PERS Predicament: 'Oregonians are stuck with that bill. We have to fund those benefits'
By Tom Adams
EUGENE, Ore. - Oregon faces a $22 billion ticking time bomb as the unfunded liability for the Public Employment Retirement System continues to put strain on the budgets of school districts, counties and cities across the state.
"State lawmakers have kicked the can down the road long enough now that it's actually built up to be a very large issue," said Lane County Commissioner Jay Bozievich.
It's a liability that is forcing schools, cities, state agencies and other public employers in Oregon to come up with an extra $885 million in the next two years to cover the "short term" tab of pension costs for public employees.
"It's going to have a huge impact on the state," Bozievich said. "They're talking about possibly a 10 percent across-the-board cut to all state agencies."
The ripple effects are also being felt locally.
At the Lane Council of Governments, director Brenda Wilson has been tracking this PERS tsunami.
"Especially for schools and the Eugene Water and Electric Board, they're looking at significant rate increases" for their PERS contributions, she said.
Wilson said LCOG alone will have to come up with an extra half million dollars by next summer to cover pension costs.
What's going on?
Think of it this way: Benefits = Contributions + Earnings.
"We have benefits, and those benefits are made up of contributions and earnings," Wilson said.
"Earnings" are the PERS contributions invested in the stock market.
Wilson said they're supposed to fuel 70 percent of benefits.
But thanks to interest rates hanging out around historic lows, that curve continues to slip lower and lower.
"The contributions have to make up the difference because the cost of the benefits is the cost of the benefits," she said.
So who's stuck with the bill?
"Oregonians are stuck with the bill," Wilson said. "Oregonians are stuck with that bill. We have to fund those benefits."
Forget the bar graphs; forget about the actuarial tables: Why should you care about this whole PERS debate?
Because all this unfunded liability trickles down to real people and real programs, like public schools.
At the Springfield School District, finance director Brett Yancey says he's been told to get ready for a 4.2 percent PERS rate boost.
"For us and our general operating fund, that's about $2.7 million in additional expense," he said. "When resources are challenged and you look at where can you cut, it's almost inevitable that personnel could be impacted."
For the Bethel School District, next year's PERS payment will hit $9.5 million dollars.
That's a nearly $2 million increase in the cost of PERS for the district.
That money could come at the expense of funding for teachers, education programs and social services.
Who deserves the blame for this predicament?
"We're the bad guys. We have this cushy retirement that nobody else has," said Don Colgan with the Lane County Association of PERS Retirees.
Colgan said that's a bum rap: the majority of PERS recipients in Lane County receive a yearly payout of $20,000 to $25,000.
"I admit to feeling a little bit of resentment when I hear people bashing the PERS retirees, as opposed to saying we have a systemic problem that we need to solve," Colgan said.
Solutions have been elusive.
Courts have held that PERS benefits cannot be cut back retroactively without violating contract rights with the employee groups.
The most recent stab at PERS reform was a package approved by the 2013 Legislature, but it was ruled unconstutional 2 years later by the Oregon Supreme Court.
Is there any plan of action?
A bipartisan PERS solutions work group has been meeting this fall to try to take a stab at reforms. We'll take a closer look #LiveOnKVAL Wednesday, November 30, at 5 p.m. and 11 p.m.