PERS Reforms Barely Pass, Includes Cuts To Benefits

In a dramatic scene at the Capitol on Thursday, May 30, the Oregon House narrowly passed a package of funding reforms designed to stabilize the heavily-indebted public retirement system. The most controversial change requires employees to contribute a share of their wages toward the fund, angering many labor groups and their supporters. 

Senate Bill 1049 initially failed 29-31, with nine Democrats vocally breaking rank to vote against cuts to public employee benefits. House Speaker Tina Kotek brought the caucus into her office for nearly half an hour, after which two members, Rep. Andrea Salinas (D-Lake Oswego) and Rep. Mitch Greenlick (D-Portland), indicated they would switch their votes. The bill passed 31-29. 

Salinas reportedly had tears in her eyes after the meeting with Kotek, but declined to comment on the details, saying only that it was about something she and Kotek had discussed previously. 

The bill seeks to save money in the short term by extending the repayment period for public employers, effectively allowing those employers to offset planned rate increases beginning in 2021. Public employer will eventually pay 25% of salary in retirement costs, increasing to 30% in the mid-2030s.   

The “cost sharing” provision of the bill redirects a small portion of employees retirement contributions into a fund for pension benefits. Estimates show the overall reduction to pension benefits is somewhere between 1 to 2 percent. Oregon is currently only one of two states which does not require public employees to contribute to their own retirement benefits.  

For public employees hired under the more generous retirement package before August 28, 2003, 2.5 percent of pay that would otherwise go into a secondary retirement account goes toward funding the program. For employees hired after that date, under a less generous retirement plan, the share is .75 percent.  

Labor unions and workers advocacy groups have roundly denounced the move. Melissa Unger, executive director of public employee union SEIU 503 has said they will not only be fighting the law in the courts, but at their own bargaining tables, pressuring employers to make up for what they see as a loss of legitimate wages. 

Other changes in the bill include a $100 million fund to offer a 25 percent match for extra contributions employees make to the pension system, and diverting $100 million from the Oregon Lottery’s new ventures into sports betting and online gambling to fund PERS debts as well. 

By Ian MacRonald