Better than any governor before him, Gov. John Kitzhaber framed the problem with the state employee retirement system called PERS.
Cut PERS or cut schools.
“The average cost per pupil in Oregon will go up about $1,000 per pupil this next biennium; $500 of that is the increase in PERS,” he said before the session began. “About $300 is salary and other benefits. The point is, we’re going to increase the cost per pupil by $1,000, but for that, we’re not going to be adding back teachers, spending more on professional development, or adding back lost school days.”
Is the Legislature getting done in PERS reform what needs to be done?
The short answer is no.
He challenged Democrats and Republicans to compromise. About 24 hours later, he declared that additional PERS reform is dead this session.
Republicans are continuing to push, but they don’t have the votes. They can tip the budget into a chasm by continuing to block a hospital tax. Many Republicans freely admit, though, they support the tax because it’s such a key part of funding the Oregon Health Plan. The tax effectively brings in over two years $1.3 billion in matching funds for $745 million in taxes. Even hospitals support the tax.
The Legislature has passed some PERS reforms in Senate Bill 822. And Kitzhaber has signed it.
But remember how it does part of what it does. It creates a reduction in PERS payments by directing the PERS board to instruct school districts and other entities with government employees to pay less.
The PERS debt burden — some $16 billion in unfunded liability — doesn’t go away. The Legislature just instructs the state to kick the can down the road.
PERS is an important benefit for public employees. It shouldn’t entitle public employees to be immunized from what’s going on in the state budget. It also shouldn’t mean that reforming PERS is the only thing that needs to be done to help schools and the state budget outlook.
But unless PERS investment returns are a wellspring of miracles, the same issue is going to be back next session. Cut PERS or cut schools.