SALEM — In a rare Saturday session, the Oregon Senate convened amid rumors that a “grand bargain” that cuts the state’s pension costs while raising taxes, all to benefit public schools, could be on the docket.
The two measures, a last-ditch effort at compromise as the session enters its final days, were not, however, on the agenda. And the grand bargain’s future remains uncertain.
“Oh, the ‘grand ultimatum?’” as Sen. Tim Knopp, R-Bend, called it on Saturday.
Republicans, in the minority in both chambers, don’t see the proposal as a compromise, and Democrats need at least two Republicans in both chambers to vote in favor of a tax increase.
Republicans have battled this session for deeper cuts to the Public Employees Retirement System, already carrying $14 billion in unfunded liability. A earlier measure, Senate Bill 822, was signed into law; it made graduated cuts to PERS cost-of-living adjustments, eliminated a tax credit for retirees living out of state and delayed employer contributions in the next budget cycle.
On the other hand, Democrats have pushed, unsuccessfully, to raise taxes on wealthier earners and on corporations. A $275 million tax increase failed in April.
The end result, Democrats say, would be a more robust state education budget. The Senate passed a $6.55 billion public school budget Wednesday, a measure headed for the House.
Knopp said the two latest pension and tax proposals — Senate Bill 857 and House Bill 2456 — are not far from what the governor proposed at the session start. At one point, Republicans were hoping the package would include tax breaks for small business. But that is no longer on the table.
“This was the governor’s plan,” Knopp said Saturday. “It does nothing to create jobs.”
Republican spokesman Michael Gay said the GOP caucus also has concerns that the two measures — HB 2456 raises revenue and SB 857 further reduces pension costs — would be voted on in separate bills.
Senate President Peter Courtney, D-Salem, said he would first put the tax measure to a vote as early as Monday. If it passes, the measure reducing the PERS would come next.
Otherwise, the pension measure won’t be brought to the floor. Votes are now expected Monday or Tuesday.
Gay noted if both bills pass, the House could move to raise taxes without further reducing pensions.
“This is political posturing and gamesmanship by the Democrats,” he said.
Majority Leader Sen. Diane Rosenbaum, D-Portland, on Saturday said she was surprised the Republicans seemed against the two measures.
“I think our Republican colleagues all session long have said they want changes to PERS,” she said. “This reduces the unfunded liability and employer rates. ... Now, the same folks aren’t going to support PERS. You’ll have to ask them why.”
House Democrats said they are waiting to see what happens in the Senate, but are hopeful the revenue and pension package makes it to the Senate. They passed out of the Senate Revenue Committee on Friday.
House Majority Leader Val Hoyle, D-Eugene, said Democrats are ready to “make a heavy lift” in slashing pension systems.
“We’re waiting to see if House Republicans and Senate Republicans are ready to make a heavy lift,” she said.
House Bill 2456
The tax bill would raise another $150 million for Oregon public schools and funnel another $60 million into senior and mental health programs. It would raise corporate income tax rates from 6.6 to 7.6 percent on amounts more than $2.5 million. It would cap deductions for couples who make more than $250,000 and individuals who make $125,000. It makes changes to the senior medical tax deduction and shifts the benefits to lower-income seniors.
Senate Bill 857
The PERS bill would lower cost-of-living adjustments for retirees. For income below $60,000, the inflation rate would be 1.25 percent, compared with about 2 percent currently. For all income beyond $60,000 the rate would be 0.15 percent. The bill would also lower pensions for former public employees who haven’t worked in public employment since 2004 but have yet to draw their pensions. The proposed changes could reduce the system’s unfunded liability by $5 billion in the next two-year budget cycle.