By PETER PRENGAMAN
Associated Press Writer

SALEM — House Majority Leader-elect Tim Knopp on Thursday called for the resignation of some state Public Employees Retirement System board members, saying eight or nine members of the 12-person board are largely responsible for the system's budget shortfall.

The Bend Republican said choices the board made in the late 1990s boom — such as deciding to give PERS members 20 percent returns on their retirement portfolios — helped create a long-term shortfall estimated at $15.7 billion.

Knopp declined to name those he blames, but said the board should be cut down to five members, and only one should be a PERS recipient. Seven of the current 12 are system members.

"There's plenty of blame to go around," Knopp said.

Knopp's recommendation was part of a package of bills drafted by the House Special Task Force on PERS Sustainability and Accountability, which he heads. The bills will be introduced during the 2003 Legislature.

Other proposals include putting an 8 percent cap on earnings guarantees for state employees hired before 1996. Those so-called "Tier 1" employees can put their money in an account fixed at 8 percent or into a stock market account, or split their money between the two. As it stands now, the PERS board can decide to give more than 8 percent to those with their money in the fixed account.

Employees hired after 1996 are not guaranteed the 8 percent return, but Knopp said the system also needs to be reformed for those employees.

Knopp also said that mortality tables being used now, originally adopted in 1978, need to be replaced. With people living an average of four more years, PERS benefits have to be paid longer than the tables allow for, straining the fund.

The PERS system covers about 294,000 active and retired state and local government workers.

Dozens of other PERS bills are expected to be introduced during the session. A group of labor and government negotiators has been meeting for weeks to craft reforms, and Gov.-elect Ted Kulongoski intends to release a plan for PERS changes next week.

Knopp acknowledged that reform efforts may be met with lawsuits because of workers' legal rights to benefits they have accrued. But he said the severity of the budget problem will probably cause lawmakers to expedite any legal challenges directly to the Oregon Supreme Court.

Even if PERS "gained 12 percent annually for the next five years, which no one expects to happen, the system would still have a $2.4 billion shortfall," Knopp said.