By PETER PRENGAMAN
The Associated Press
SALEM - Gov. Ted Kulongoski and Senate leaders praised a "compromise" plan to create a new pension system for future state workers, but the leader of pension reform in the Republican-controlled House said it's too costly and likely won't vote for it.
"This compares to the standard public sector plan," said Margaret Hallock, Kulongoski's policy adviser. "It's not a rich and extravagant system, but it's an adequate plan."
But House Majority Leader Tim Knopp, a Bend Republican who leads pension reform efforts in the House, said Friday that the plan doesn't do enough to scale back state employers' future costs.
"I would be concerned if they said 'this is our final offer, take it or leave it,"' Knopp said.
If the two chambers can't agree, House Bill 2020 will be sent to a special negotiating committee.
Creating a new retirement plan for future teachers, policemen, firefighters and state administrators is the last piece of a sweeping package of reforms to the Public Employees Retirement System.
In May, the Legislature passed two laws to sharply scale back pension benefits, shaving about $9 billion from the $17 billion shortfall facing the system over the next 25 years.
The House and Senate, however, are at odds over what the plan for future hires should look like.
In May, the House passed a bill to replace the current pension system, which guarantees benefits based on years of service and final salary, with a cheaper 401(k)-style plan.
Kulongoski, a Democrat, along with Democrats in the House and Senate, said the plan was too stingy and left public employees vulnerable to stock market fluctuations.
"It's bad public policy to give people a plan so bad that they could work 30 years and end up on food stamps," said Sen. Tony Corcoran, D-Cottage Grove.
Corcoran, chair of the General Government Committee, said the Senate crafted a plan mixing elements of a guaranteed benefit and a 401(k).
Specifically, retirees would receive a pension benefit aimed at 45 percent of their final salary. Employees would also be required to contribute 6 percent of their salary to a 401(k)-style investment account.
The plan, which the Senate is expected to vote on next week, would drop employer costs from 12.47 percent to 8.6 percent of total payroll.
Hallock said that would create hundreds of dollars of savings over the next decade, depending on the number of state hires.
Because the $30 billion PERS fund is heavily vested in stocks, negative returns in the stock market the past three years, coupled with guaranteed benefits to retirees, have added to the system's shortfall.
Hallock said the proposed plan distributed the risk of the plan between the employers and employees.
"It's a fairly elegant solution to have part of the pension be guaranteed and the other part be a traditional savings that functions like a 401(k)," she said.