By PETER PRENGAMAN
The Associated Press
SALEM Gov. Ted Kulongoski said Tuesday that he supported a compromise plan to protect the pensions of public workers close to retirement while cutting back benefits of younger workers in the system.
The plan would accomplish that by updating the life expectancy tables used to calculate the benefits for retirees in the Public Employees Retirement System.
The governor made the comment as he signed into law another PERS reform measure to put an 8 percent cap on the annual returns that can be put into the portfolios of employees in the system.
Kulongoski's support of the plan marked a significant development in efforts to reform the beleaguered pension system, which is facing a $15 billion long-term shortfall.
The issue of updating the tables is one of the most contentious of all reform proposals because any change could cut benefits for current workers.
Because retirees are living an average of five years longer than the 1978 tables project, PERS has had to dip into reserves to continue paying, adding to the shortfall.
The PERS board wants to update the tables beginning Jan. 1, 2004, giving current employees the chance to retire before any changes are implemented.
But until Tuesday, Kulongoski had said the tables should be updated retroactively, beginning January 1 of this year. A House committee taking up PERS reform was considering a proposal to do that.
The panel on Tuesday amended the bill, HB2004, to update the tables beginning July 1 of this year.
The change represents the biggest compromise on PERS reform so far this session.
The unions that represent many of the 294,000 Oregonians in the system said any retroactive implementation would be a breach of contract, prompting lawsuits.
Lawmakers argued that implementing the tables as of 2004 wouldn't produce a big enough savings. They also worried it would produce a "brain drain" of state workers eager to retire before their pensions took a whack.
With 40,000 pensioners eligible, 3,000 have already retired this year, said Jim Voytko, executive director of PERS. Voytko said he wasn't sure what the savings of updating the tables as of July would be, or how it would affect retirements.
The amended bill also would protect anyone retiring from receiving a smaller benefit than he or she would have been entitled to on June 30, 2003.
Rep. Mary Nolan, a Portland Democrat who is a member of the PERS committee, said that provision should ease the pressure workers feel to retire.
"You don't have to leave now just to protect your benefits," Nolan said.
Workers who are further from retirement wouldn't benefit from that protection. That's because within a few years, their benefits under the new tables would be higher than they would be by June 30 of this year, Nolan said.
Added to the mortality-table mix is a decision last month by Marion County Circuit Judge Paul Lipscomb, who ordered that the new tables be implemented "immediately and fully."
The ruling stemmed from a suit brought by the cities of Portland and Eugene, Multnomah County and four smaller public employers.
The unions representing PERS recipients are appealing the ruling, and it's unclear how that could figure in the debate.
The bill signed by Kulongoski on Tuesday is the first to be signed this session. It's estimated the measure will cut about $900 million from PERS' long-term shortfall.
Lawmakers said the law will keep the PERS board from doling out excessive returns, as it did in the late 1990s stock market boom.
For example, in those years the board gave out upward of 20 percent returns, a decision that didn't leave sufficient reserves to cushion sharp drops in the market the past three years. And workers in the system hired before 1996 are entitled to an 8 percent guarantee, which added to the shortfall when the markets were producing negative returns.