By Shelby Sebens | Northwest Watchdog
PORTLAND — Like the mythical Cassandra, Gov. John Kitzhaber may find that his call for public pension reform could fall on deaf ears among the Democratic leadership in the Legislature.
But Republicans and some Democrats, who are on the record supporting reform, want to use his warning as a battering ram for change to the Public Employees Retirement System, whose gaping budget hole could mean drastic cuts for schools.
“Regardless of the election outcome, the governor taking that leadership role, supplying that voice and perspective and authority as well as insight into the state budget was going to be necessary, if we were going to get anything done,” said state Rep. Jason Conger, R-Bend.
Democrat Kitzhaber did not specify the pension reforms he is seeking but emphasized the “need to reduce the cost drivers within the system of public education that are diverting resources from the classroom.
“For example, if we continue into the next biennium doing business as usual, the cost to school districts will increase by more than $1,000 per student,” he said during a speech Nov. 10 to the Oregon School Boards Association.
School districts and other state agencies will contribute 45 percent more in taxpayer money to the pension system in fiscal 2013-15. The PERS Board of Trustees, a five-member board created by the Legislature to administer and manage the system, voted unanimously in September for the increase.
The increase in payments will hurt already strapped budgets, resulting in possible cuts in public safety and schools, firings or higher taxes.
Kitzhaber said the increase in the cost of PERS alone — which is approaching 25 percent of payroll — accounts for $500 per pupil. Salary increases account for another $300 and other benefits, $130.
As these costs increase, lawmakers are mixed as to how or if pension reforms should be addressed in the next session, which begins in February.
Incoming House Speaker Tina Kotek, D-Portland, told the Eugene Register Guard the day after the election: “What people want to talk about is schools and jobs. They don’t want to talk about PERS.”
Kotek’s office said she did not have time for an interview with Northwest Watchdog when contacted Wednesday.
Though Kitzhaber didn’t specify reforms, he told the Oregonian that an end to the supplemental tax remedy benefit for retirees who have moved out of state and don’t pay Oregon income taxes or a decrease in cost of living adjustments could be possible ways to dig PERS out of its budget hole.
State Sen. Ginny Burdick, D-Portland, told Northwest Watchdog last month that she plans to introduce legislation calling for an end to the tax remedy, which reimburses retirees for state income taxes.
The Legislature in the 1990s approved making PERS benefits subject to state income taxes, but the Supreme Court ruled that anyone hired before the law took effect in 1991 only could be taxed if a “remedy” was provided.
Other lawmakers plan to fight for PERS reform. State Sen. Doug Whitsett, R-Klamath Falls, said in an email newsletter sent Wednesday that he has about a dozen PERS reform legislative concepts being drafted for the 2013 session.
Whitsett called out the Democratic majority for failing to listen to any of the dozens of reform measures pushed forward by his colleagues. Dozens of reform bills in 2011, including Burdick’s proposal, never saw the light of day. They ranged from modifying cost of living adjustments to limiting lump sum vacation and unused sick day pay. Even Burdick, a member of the majority party, couldn’t get her bill on the out of state tax remedy heard.
“At best, the status quo will ensure continuing unsustainably high costs and inadequate public services,” he said in the newsletter. “At worst, it may result in the collapse of the retirement system and the loss of retirement benefits to all those who have earned them.” He added he hopes to work with the majority party moving forward.
The state projects the unfunded liability at $16 billion, but other pension experts have put it as high as $47 billion, a number projected in 2010 by the National Center for Policy Analysis, a conservative free-market think tank.
Conger said it shouldn’t be viewed as a partisan issue but rather a budgetary crisis.
“I can’t think of a single more important budgetary issue,” he said.