PERS: The Sticking Point for Adequate Education Funding

Right From the Start

Senate President Peter Courtney (D-Salem) is a dedicated liberal, public employee and unflagging supporter of Oregon’s public employee unions. At a point in time, he will become a beneficiary of Oregon’s gold-platted Public Employees Retirement System (PERS). It is for these reasons that I view a proposal by him regarding K-12 school funding for the next biennium with great suspicion even though I have agreed with and advocated the proposal myself in previous years.

But let’s put some meat on the bones before jumping into a discussion about the value of Mr. Courtney’s proposal. An article by Harry Esteve in last Saturday’s Oregonian framed the issue over school funding:

“Battle lines over retirement benefits and taxes are deepening at the Oregon Legislature and threaten an effort by both parties to pump enough money into K-12 schools to avoid more teacher layoffs and shorter academic years.  Republicans want more than $1 billion in cuts to the Public Employees Retirement System, and dismiss a smaller Democratic proposal as “PERS Lite.” Democrats say any PERS reductions need to withstand a legal challenge and be matched by increased taxes on the wealthy, achieved by closing off some tax loopholes.”

The Oregonian article continues:

“Without PERS savings, tax hikes or some combination, state budget writers say they can’t get to the $6.75 billion level for schools that would prevent more teacher layoffs and shortened school years. Although both parties appear committed to at least that level of school spending, that’s where the agreement ends.”

Let’s make sure we understand what they are talking about. That $6.75 Billion represents what is called Current Service Level (CSL) funding. That figure is calculated by assuming that every program in the public school system – not just the curriculum – will continue unabated and will be grown by population projections, union contracts, accelerating PERS cost and general inflation. It also means that nobody is looking to determine whether any of these programs are being run efficiently, delivering the results anticipated or are in actual furtherance of educational needs. This continuing failure to engage in the hard questions is one of the reasons that academic achievement of Oregon’s children continues to decline in relationship to other states and other nations.

If you make those assumptions – particularly the assumption about the projected increases in costs of funding PERS – then you will need $6.75 Billion and apparently the $1.7 Billion additional revenue available for the next biennium is insufficient to cover this CSL funding level – small wonder given how rapidly the costs of PERS is accelerating. So the Republicans want substantial reforms in the PERS system to reduce the increasing cost of funding this white elephant. Of course the Democrats – wholly beholden to the public employees unions who are their principle campaign funding source – want to increase taxes to pay for the abusive system. The Democrats proposal for PERS reform is like putting lipstick on a pig – all show, no results.

Into this melee jumps Mr. Courtney. As the Oregonian notes:

“Senate President Peter Courtney, D-Salem, a veteran of countless legislative impasses, says he doesn’t see a clear path to compromise. But he has an idea to get things moving: Pass a K-12 budget quickly, then start negotiating over how to pay for it.

“’Everybody knows that’s the 10,000-pound chicken in the room’ he said. ‘If we were to move that budget, it would dramatically start to frame the rest of the session.’

“In other words, the pressure would be on lawmakers to compromise.  Courtney said he would like to see the Joint Ways and Means Committee elevate the K-12 budget to the top of its priority list and vote it to the Senate floor by late this month or early the next.”

This was an idea advanced by former Sen. Jason Atkinson (R- Central Point) who was critical of the legislatures continuing the practice of balancing the total state budget on the back of school children. Historically the legislature has shown little restraint in showering its largesse on favorite projects knowing full well that any gap they are causing will fall directly on education funding – the biggest part of the budget – and resting comfortably on the fact that nobody will ever let the chi-i-l-l-d-d-r-r-e-n-n (it’s better if you say it with a moan) suffer. In virtually every instance, it has been the lever to force additional spending and tax increases. That kind of cynical legislating has been the hallmark of the Oregon legislature for at least two decades.

Mr. Atkinson sought to end this form of cynical fiscal blackmail by requesting education funding be done first WITH the assumption that it would fit within existing revenues streams. It appears that Mr. Courtney is turning that concept on its head by suggesting that an education budget be adopted and then use it to justify additional taxes. As the Oregonian article notes – “pass the K-12 budget quickly, then start negotiating over how to pay for it.” In short, Mr. Atkinson’s proposal assumed removing education funding from political manipulation while living within existing revenue, while Mr. Courtney appears to concede that additional revenue will be needed and resets education as the whipping boy for increases.

Let me suggest a better course – one that is reminiscent of the work of Rep. Dennis Richardson (R- Central Point).

1. Start with the revenue available through existing tax and fee structures and commit to limit spending to that amount. The Legislative Revenue Office has already calculated that amount.
2. Set priorities for spending with the assumption that education, law enforcement, and judicial administration receive the top priorities. Prioritization should be based upon necessity to maintain a growing economy and maximize protection of the citizens.
3. Subject every department and program to a “sunset” audit process which requires the department and program to define its goals and objectives, relate its programs to the achievement of those goals and objectives. Use the results of those audits to improve the focus of departments and programs and to trim and/or eliminate unnecessary or inefficient elements.
4. Make funding for ensuing years dependent upon achievement of goals and objectives for the preceding years.

That is simply efficient management and should be done as a matter of routine – something that apparently escapes much of the legislature and all of the twenty-five plus years of Democrat administrations.

But there is still the matter of the elephant in the room – PERS. The cost of PERS has grown so great that it now threatens to disrupt delivery of needed services, including educational services. The public employee unions, with the assistance of their wholly owned subsidiary, the Democrat party, lobbied and passed a bill several years ago that requires the funding of PERS as the first priority of every budget passed. That means that while the Oregon Education Association decries the lack of teachers, they are responsible for the requirement that teachers be laid off rather than reducing payments to PERS. That was after they included all of the legislature and the Oregon courts as beneficiaries under PERS in order to ensure that the members would vote to benefit themselves rather than the people.

The solution to PERS is four simple steps:

1. Adopt legislation that prohibits beneficiaries of the PERS system from hearing or deciding any challenge to the constitutionality of the PERS system as set forth in legislation or as practiced by the Administration. A provision can be made for special appointment of qualified lawyers to act as interim judges and justices for any such challenge.
2. Require public employees to pay the full six percent of PERS contribution that is currently required by law but paid for by the government.
3. Adopt changes to the benefits to be earned on a going forward basis thus putting the Oregon PERS system on the same footing as every private sector pension plan in America.
4. In doing steps 2 and 3, you will ensure that a new challenge as to “constitutionality” of such changes will be undertaken by the public employee unions citing previous decisions of the Oregon Supreme Court giving constitutional protection to uniquely to public employees that are unavailable or applicable to those in private industry. That will give Oregonians with the opportunity to both have an unbiased judicial review from the independent interim judges referenced in 1 above and to appeal any decision of the Oregon Supreme Court’s twisted view public employees pension rights under federal constitutional guarantees to the federal courts for an impartial review. This time the State Attorney General should not be allowed to torpedo such an appeal as did Ted Kulongoski – former Democrat attorney general, Democrat supreme court justice and Democrat governor and now grateful Democrat recipient of a generous PERS pension.

But as usual, this is Oregon. It is controlled by the Democrats which in turn are controlled by the public employees unions who are insistent upon increasing spending for raises and benefits for its members regardless of the consequences on education, public safety or economic growth.