The leaders at Bend Park & Recreation District have succeeded where legislators in Salem and many local governments have failed. They have abolished the so-called “6 percent pickup” for their employees in the state retirement system.
The 6 percent pickup is one piece of the funding for the state’s Public Employees Retirement System. Funding for PERS comes from the employer, the employee and money made by investments. State statute requires employees to contribute 6 percent of their annual salaries to PERS. But local governments and the state “pick up” the 6 percent employee contribution for most employees in PERS. Those employers pay that money to PERS.
Decades ago, unions bargained for the pickup instead of a salary increase. At the time, employers liked it because they could give employees more without paying more payroll taxes. Employees liked it, too. They got an effective increase in compensation bigger than what they would have received in a salary increase.
Getting rid of the 6 percent pickup has been on the agenda of people who want to reform PERS for years. It would get the government out of paying the pension contributions for employees. And people have said the pickup creates a retirement system for employees in which they have no skin in the game. Getting rid of it might then weaken some of the complaints about PERS.
Gov. John Kitzhaber and legislators have proposed various ways to change the way the 6 percent pickup works for state employees in this legislative session. Any change is difficult for a number of reasons. Basically, unions understandably don’t want to give up the 6 percent pickup and get nothing in return. Some labor agreements in Oregon also have requirements that a decrease in the pickup must be made up by increases in compensation.
The Bend parks board got it done by approving its new budget. Park district employees are not represented by a union.
Employees will start paying 1 percent of their 6 percent contribution starting in the new budget year in July. The plan is to increase that by 1 percent a year until 6 percent is reached. New employees hired starting in July would pay the full 6 percent from the start.
Don Horton, the district’s executive director, does intend to keep current employees whole through compensation increases. The advantage for the district is not having to pay the 6 percent pickup for the new employees. It’s not clear what that future projected savings would be. But it will help.
Perhaps other local governments and state government will be able to follow the reform leader in Bend.