Taxpayers, both local and state, pick up a healthy tab each year to finance the Public Employee Retirement System. Pensions for nearly all city, school, county and state employees are provided through PERS, a plan that is seriously out of whack.
Again this session efforts are being made to keep it solvent in the long term so the money will be there to pay retirees and, simultaneously, to avoid intolerable escalation in public costs. Those costs go directly to Oregon property and income taxpayers.
Arguments are going on between two camps: those who want to enact changes that hold small and short-term advantages; and those who favor doing it right by also establishing a Tier 3 category with reduced benefits for employees hired later this year. That would echo a 1995 bill that created Tier 2, effective in 1996. The change would protect employees from a depressed or flat market when earnings drop dramatically, and it would save governments substantial sums over the years.
The pension reform package is so important to Yamhill County that Commissioner Leslie Lewis and Administrative Services Director John Krawczyk testified in Salem on Monday in favor of the bill. They pressed for passage of the entire package instead of nibbling at the problems and putting off essential action. The Senate passed a reform measure last session, but it failed in the House.
One uncomfortable aspect of all this is that legislators themselves are covered under PERS. In 1981, they adopted a multiplier that upped their status along with that of firefighters and law enforcement employees. That move increased their pensions and authorized retirement at age 50. It works "best" for legislators who take another job under PERS, such as agency director or department head, because their final benefits are calculated on pay in their last three years of PERS employment.
Pension payments are calculated on average pay in those three years, times number of years employed, times 1.67 percent (except for the special status people at 2 percent).
Urgency of this issue comes from the PERS gain/loss reserve, which has dipped to cover only 10 months instead of the policy-set 30 months. A continuation of the flat market, or worse, could require PERS to borrow from its reserve for the future. There's nothing to the rumor that PERS is $70 billion in debt. It's definitely solvent, but unquestionably in need of reform.
Time was when contributions to the PERS pensions were split between employees and government, with employees paying 6 percent of their salary. Now, almost all government jurisdictions pick up that employee share, with resulting employer payments soaring to between 10 and 20 percent of salaries.
A welcome provision would pool all government contributions, thereby decreasing the huge jumps in PERS costs now experienced based on actuarial advice and board action.
Government employees deserve an equitable pension, but preposterously large payouts under a flawed system cannot be justified or sustained by Oregon taxpayers.