By BRAD CAIN
The Associated Press
SALEM Democrat Ted Kulongoski says it's come up at every campaign event he's attended in the past few months.
Republican Kevin Mannix says that at his appearances around the state, "if I don't talk about it, I get asked about it.'
The two gubernatorial candidates are referring to the Oregon Public Employees Retirement System - PERS - and the multibillion-dollar shortfall facing the system that provides benefits to 294,000 public employees.
PERS wasn't an issue that either Kulongoski or Mannix were saying much about when they launched their campaigns for governor a year ago.
They are trying to hit the issue hard now, however. That's largely because Ron Saxton, who lost to Mannix in the May Republican primary, made PERS reform his No. 1 campaign issue. Saxton ran television ads calling PERS "another Enron."
Kulongoski and Mannix both have said they would look at broader issues of employee compensation and benefits as ways of reining in PERS costs. But neither candidate claims to have a simple solution to what is widely regarded as one of the most complex issues that will face the new governor.
Critics long have argued that PERS is an overly generous system in which the average pension benefit for a person who retires after 30 years in public service is 105 percent of his or her final salary.
Besides the publicity Saxton gave PERS, the retirement system has become a hot-button election issue this year also because of new estimates showing the system's financial shortfall rising to $8.5 billion.
It's not a new political debate.
Anti-tax activist Bill Sizemore sponsored a 1994 ballot measure to scale back public employee pensions by requiring them to pay part of their salaries toward their pensions. Voters approved the measure, but it later was thrown out by the courts.
Sizemore said there's no doubt this year's governor's race has put PERS "on the front burner."
"I think both candidates realize that they have to talk about PERS right now," Saxton said. "The PERS issue is weighing heavily on the public's mind. People think we are wasting hundreds of millions of dollars a year to fund these ridiculously fat pensions."
A labor union lobbyist who's been involved in efforts to protect PERS benefits for workers agrees the issue has reached critical mass and that the next governor will have to devote long hours to it.
Mary Botkin of the American Federation of State, County and Municipal Employees said she worries that Saxton has turned the issue into a "political football."
"There are some funding issues with PERS, but they are caused by a sluggish economy and downward spiraling stock market," she said.
Under the PERS system, most employee retirement accounts are guaranteed to grow at least 8 percent a year. In the past two years, the retirement system's investments have returned much less than that in the declining stock market.
The state eliminated the 8 percent guarantee for workers hired after 1996, creating what's called a second tier of benefits. However, less than 5 percent of PERS' current obligations involve second-tier employees.
The courts have ruled that promised PERS benefits are the equivalent of a contract between employers and beneficiaries and that the government cannot unilaterally change the terms of a contract.
Looking for a long-term fix, some legislators pushed a bill in the most recent special session that would have junked PERS for workers hired after July 1, 2003, and replace it with a still-undefined retirement system. The bill was never brought to a vote, however, because legislative leaders felt it was too complex an issue to take up in special session.
Mannix and Kulongoski have said they would consider formulas that would include employee compensation or health benefits after retirement to entice veteran public employees to accept lower pension benefits.
Kulongoski worries that without some changes, the rising cost of PERS will cut deeply into public services and threaten a potential taxpayer backlash.
"It's a confidence issue," the Democratic contender said. "It's a question of whether government is spending money in a way that the public believes is responsible."
Mannix also said it will be one of his top priorities to bring all of the players together next January to put PERS on solid ground.
"It will be my job as governor to come up with some attractive enough that still works financially for public employees and but also saves the taxpayers' money."