The Oregon State Legislature, in efforts to do major reform policies, ramped up the 2019 Legislative Session with six informational hearings on the Public Employees Retirement System (PERS) and reform options between February and May in the Joint Ways and Means Subcommittee on Capital Construction. At its May 10 meeting, the subcommittee received an overview of conceptual reform options for PERS through Senate Bill 1049. In its current form, the bill serves as a placeholder for possible future policy. If the bill advances in the legislative process, it will be ‘gut and stuffed’ with amendments. Thus far, two amendments have been presented to the subcommittee.

The -1 amendment, explained by PERS Director, Kevin Olineck at a high level, includes the following policies:

  1. Redirects the Individual Account Program (IAP), and restores IAP once Unfunded Actuarial Liability (UAL) is funded at 90 percent;
  2. Reamortization of Tier One and Two UAL over 22 year period;
  3. Creates a work after retirement option for PERS retirees to pay into the system while working and create cost savings;
  4. Changes annuitization rate for Money Match; and
  5. Changes the final average salary limit.

To review the Olineck’s presentation on the -1, click here.

The -2 amendment, unveiled hours before the first public hearing May 14, is akin to the policy proposed in the -1 amendment, with two meaningful changes. The first change is a technical fix to the IAP redirect clawback provision. In the -1, when 90 percent of funding of the UAL is reached, the program would be restored as currently exists. In the calculation of 90 percent funding, the -1 includes side accounts. Side accounts are funded through borrowing of money to pay down debt. The -2 amendments remove the calculation of side accounts to reach a true 90 percent funding.

The second fix in the -2 is a change in the operative dates, moving the start date to 2020 rather than the 2021 date in the -1, allowing savings to occur more expediently.

Generally, Association of Oregon Counties’ (AOC) principles around PERS are:

  • Support good retirement benefits for public employees at a stable, sustainable, and affordable cost to taxpayers.
  • Oppose proposals that increase employer costs, such as expanding the definition of those eligible for police and fire benefits.

The subcommittee originally scheduled two days this week for a hearing and possible work session on the proposal. At the May 14 public hearing, AOC Legal Counsel, Rob Bovett on behalf of Oregon’s 36 counties noted, “this is really hard. But the reason we’re sitting here is because we’ve seen the cost curve.” He continued, “…counties, in particular in Oregon are key service delivery providers for a lot of public services. There are some states that don’t even have county governments. We use county governments historically in Oregon to deliver a ton of public services. And we’ve looked at this cost curve. If we do nothing, we’re going to see severe reductions in public services ranging from public health, public safety, and across the board. So that’s why we’re here. I don’t blame any of the people in this room for creating this problem; it’s a legacy problem. Unfortunately, it’s a $27 billion legacy problem. And that cost curve is really scary to my members right now.”

To view Bovett’s feedback on the amendments to the committee, click here.

As of May 15, the possible work session on SB 1049 was canceled, and further action on the bill is uncertain at this time.

Contributed by: Megan Chuinard | Public Affairs Associate