A panel created to come up with ways to shave a $5 billion chunk off the $25.5 billion debt of the Public Employee Retirement System held its final public meeting on Friday.
The PERS Unfunded Actuarial Liability Task Force is the brainchild of Gov. Kate Brown, who wanted a group of top public and private minds to tackle the debt. In a move criticized by Republicans, Brown limited their mandate to revenue. Any changes in retiree benefits would wait.
A final report is due on Brown’s desk by Nov. 1.
During Friday’s meeting at Portland State University, the group came to a consensus on a two-part approach.
Part one: Generate money via a smorgasbord of options, including redirecting part of the Rainy Day Fund, selling timberlands, and a 5 percent increase in licenses and fees. Possible amounts were as little as $10 million by selling a vacant prison property to $1.1 billion over 10 years in combined new lottery and liquor revenue.
“There’s not one silver bullet, but a series of things that do add up to a significant amount of money,” said panel member Bob Livingston, a battalion chief with the Salem Fire Department.
Part two: Use the money from Part One to create a matching fund for the more than 800 entities that are part of the PERS. Each would submit a long-range plan to control retiree benefits.
The state PERS board has planned a 20-year-long pay-down on the debt. Entities — counties, cities, school district, etc. — that accelerate their portion of the payoff would get a match, most likely 25 cents for every dollar cut.
“We need a matching program that is robust, simple, and easy to follow,” said panel member Lawrence Furnstahl, chief financial officer of Oregon Health & Science University.
Some members supported a stick to go with the carrot, such as not allowing entities that do not come up with a plan to reduce costs to take part in PERS rate “collaring.” That is a process where individual PERS rate spikes are limited by the overall fund.
Exceptions could be made for payments that are constitutionally required, and for entities that did not have the assets and resources to make cuts.
An exemption could also be given to entities that deal with “at risk” communities or public safety.
Without a “disincentive,” some members worried that the easiest way out will be for entities to come up with a plan, and say they don’t have any excess assets to speed up their pay-down.
Panel members said local officials are mostly focused on constituent’s desires and problems.
“Today’s needs will always overwhelm tomorrow’s needs — 10 or 20 years from now is somebody else’s problem,” said panel member Cory Streisinger, former director of the state Department of Consumer and Business Services.
Panel member Charles Wilhoite, managing director of Willamette Management Associates, agreed that getting a critical mass of entities into the accelerated payment plan was crucial.
“If you don’t get enough participation, the overall liability will put the state in jeopardy,” he said.
The group was told by Brown to put forward any viable ideas, even if they did not support them. The panel in turn told the governor’s representatives on Friday that their ideas had not been fully vetted for legal and other considerations.
Increases in taxes would need legislative approval, some financial returns may be far less than projected, and others may be earmarked for other uses.
“We don’t know what we don’t know,” said Donald Blair, the retired Nike chief financial officer who served as the task force chair.
With public comments closed and the “skeleton” of the plan in place, Blair said members should expect a rough draft of the proposals next week, submit their changes and comment as soon as possible, then some “wordsmithing” will be done prior to sending the final version to Brown at the Capitol in Salem.
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