Knute Buehler proposes reforms to PERS and the Audit Division

Knute Buehler for Secretary of State

Knute Buehler, Republican Party and Independent Party nominee for Oregon Secretary of State, announced proposed reforms yesterday to improve the office’s auditing functions and to improve the Public Employee Retirement System (PERS). Buehler was joined by State Rep. Jason Conger, who is leading the fight to reform PERS in the legislature.

“The Secretary of State is beholden only to the citizens of Oregon and should ensure all agencies are efficient, programs meet benchmarks, and point out when counties, cities and public programs are in danger of insolvency,” Buehler says. “One of the most pressing financial issues in need of reform is the Public Employee Retirement System, and I intend to introduce and advocate for those reforms.”

Rep. Conger added, “PERS is one of the largest cost drivers in our state. It is draining critical resources that could be spent in our classrooms and protecting our communities. We need leaders like Knute Buehler who are willing to take on this difficult issue and protect the essential services that Oregonians depend on.”

On audits, Buehler will work closely with the Legislature to use audits to improve the budgeting process for state agencies as well as assist with the implementation of the new outcome based budgeting approach. He also pledged a more rigorous approach to reviewing and monitoring local government audits.

“Unfortunately, under Kate Brown, the office has let far too many audits sit on the shelf,” Buehler said, pointing out examples like the cities of Molalla, Oakridge and Creswell.

Among his PERS reforms, Buehler said he will propose and advocate for eliminating the practice of ‘double dipping’, capping the cost of living adjustment, and reducing the guaranteed rate of return to six percent. Buehler also pledged to not join PERS and thus eliminate any conflict of interest.

“The reform of Oregon’s public employees retirement system is one of the most pressing financial issues facing the state. It impacts every level of government,” Buehler said. “The increased costs lead to fewer teachers in our classrooms, fewer police in our neighborhoods, and reduce services across all sectors of government.”

Proposed Reforms to the Secretary of State’s Audit Division

The Secretary of State has the power and the responsibility to audit all state agencies and programs and look for ways to improve efficiency, performance, and value.  The Secretary of State is beholden only to the citizens of Oregon and should ensure all agencies are efficient, programs meet benchmarks, and point out when counties, cities and public programs are in danger of insolvency.

As our Secretary of State, Knute Buehler will make the position a leader in getting more out of our tax dollars by helping to those who need it most. He will push to increase audits and make agencies accountable to taxpayers – freeing up funds for critical programs like schools, law enforcement, and families in need.

1. Require all major agencies to complete audits

Knute will make sure that all major state agencies are doing their statutorily mandated annual internal audits. He will also increase performance based auditing of state agencies so that Oregonians get the biggest bang for their tax dollars.

2. Use audits to assist the Legislature with budgeting

Completing an audit is only the first step. If it sits on a shelf, it doesn’t do any good. As Secretary of State, Knute will provide the Legislature’s Ways and Means Committee with meaningful performance based audit information to help them develop agency budgets.

3. Work with the Governor to implement outcome based budgeting

Senate Bill 676 (2012) changed the way Oregon is supposed to build a budget. The bill requires a new outcome based budgeting approach. Knute will work cooperatively with the Governor to facilitate the implementation of this approach and to ensure the Legislature has the audit information needed to successfully and prudently build a state budget.

4. Review, monitor and provide feedback on local government audits

The Secretary of State’s office is tasked with reviewing the annual audits that local governments must complete. Unfortunately, under Kate Brown, the office has let far too many audits sit on the shelf. City of Molalla, City of Oakridge, City of Creswell, LaPine Soil and Water District, and the Clackamas River Water District have all had problems over the past 18 months that were indicated in their audits. Yet the Secretary of State failed to sound the alarm.

Knute will protect taxpayers and ratepayers by making sure local government audits are reviewed and assistance is provided where appropriate.

5. Track the performance of the Governor’s health and education initiatives

Healthcare and education make up nearly 75 percent of the Oregon budget. It is imperative that new initiatives in those areas are tracked closely to make sure Oregonians are getting the best bang for their buck. As a physician, board member at St. Charles Medical Center and former board member at OSU Cascades, Knute is in a unique position to track these budgets because he understands and has experience in these areas.

