With the continuously rising costs to the Public Employees Retirement System (PERS), the Legislature is under pressure to find solutions to buy down and curb the exponentially rising cost of PERS. Current estimates set the unfunded actuarial liability (UAL) at $26.6 billion.
Burden on Counties
What does the unchecked cost of PERS mean to Oregon counties? As costs remain unchecked, portions of county general funds are eaten away to pay down costs of PERS recipients, this strips county funds away from critical programs and services like public safety.
Inaction on PERS reform is not the only thing increasing the costs of the UAL. Counties should know, the Legislature is considering additional cost drivers for PERS.
On April 3, the House Committee on Business and Labor held a public hearing on House Bill 2786. In its current form, the bill would move district attorneys and deputy district attorneys into PERS Police and Fire. The cost assumed by the state would be for district attorneys, while the costs associated with deputy district attorneys would be assumed by Oregon counties.
A new amendment that would take the state out of this unfunded mandate, and put the burden solely on counties, was introduced at the public hearing. The cost of moving all deputy district attorneys to PERS Police and Fire would cost the counties at least $1.5 million in the first year of implementation.
Marion County Commissioner Kevin Cameron and Association of Oregon Counties (AOC) Legal Counsel Rob Bovett testified in opposition to the bill and amendment and stressed the burden it would put on counties.
The bill is scheduled to be moved out of committee on April 8, with the intent to adopt the amendment that will place burden exclusively on county budgets.
Legislative Exploration of PERS Solutions
A stage has been set for the desperately needed discussion on PERS solutions through the Joint Ways and Means Capital Construction Subcommittee. The committee began discussions in March, inviting testimony from various groups to learn about the structure of the program, extent of challenges, and options for solutions.
Most recently, the committee invited Tim Nesbitt, contractor for Oregon Business Council and Melissa Unger, executive director for Service Employees International Union to make presentations to the committee on possible options to combat the cost.
In his presentation, Nesbitt proposed several options for PERS solutions:
- Reinstate employee cost staring for PERS pension plans options: six percent for all plans, or six percent for Tier 1/2 and three percent for Oregon Public Service Retirement Plan (OPSRP);
- Modify Tier 1/2 benefits related to Money Match annuitization;
- Establish new defined contribution plan at 12 percent or expand IAP to 12 percent as an alternative to the pension plan; and
- Reform double dipping and create a work back/pay back plan.
Nesbitt asserted that the proposals presented would pass muster under the Morrow decision.
Unger advocated against all of the reform options and focused on amortization rates and advocated for raiding SAIF reserves.
The key takeaway from committee commentary is there is an interest in addressing PERS, but legislative leadership expressed concerns about all reform options except raiding SAIF.
Next steps for the committee are unclear.
In the continued discussions surrounding PERS, AOC will continue to advocate for solutions that help counties keep PERS from eating away general fund budgets that help counties provide critical services to Oregonians.
Contributed by: Megan Chuinard | Public Affairs Associate