Raising taxes without addressing the state’s largest spending problem, as the Democratically controlled Legislature and Gov. Kate Brown seem inclined to do in 2019, is not the way to go.
Unless the state makes a serious attempt at reining in the Public Employees Retirement System’s unfunded $23 billion liability, most of what’s raised will do little more than help school districts hold the line on PERS-prompted cuts.
Meanwhile, the liability will grow next year unless the stock market has a stellar December. That’s because it’s dependent on how well the stocks in which PERS funds are invested do. The current figure assumes those investments will have gained about 7.2 percent in value this year, though currently they’ve gained less than 2 percent. That difference, if it holds, would increase the liability by $3.5 billion to $4 billion, according to The Oregonian, raising it to about $26 billion.
Oregon business leaders offered the governor three suggestions for reform this week. The state should require employees to contribute to the pension fund, they said. Nor should employees be able to participate in both the state’s pension and 401K plans, as they now can. Finally, the state could create a system that would allow older employees to collect both salary and pension for several years. In return, employers’ contributions to the pension fund for those employees during that period could be used to pay down the unfunded liability. It’s not clear-cut how well that would work.
Lawmakers know there’s a possibility any tax increase would end up on the ballot. If they’re savvy, they must also know that, once turned over to voters, any tax increase stands a reasonable chance of being defeated.
PERS reforms like those suggested at the Oregon Leadership Summit could tip the scales in the state’s favor, however. They’d be visible proof that state leaders really are willing to address the pension fund’s financial problems before they simply raise taxes to do so.