6.  Identify fiscal problems for Oregon’s future

While Kate Brown calls it “political” for the Secretary of State to address the need for PERS reform, Knute calls it irresponsible not to advocate for reform. PERS is the largest unfunded liability most governments face, and the Secretary of State absolutely as a responsibility as State Auditor to draw attention to the fiscal problems it presents.

As State Auditor, the Secretary of State is the one person in Oregon charged with reviewing all government audits. As such, the Secretary of State’s office must look for common problems and issues that arise in these audits.

Unfunded liabilities and pension costs go to the health of government. They hinder our ability to have good schools, to protect citizens, and to provide help for our most vulnerable citizens. The Secretary of State must look at them as part of auditing, acknowledge them, and when appropriate propose reforms in the areas most detrimental to the health of government. PERS is one of those areas.

Proposed Reforms to the Public Employee Retirement System (PERS)

The reform of Oregon’s public employees retirement system (PERS) is one of the most pressing financial issues facing the state. It impacts every level of government. The costs have been increasing yearly. The increased costs lead to fewer teachers in our classrooms, fewer police in our neighborhoods, and reduce

services across all sectors of government.

As Secretary of State, Knute Buehler will use his position to introduce and advocate for needed reforms of the PERS system.

1. Eliminate tax refund for out of state residents

There are an estimated 14,000 to 16,000 PERS retirees living in other states who are not subject to Oregon income taxes. They receive an additional benefit from the state of Oregon equal to the amount of their Oregon tax liability. We should eliminate the additional benefit for out of state retirees. The benefit to Oregonians from the $72 million per biennium savings is equivalent to 450 more teachers in our classrooms each year.

2. Eliminate the practice of ‘double dipping’

We must also limit the practice of “double dipping” whereby an employee retires, collects PERS, and then returns to work on contract. A retired employee should be limited to a 2 year maximum contract in their previous job. While a former employee likely has expertise that is hard to replace in the short term, 2 years provides for sufficient time to find and train a replacement.

3. Cap the Cost of Living Adjustments (COLA) to first $24,000 of benefits

Currently, all COLAs are directly tied to the increase in the consumer price index (CPI) and capped at 2 percent for some recipients. Others are allowed to bank the ‘in excess’ amount for years when CPI is not above 2 percent. This allows them to almost always get a 2 percent COLA even across years with a low CPI. Knute supports the proposal from Rep. Jason Conger to cap the COLA adjustment to the first $24,000.00, which is the average PERS benefit.  This would save an estimated $576 million per biennium, the equivalent of 3,600 teachers.

4. Reduce the Guaranteed Rate of Return to 6 percent

The Guaranteed Rate of Return (GRR) is currently set at 8 percent for Tier 1 PERS employees, while actual return has only been 4.43 percent over the last 5 years.  We need to decouple the GRR from the Assumed Earnings Rate (AER). Decoupling, before decreasing the GRR, allows the GRR to be lowered without triggering a short-term increase in the amount local governments would need to pay due to a decreased AER.

5. Redirect Tier 1 and 2 employee contributions away from the IAP and into the PERS fund

Redirecting the mandatory 6 percent pickup for Tier 1 and 2 employees from the Individual Account Program back into the PERS general fund would reduce the Unfunded Actuarial Liability of the PERS program. This will help return the program to being fully funded and lower the burden of PERS liabilities passed on to future generations.

6. Remove the conflict of interest for state elected officials

The fox can’t guard the hen house. Legislators who are not also employed by a PERS contributing employer should not be allowed in the system. This allows police officers, fire fighters, and teachers elected to the Legislature to continue working and participating in PERS while also ensuring that, to the greatest extent possible, those who are making policy decisions about the program do not have a vested interest in the outcome of those decisions. All conflicts of interest need to be placed on the official legislative record prior to votes on PERS reforms.

In addition, all future legal cases related to PERS should be handled by judges without a conflict of interest.

Finally, as a statewide elected official, Knute pledges to not become a member of the PERS program.