Wilsonville-area representatives say there are no good options for reform

by: JOSH KULLA - Rep. John Davis, R-Wilsonville, speaks at a recent legislative open house in Wilsonville.Oregon’s Public Employee Retirement System, or PERS, is the proverbial elephant in the room when it comes to the state Legislature’s efforts to craft a budget for the 2013-15 biennium.

And given the 45 percent net contribution increase approved by the state’s PERS board of directors last fall, it’s easy to see why. It adds to a currently $14 billion gap between current PERS assets and liability and is causing lawmakers a great deal of consternation as they try to find a fix.

“We have some people in the House who are dedicated to finding a variety of solutions to the PERS thing,” Sen. Larry George, R-Sherwood, said at a Feb. 13 legislative town hall in Wilsonville. “But it’s going to boil down to a substantially partisan issue as to how that goes out.”

It’s not just the state that’s affected. PERS covers thousands of public employees and retirees of local municipalities, counties, police and fire agencies and other public entities around Oregon. All would be affected by the estimated $900 million increase in contributions required of public agencies over the next two years.

In the West Linn-Wilsonville School District, for example, the school board is currently weighing how to manage what will be a $2 million increase in contributions. Other districts, cities and public agencies are facing differing rates of increase, all based on the number of their employees and which retirement categories they fall into.

Clackamas County Commissioner Paul Savas, who attended the town hall along with fellow commissioners John Ludlow and Tootie Smith, told Rep. John Davis, R-Wilsonville, and George that Clackamas County is facing a potential $4 million hike in its own PERS contributions in 2013. Without additional revenue, Smith added, the alternative is to “raze” county services.

“I’m just letting you know,” she said. “It’s no problem to raze departments, but that’s the decision that we’re left with.”

No good solutions

When it comes to solutions, lawmakers currently are faced with a host of unpalatable options.

“There are about 11 different proposals out there that would save schools and governments all different levels of money,” George said. “And we can probably get to 16 (votes) on most bills in the Senate, but it’s getting to 31 in the House with Democrats in control that’s tough. So when you ask me which ones specifically we can pass, it’s a very small, select group. I think right now it’s probably things like taxing out-of-state PERS recipients, things like that.”

George went on to say it’s likely to be difficult for Democratic elected officials to stand up to public employee unions, which delivered millions of dollars into their election campaign coffers last year.

“I think we’re at about $1.1 or $1.2 billion short on the budget right now,” George said. “It could be less than that, but I think we may come up with maybe $200 million of that from PERS, so I think they’re going to be very short of where they want to be with the budget.”

A Feb. 7 memo issued by the Legislative Counsel’s office already has thrown water on the fire of PERS reform. Written by legislative counsel Dexter Johnson, the memo stated that Gov. John Kitzhaber’s proposal to limit the cost of living adjustment (COLA) to the first $24,000 received each year by Tier 1 and 2 PERS recipients likely would be found in violation of the contract rights of PERS members.

Public employees have successfully turned back in court earlier attempts to restrict cost of living adjustments, and are certain to strongly resist any further attempts to limit their pensions.

Despite that, George and other legislators are likely to try and carve out a deal of some sort that enacts new limits for public retirees. One proposed bill would decrease or eliminate the so-called “pick-up” of PERS contributions by public agencies, while another, House Bill 3059, would eliminate a tax benefit for out-of-state retirees.

“Every time I meet with a county government, schools or cities, that (PERS) is the first thing that comes up,” Davis said. “There’s only one place that money comes from. It comes from existing employees and local budgets. Our local governments are running through the reserves they’ve saved over the last dozen years to bridge that gap.”

Davis said that in meetings with West Linn-Wilsonville School District officials, they have told him that failure to counter those rising costs could have the effect of increasing class sizes from 27 to 34 students per teacher at the kindergarten level. At the high school level, he added, it would be worse, rising from 37 to an average of 44 students per class. “That’s going to be a discussion that really trumps all others,” Davis said. “Because it has a trickle-down effect.”

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