The $22 Billion Question: Understanding PERS

Maybe you already know a lot about Oregon’s Public Employees Retirement System. Or maybe you feel like you should know more, but every time you try to learn about it your eyes start to glaze over. Most likely, you know enough about PERS to know that there’s a problem — a problem that amounts to $22 billion.

Basically, there’s a gigantic gap between what public employers owe in pension costs and the money they actually have. And, obviously, every dollar that's spent on pensions can’t be spent on anything else.

You can really boil it down to these big questions:

• What do we — as a state — owe to the people who were promised a certain kind of retirement?
• What does everyone deserve, in terms of crucial public services like education and public safety?
• And what happens if the answers to those first two questions are at odds?

We talked to a number of people affected by, and trying to fix, PERS to try to find some answers to these questions.

The Activist 

Everice Moro was an educational assistant in the Estacada School District for three decades.

"I can tell you that the hourly wage when I left, after 30 years, was $14.61," she said.

Moro’s husband, David, also worked for the school district. He was a custodian. They were both what’s known as “classified employees.”

"When we both worked for the district, we still qualified for free lunch for our kids when they were in school," Moro explained.

Many public employees, like the Moros, agreed to a kind of tradeoff: in return for lower salaries than what they might get in the private sector, they’d receive more generous retirement benefits.

In 2013, the Oregon Legislature passed a bill that slashed more than $5 billion from future pension payouts by reducing the cost-of-living adjustment for those pensions. Lawmakers called it “the grand bargain.” Unions called it “the grand theft.”

Public employee unions sued and successfully overturned many of those changes. Moro became the lead plaintiff in the lawsuit.

"I committed my life to this job that I loved, but I don’t think I should be punished because I did that job and I was good at that job and I stayed at that job for all those years," she said. "Here’s what you promised me and now you’re going to take it away? No. That’s not OK."

The Employer

Joe Gall is the city manager of Sherwood, a city of about 20,000 people in Washington County. Over the last four years, the amount that his city pays in PERS costs has nearly doubled.

"And if those costs were not rising at such a high rate, some of the resources that we’re going to be spending on PERS costs could be allocated towards additional police officers," Gall explained. "Sherwood is a very safe community ... And as our city grows and we get more businesses and more residents, our police department is not growing — in terms of staffing — to keep up with that growth. And they are worried and concerned that we are going to lose that distinction of being a very safe community. And that’s real to people."

Gall says the solution to the very real problem Sherwood and other communities are facing is not going to come at the local level.

"The solution, quite honestly, is in Salem," he said.

The Governor

The politics of PERS are at least as complicated as the economics. Ten years before Oregon Gov. John Kitzhaber signed that "grand bargain" to try to rein in PERS costs, his predecessor, fellow Democrat Ted Kulongoski, did something similar.

Those reforms also raised the ire of public employee unions, who were able to partially overturn them in a court challenge. The state's largest public employee union also backed a primary challenger to Kulongoski when he ran for reelection in 2006 after making those changes to PERS. He defeated that challenger and went on to victory in the general election.

"They just shot at me and missed," he said.

Kulongoski says part of the political problem is that most taxpayers don't have the kind of generous pensions that public employers have.

"They're very fair and what they want is everybody to be treated fairly. That means they don't want a perception that one's doing much better than them when they're paying for it."

The Politico

Julie Parrish is a Republican from West Linn who served four terms in the Oregon House before being voted out this past November. She is passionate about the urgency of reducing PERS costs.

"If we don't do anything about PERS, it will swallow every available dime that is in the growth of our government," she said. "You can keep raising taxes and you can keep throwing money at our state government, but it is being consumed by PERS and if you don't fix it, you will be paying more for less services."

Parrish won't be involved as a lawmaker anymore, but she's working on a ballot measure to prohibit public employers from borrowing money to pay down their pension costs. She hopes that this would put enough pressure on lawmakers that they would be forced to make drastic changes to reduce the costs of the whole system.

"The voters are going to have to get engaged with this," she said.

The Reporter

Ted Sickinger has reported on PERS for more than a decade for the Oregonian/OregonLive and he probably knows as much about the system as anyone in the state.

"You know, I still find the dynamics of this whole thing fascinating. It's really complex politically, legally, economically, and people are passionate about it. They read these stories and they react to them, sometimes in ways that I can't predict," he said.

Asked what he sees as the biggest public misconceptions about PERS, he said, "Maybe one of them is that if we ignore this, it'll go away."

Needless to say, it won't.

Looking ahead to the 2019 session, Sickinger says that if the Legislature doesn't make changes, a ballot measure is inevitable. 

"And that looks a lot more draconian than anything that the Legislature is going to touch."

The Employee 

Justin Kuunifaa is a nurse at the Southeast Portland Health Center. He's originally from Ghana and he's been a public employee for his entire career. Kuunifaa is a Tier 3 public employee, which means his benefits are less generous than his peers in Tier 2 and Tier 1, who were hired before him.

"Frankly speaking, it would be significantly harder for me to stay in public service if PERS were to be cut," he said. "Despite the fact that these are some of the patients that need care the most and who I love and am honored to work with, I would have to leave them behind to go find a job in the private sector where I could make more money."

What's Next?

It's unclear whether lawmakers will take up any major changes to PERS in the 2019 legislative session. It's politically tricky for Democrats, who control both chambers as well as the governorship, because public employee unions are a big base of support for them.

"It will be difficult," said former Gov. Kulongoski. "There is a way to resolve it, but it's going to take somebody who's willing to get out and pay the political risk of doing something."

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