By PETER PRENGAMAN
The Associated Press

SALEM - Retirement benefits for future state workers will be sharply scaled back compared to those in the current pension system, but the Oregon House and Senate can't agree on how much to cut.

On Monday the Senate passed 16-14 its version of House Bill 2020, which aims to give retirees a guaranteed pension benefit worth 45 percent of their final salary. Under the Senate plan, employees would also be required to contribute 6 percent of their salary to a 401(k)-style investment account.

Along with Social Security, the Senate plan would give retirees about 70 percent of their final salary.

That version, however, is at odds with the plan passed by the Republican-controlled House in May, which would turn the Public Employees Retirement System into a straight 401(k)-style plan. Workers would be responsible for making investment decisions with money contributed to their portfolios.

Democratic Gov. Ted Kulongoski, along with Democrats in both chambers, said the House plan was too stingy and put retirees in danger of not having enough to live on.

"Many workers will need state services in retirement if they only have a cheap defined contribution plan to rely on," said Sen. Tony Corcoran, D-Cottage Grove, who leads pension reform efforts in the Senate.

But House Majority Leader Tim Knopp, a Bend Republican who leads pension reform efforts in the House, said the Senate version doesn't go far enough to cut back costs.

"The Senate plan is more expensive," Knopp said.

Knopp said the Senate plan doesn't have enough safeguards against additional retirement benefits being added in the future, either by the pension board or sympathetic legislators.

The House and Senate split will have to be resolved in a special negotiating committee.

Creating a new retirement plan for future state workers 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.

Pension benefits are currently guaranteed, based on a calculation that includes number of years service and final salary. For a handful of recent retirees, pension checks have exceeded salary when they were working.

The unions that represent many of the 294,000 people currently in the system are split on their support for the proposed successor plans. Some reject both versions, others support the Senate blueprint, calling it the lesser of two evils.

They say both plans will make Oregon a less attractive place to work.

"We are competing with every other state and county in the nation" to recruit workers, said Mary Botkin from the American Federation of State, County and Municipal Employees. "What made Oregon a cut above was the retirement system."