By Eileen Kiely

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The recent column by Knute Buehler described five PERS myths. Oregon’s PERS problem dates back to the mid-1970s when America was stuck in years of double-digit inflation. We could not afford to give our employees cost of living raises, so instead we offered excellent retirement benefits. Essentially, Oregon’s public employees loaned employers the money to meet budget, with the payoff coming 30 years later at retirement.

In 2003, a bipartisan group of legislators passed dramatic PERS reforms, creating the Oregon Public Service Retirees Program (OPSRP). By 2035, the majority of retirees will be on OPSRP, and the state’s retirement payout will decrease. However, the 2003 reforms did not address the debt we already created — an oversight that was laid bare by the 2008 market crash. Between us and 2035 lies a $25 billion shortfall.

Unfortunately, it falls to us to pay the debt that past legislators of both parties created for us. Without additional revenue, we will pay it in reduced services, increased class sizes and unacceptable graduation rates. The Student Success Act is the first step to meeting our PERS obligation while investing in education. Local governments, however, still struggle under the debt burden.

So now that we’ve started the discussion, there are five more myths that need to be dispelled:

1. Eliminate the unfunded liability by cutting PERS. PERS liability is accrued for work already performed, whether or not the employee is fully retired. Oregon is short $25 billion for hours already worked. We can make changes going forward, but the existing liability is like a student loan — you have to pay the debt for the classes you already took.

2. Public employees make more in retirement than they did when working. Tier 1 and 2 employees can choose how their pensions are calculated — a percentage of final salary times years of service, or Money Match, which is based on market returns on the employee contribution. Investment returns in the 1990s generated payouts of 75% and more of final salary, so more than 70% of retirees chose Money Match. OPSRP pensions are based only on final average salary, at a 25% lower rate than Tier 1 and 2 plans.

3. Employees don’t contribute to PERS. By law, employees contribute 6% of their salary to PERS. By choice, 70% of employers make the contribution for them — because it saves money. The employer can increase overall employee compensation without paying payroll taxes on the additional benefit. In the 2003 legislative reforms, this contribution was redirected from the employee’s pension fund to an individual account, similar to a 401(k).

4. If the 6% employee contribution went to the pension, this would solve the unfunded liability. There is some truth to this statement, but this change was a critical part of the 2003 reforms. It reduced the value of Money Match, without violating the employment contract. Considering the bull markets of the last seven years, our unfunded liability would be significantly higher without this reform.

5. Move PERS to a 401(k)and make employees contribute. If employers no longer have the option to pay the employee contribution, how much will they have to increase salaries to maintain a stable workforce? At current pay and benefits, Oregon’s public employers are challenged to recruit and retain qualified staff for our police forces, schools, and other critical public services.

The 2003 reforms triggered mass retirements; 30% of our current public workforce is eligible to retire. What will it cost to recruit and train new employees?

We won’t solve this problem with ideology. It will take dollars and sense — common sense. There is no silver bullet, but like paying off a mortgage or student debt, there are many smaller solutions that add up to the whole. It starts with facing facts.

The first thing we should resolve is not to make the problem worse. Reducing PERS rates is not the end goal. Managing our budget is.

— Eileen Kiely lives in Sunriver.

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