Oregon Senate Republicans
Salem, OR – Senate Republicans introduced a simple and constitutional proposal to address the massive shortfall in the Public Employee Retirement System on Thursday. A 2010 analysis from PERS on a similar proposal projected that the system’s unfunded liability would be reduced by a onetime amount of around $1.7 billion.
“This idea saves taxpayers and local governments billions of dollars,” said Senate Republican Leader Ted Ferrioli (R-John Day). “For too long officials have ignored the PERS problem, hoping that it would disappear on its own. Meanwhile, rising PERS employer rates continue to take money directly out of classrooms and public safety budgets across the states. It’s time to attack this problem head on.”
The proposal contained in Senate Bill 1593 would lower the assumed interest rate used to calculate annuity benefits from 8% to 6%. This is not the 8% assumed earnings rate guaranteed to Tier One retirees on their account contributions during employment, but the rate that PERS uses to calculate payouts for all Tier One and Tier Two employees once they retire, based on a lifetime annuity. Annuities in the private market are typically calculated using a much lower percentage assumption.
“This is a solution that brings government benefits in to closer alignment with private sector benefits and begins to address a problem that has seemed unassailable,” said Senator Chris Telfer (R-Bend). “The longer the legislature lets this problem go unaddressed, the more it costs taxpayers.”
Rates paid by state and local governments to keep up with PERS payments doubled this budget cycle, increasing the burden on core service providers by $1.1 billion. At the end of 2010, the pension fund’s deficit was $13 billion, excluding side accounts.