How do we solve the PERS crisis?

by Dan Lucas

Oregon PERS Crisis 101 – Part 3: How do we solve the PERS crisis?

Previous PERS reforms have made major strides in making PERS sustainable, but the excesses of the past still leave PERS vulnerable to downturns in the market. The significant PERS reforms in 2003 were spurred on by the bust of the Dot-com bubble, and the 2008 market collapse has once again exposed the vulnerabilities hard-wired into PERS by past excesses.

Without reform, PERS will continue to eat away larger and larger portions of government budgets across Oregon, including school budgets. Gov. Ted Kulongoski’s 2010 Reset Cabinet report warned that if it wasn’t reformed, PERS could add more than $1 billion by 2015-17 to the general fund costs for state and school employees. The total state general and lottery fund budget is $14 billion to $15 billion, and so adding $1 billion just for increased PERS costs is a major problem.

The problem with the additional reforms needed for PERS isn’t a lack of ideas; it’s a lack of political will.

To pay for the PERS funding problem, there are three general options:

1. Increase taxes
2. Further reduce services (cut school days, lay off more teachers, etc.)
3. Reduce the costs of government (reduce PERS costs, reduce other government employee benefits, find government efficiencies, etc.)

Increasing taxes is going to be a tough sell to pay for past PERS excesses. How can we ask those who have already taken a beating in the economy to pay even more so that PERS retirees can be insulated from the downturn in the economy? It’s not fair to ask someone who lost their job and had to cash in their IRA or everyone who saw the values of their 401(k)s drop, to now double-down on their economic pain just so PERS retirees don’t have to feel any pain.

It’s just as unfair to continue reducing services. Our schools and other essential government services need to have their funding restored, not cut further.

The first option that needs to be pursued then, is reducing the costs of government, and specifically reducing the cost of PERS first. There are well thought out and reasoned proposals for reducing PERS costs in places like the 2011 report on PERS by the City Club of Portland, and there are other ideas for reducing the costs of government in places like Gov. Kulongoski’s 2010 Reset Cabinet report.

What we need now is the political will. There are intrinsic forces that will oppose reducing PERS costs and reducing other costs of government, and there will be tough battles to fight.

We need to vote for representatives and officials who will fight those fights. We then need to strongly encourage and support those representatives and officials to reduce PERS costs and other costs of government. We can support them with emails, phone calls, letters to the editor, participating in town halls, etc.

The cost of not fighting these fights is too high. We can’t continue to stand by and watch as our schools continue to make cuts we can’t afford.

Part 1 of this three-part Oregon PERS Crisis 101 series looked at “What is the PERS crisis?”, and Part 2 looked at “What’s causing the PERS crisis?” – Click here for a PDF that contains the entire 3-part series: Oregon PERS Crisis 101.