reform plan offered by Republicans and the state School Board Association is the most aggressive in curbing future costs. But their proposal is unlikely to go far with Democrats in control of the House and Senate. That means that any final budget bill is likely to include PERS reforms negotiated by the governor and Democratic budget-writers.

Gov. Kitzhaber has demonstrated real leadership on this issue. He has not wavered in his demand for reform that ensures the long-term viability of PERS. And he set an aggressive target of $865 million in reductions in the next biennium.

The governor's plan limits cost-of-living increases to the first $24,000 of PERS income and eliminates paying extra benefits to out-of-state retirees to cover their Oregon income taxes. It also makes fundamental changes in PERS to ensure the program is sustainable for state workers. And that's what separates his plan from those of fellow Democrats.

House Speaker Tina Kotek doesn't even view the rapidly spiraling cost of PERS as a crisis. She told Oregon Public Broadcasting: "We have a short-term problem. We need a short-term solution."

That narrow viewpoint pervades Senate Bill 822, which is the plan put forward by Rep. Peter Buckley and Sen. Richard Devlin. It sidesteps a cap on COLAs in favor of reduced increases for different income levels. The plan also calls for higher taxes to support retired state workers.

Savings from SB 822 fall far short of the governor's plan. Worse, the bill proposes to delay payments by local governments into PERS as a temporary cost-saving measure. It's a short-term gimmick that places a risky bet on future investment returns of the pension fund. State Treasurer Ted Wheeler already has warned that the fund's current assumption of an 8 percent return is too aggressive.

The release of the Democrats' plan has at least put on the table the concept of reducing increases to state retirees. Public employee unions have long argued that PERS benefits are guaranteed by state constitution - an argument, they claim, is backed up by court decisions.

But a recent legal opinion from the state Department of Justice suggests there is room to maneuver. That gives lawmakers from both parties one less excuse to delay meaningful action.

- Pendleton (Ore.) East Oregonian