The state pension system is the toughest challenge Oregon faces that our leaders in Salem are likely to diligently avoid.
The $24 billion debt of the Public Employees Retirement System is complicated. It is paid off in some abstract future. Taxpayers don’t feel the impact of it very directly. And there’s no way to fix it without making taxpayers and people who get the pensions unhappy. So lawmakers in Salem and governors have been dodging reforms.
There have been notable exceptions, of course. State Sen. Tim Knopp, R-Bend, has consistently tried to compel his fellow legislators to take on PERS.
Also, the 2019 reform by the 2019 Legislature and signed by Gov. Kate Brown was worth admiring. It put off payments of the debt more than cut costs. Still, the state’s leadership did something. Democratic lawmakers, in particular, have taken considerable heat from unions for voting for the bill. Unions have said they won’t be making contributions to some political campaigns because of it.
Now there’s a new danger that the state’s leadership will lapse back into its diligent efforts to avoid PERS challenges. 2019 was a good year for PERS, as The Oregonian’s Ted Sickinger reported. Investment returns came in at just over 12%. Other forms of investment also showed improvement. The end result is that the $27 billion PERS future liability may only be a $24 billion future liability.
The reduction in liability can make a big difference in budgets — of everything from state government to school districts like Bend-La Pine or towns like Madras. When the liability goes down, so does the money government employers have to pay into PERS to cover the future liability of the retirement costs of their workers. In schools, when districts have to pay more to cover PERS they can’t use that money to hire more teachers or buy new computers. Across PERS, “employers are paying an average base pension contribution rate of about 25% of payroll and about 18% of payroll after they receive rate offsets from any side accounts,” The Oregonian reported. Because, in part, of the reduction in the liability, those contribution rates may not have to climb in 2021.
That’s great news. It doesn’t mean PERS is not a big deal, anymore. Investment returns don’t always behave in a way that helps PERS. Oregon will still have a huge unfunded debt that many of our state leaders would rather not talk about.