Legislators' PERS, Cost Control Proposals Too Timid

Published Thursday, June 8, 2017

With the end of the 2017 Legislative Session a little more than a month away, proposals to control the cost of government slowly are becoming a little bit more specific. It is a good sign that Legislators are offering concrete proposals to contain costs, but much work remains.

There have been two proposals to reduce the impact of the Public Employees Retirement System (PERS) on the state budget - one vague and one specific but relatively unambitious.

The vague effort is Governor Kate Brown's proposal to sell some state assets to "buy down" the state's unfunded pension liability. She has appointed a seven-member panel to look at possibilities. Any final judgment on this idea requires a specific proposal. But beyond the philosophical objection to privatization and "pawn shop politics" already raised by some in both political parties, selling assets fails to acknowledge or address the core problem with PERS - unrealistic benefit promises.

The second proposal, introduced this week by Senate President Peter Courtney (D-Salem) and Senator Mark Hass (D-Beaverton), does recognize the benefits problem and makes an important fix. SB 1068 would have public employees contribute to their own pensions, something public workers do in every other state but haven't done in Oregon since 2004. However, the proposed cost sharing does not go far enough to help with escalating costs due to the pension system's unfunded liability. Public employees would contribute 1% of their salary to a "risk sharing" pool starting July 1, 2018, increasing to 2% a year later. Future annual adjustments would be based on the funded status of the system and its overall cost.

The PERS proposals, as well as cost-containment ideas for other aspects of government contained in SB 1067 (also introduced this week), are a step in the right direction. But they are insufficient to alter the state's current path of sustained structural budget deficits.

Associated Oregon Industries (AOI), Oregon Business Association (OBA) and other members of the Oregon Business Plan Coalition, known as Brighter Oregon, remain committed to pushing for meaningful spending reform that will create a stable fiscal foundation.