By CHARLES E. BEGGS
The Associated Press
SALEM — An issue left in the dust as lawmakers plugged another budget hole and ended their fifth special session last week was the nagging problem of public pensions.
A measure to end the Oregon Public Employees Retirement System for workers hired after 2003 and limit growth of pension accounts for current employees won narrow Senate approval but died in the House.
Senate passage of the bill was a partial victory for outgoing Senate President Gene Derfler.
The Salem Republican, long a critic of the pension system's costs, at one point had said he might block action on a budget-balancing tax ballot measure unless the Legislature passed the PERS bill.
In the end, Derfler voted for the tax measure. His point on PERS was made with the bill, which was intended to spur the 2003 Legislature to revamp the troubled pension system.
The subject is bound to be a major one for legislators next year in any case. Plus, labor lobbyists put on the pressure not to take action that looked to be radical.
‘It's wrong to end the system before you have something to replace it with," said Brian DeLashmutt, who represents associations of police, corrections and parole officers.
"I think legislators realized that the setting was wrong, the timing was wrong and the political dynamic was wrong," he said.
Two task forces, one legislative and one appointed by Gov. John Kitzhaber, are working on changes to propose to the 2003 Legislature.
The system, with a $33 billion pension fund, covers 294,000 retired, current and former state and local government employees.
Losses in the fund's stock holdings coupled with what some consider overly generous benefits have produced a projected fund shortfall of $7 billion to $8.5 billion from what's needed to cover future benefits.
The problems are causing sizable boosts in payroll charges that governments pay to fund the pension system. The increases could threaten the existence of some local governments, says Rep. Knopp, R-Bend, chairman of the House PERS task force.
"If in the next two to four years there are not fundamental fixes to the PERS system, we'll see some local governments and special districts collapsing and wanting to declare bankruptcy," Knopp said.
"The choice is down to, for many local governments, having to fire two employees to cover PERS costs for the remaining eight," he said. "You can only continue that for so long."
The special session bill would have cut costs by changing a PERS requirement under which most employee retirement accounts are guaranteed to grow at least 8 percent a year. The bill would have limited account growth to 8 percent, with any extra earnings put into PERS reserves.
"That's clearly on the table" as a possible change, Knopp said.
The panel also will look at a number of proposals to create new pension plans for new employees. They could include 401 (k)-style plans under which employees contribute certain amounts and decide on their investments.
The PERS governing board last month voted to update in 2004 the system's life expectancy tables, which dated to 1978. Officials hope the move could shave as much as $1.5 billion off of the shortfall.
At least one union plans to challenge that action in court on grounds it unilaterally reduces benefits, violating constitutional contract rights. The outcome of the case could indicate how far legislators can go in changing the retirement system.
A retiree draws his or her benefit for life, with payments based on life expectancy. Because people now live an average of four years longer than they did in 1978, the system must make payments longer than it has money for them, and taxpayers have to make up the difference.
