The state’s public employee retirement account has passed the point of being healthy, and a new state report says a 2015 court decision throwing out billions of dollars in savings to the system only accounts for about half of the deficit spike between 2013 and 2014.
The deficit for the Public Employee Retirement System in recent years has jumped to between $21 billion to $22 billion, in part because the state Supreme Court ruled a cost-saving move was unconstitutional. But poor returns on investment and decisions by the board overseeing the system have contributed significantly to the deficit, according to a report released Thursday by the nonpartisan Legislative Fiscal Office.
The report follows calls this week by Sen. Tim Knopp, R-Bend, who asked Democrats in Salem to hold public hearings to consider any other options ahead of pressure to reform the retirement system.
“The high cost of impending 2017 PERS rate increases will be felt throughout the state,” Knopp wrote in a letter to Senate President Peter Courtney. “In order to enact fair, constitutional PERS reforms, we need to start the public discussion with hearings now.”
Local and state governments and colleges all pay into the system for employees. Those and other public employers are facing pension costs for the 2017-19 budget cycle that are around $800 million higher than in the current budget.
Oregon lawmakers have tried to reform the system in recent years, finding some savings. But significant cost cuts that affected the retirement benefits of former public employees have been thrown out in court.
The Oregon Supreme Court ruled in April 2015 that the Legislature’s 2013 cost-saving reforms were unconstitutional. That accounted for $5.1 billion, just over half of the $9.5 billion the deficit grew by between 2013 and 2014.
But the analysis also showed decisions by the state’s PERS board and investments made by the system account for the other half the deficit that ran up between 2013 and 2014.
Aside from the savings thrown out by the court ruling, decisions by the PERS board added $4.2 billion, or 44 percent of the deficit between 2013 and 2014. Lower investment returns from the Oregon Investment Council added another $200 million, or 2 percent, to the increase in that time, the analysis said.
Knopp asked Courtney to schedule three public hearings throughout 2016 to focus on potential cost savings for state and local governments on PERS.
“Absent quick and decisive action, state and local governments are facing a $1 billion increase in PERS costs in the 2017-19 biennium,” Knopp wrote.
Courtney last month said he wasn’t interested in another attempt at cost savings for the system, noting the unfavorable court rulings.
“I really think that I don’t see us doing much on PERS at all at this stage in the game,” Courtney said in response to a question from The Bulletin. “The court has pretty much said ‘you’re wrong.’”
Robin Maxey, Courtney’s spokesman, said Sen. Michael Dembrow, D-Portland, who chairs the Senate Workforce Committee, was considering holding hearings on the PERS issue this year. Dembrow was traveling and couldn’t confirm the hearings, Maxey said.
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