Oregon Initiatives To Revamp PERS Withdrawn As Political Picture Changes

A business-backed effort to get Oregon voters to reduce the costs of the state’s public pension system has quietly closed shop — at least for the 2020 election.

Backers had filed five potential ballot measures sponsored by two prominent Oregon political figures — former Democratic Gov. Ted Kulongoski and former Republican state Sen. Chris Telfer — that would revamp the benefits provided by the Oregon Public Employees Retirement System.

After earlier withdrawing three of the measures, supporters quietly dropped the last two the day before Thanksgiving.

Tim Nesbitt, the former Oregon AFL-CIO president who has worked with state business leaders on the issue, said actions taken during the last legislative session helped reduce the immediate air of crisis around a retirement system facing a $27 billion debt. In addition, he said, the booming stock market should also help hold down increases in pension costs in the near term.

As a result, he said, backers concluded it makes more sense to see how the finances of the system play out over the next several years — instead of trying to tackle the costs of the pension system during a 2020 general election dominated by a high-intensity presidential election.

Related: The $22 Billion Question: Understanding PERS

How to solve the puzzle of PERS has been a hot topic in state politics repeatedly over the past two decades. Democratic Gov. Kate Brown last year defeated a Republican challenger, Knute Buehler, who wanted to make major cuts in PERS benefits. But she vowed to take action to reduce the rise in employer rates, which now average about 25% of payroll.

Brown signed a measure, Senate Bill 1049, earlier this year that makes some modest benefit reductions while also stretching out the time to pay off the unfunded pension liability.

Without the bill, pension costs were projected to rise to about 29% of payroll, costing public agencies another billion dollars over the two-year budget cycle, Nesbitt said.

Instead, employee rates are projected to stay about the same, particularly if this year’s stock market advances stick through the rest of the year. The pension system is heavily dependent on investment earnings, so the stronger the market, the more money generated to pay benefits.

“The legislation seems well-designed to avert another round of increases which would devastate budgets” for schools and other services in the next several years, Nesbitt said. “We should give the legislation time to see how it works.”

The withdrawal of the PERS initiatives pleased the public employee unions, which have bitterly opposed any reductions in worker benefits.

“I think it’s time for them to stop these corporate-backed attacks on hard-working public employees,” said Patty Wentz, a spokeswoman for the PERS Coalition, which represents several unions.

She argued that attempts to cut pensions only make it harder to attract and retain talented teachers, firefighters and other public employees. And she said that voters made it clear when they rejected Buehler’s gubernatorial candidacy that they weren’t interested in cutting pensions.

Nesbitt said his supporters could return in later years for another attempt at initiative reform. He noted that the Oregon Supreme Court is considering the constitutionality of the PERS measure signed by Brown this year. The court's decision could roll back some or all of the benefit cut. And it will also provide more clarity on what benefit changes it is willing to accept.

The business-backed measures prevented a variety of approaches to reducing costs. They include shifting new workers to 401(k)-style retirement plans and diverting some contributions to existing public employee retiree investment accounts toward paying the costs of the main pension plans, which guarantee workers a set pension amount depending on their pay and years of service.

One other pension-related measure has been filed for the 2020 ballot. It's sponsored by two former Republican state representatives — Julie Parrish of West Linn and Mark Johnson of Hood River — and Portland activist Kim Sordyl. Their measure would amend the state constitution to require future benefits for all public pensions to be paid without going into debt. The intent is to force public agencies to either lower their pension costs or to ensure they are paid without borrowing.

Parrish said she and other sponsors are still deciding whether to go ahead with the measure. She expressed confidence that they could collect enough signatures to qualify for the ballot but acknowledged the difficulty of raising enough money to conduct a fall election campaign against determined union opposition.

“We are committed to this concept,” she said. “The real question is are we going to roll the dice and get it done this [upcoming] year, or do we take the full two years going into the ’22 cycle.”