Of all the things parents want to pass on to their children, debt is probably not one. House Speaker Tina Kotek has suggested doing it anyway.
One of the ideas she has been thinking about as a partial solution to the state pension program’s $27 billion unfunded liability is kicking the can down the road. Delaying payments. Stretching out the liability farther into the future.
The idea in pensionspeak is to lengthen the amortization period for the Public Employees Retirement System. In plainer language, that means stretching out the number of years used to calculate the time to raise the money to pay PERS pension benefits.
Think of it like a car loan. Paying it off over 6 years rather than 4 years lowers the monthly payment. The Legislature could do a similar thing to PERS.
PERS amortization periods actually vary depending on the class of beneficiaries. Some are 16 years. Some are 20 years. Oregon could stretch those out both out to 25 or further. Kotek pointed out state statute permits 40 years.
She said Oregon has one of the shortest amortization periods in country at 15 years. That is not correct, as The Oregonian’s Ted Sickinger pointed out.
The lower payments could, indeed, provide some temporary relief for Oregon’s public employers — school districts, state and local governments. The rates that many of them have to pay into PERS have been ratcheting up. That’s because, in part, of richer retirement benefit packages the state promised in the past.
For instance, the Hillsboro school district is paying about 28% of its payroll into PERS for the 2019-2021 biennium. That’s projected to go up to over 33% for 2021-2023, meaning the district will have less money to work with. So one way to hold down those increases is to fiddle with the calculations to lower those payments.
But we all know what happens. Delaying paying off the debt means paying more in the end. Kotek knows that. She sees it, though, as one way to limit the increases in PERS rates as state employees with the richer packages move through retirement.
As The Oregonian’s Ted Sickinger explained, though, there’s no guarantee that lengthening the amortization period would help much. What if the stock market dipped and PERS investments faltered? Oregon might be even worse off. Oregon could just make things harder for the next generation. That’s not a solution the Legislature should pursue.