Dems’ PERS Lite was farcical, Kitz trying to provide politcal cover on next attempt

Sen Doug Whitsett

by Sen. Doug Whitsett (R-Klamath Falls)

Governor John Kitzhaber recently alerted the Oregon Legislative Assembly that he may “potentially” call a special legislative session on Sept. 30th   His stated purpose is to further address the unsustainable costs of the Public Employee Retirement System. He said in his statement that by that date he hopes to have enough votes committed in both chambers to enact meaningful restructuring of PERS.

Senate Bill 822 was introduced by the majority party and was enacted into law during this year’s legislative session. It was allegedly aimed at addressing the unsustainable increases in the cost of public employee retirement. The bill provided only minimal PERS cost reductions.

In fact, the measure addressed less than 17 percent of the fiscal problem that was created during the past four years by increases in PERS employer contributions that were required to keep the System solvent. The remainder of the “saving” created by SB 822 simply delayed the payment of required contributions, to be repaid in later installment payments including interest.

SB 822 was not supported by any Republican members, of either chamber, because most of us considered the bill to be so inadequate as to be farcical. The PERS governing board had already signaled that they felt obliged to make changes in the earning assumptions related to the PERS trust fund that would result in significant and immediate increases in PERS taxpayer funded contributions. In August the PERS Board did take action that wiped out virtually all of the SB 822 savings.

The current average state employer is paying about 27 percent of payroll toward PERS retirement benefits. This includes the cost of pension obligation bonds, other side accounts, and the six percent of payroll that was designed by the system to be paid by the public employees. Add an additional six and one half percent of payroll, that most government employers are paying as their share of social security payroll withholding, and total taxpayer funded pension benefit contributions exceed a third of payroll.

Under the current PERS structure, many government employers will be contributing in excess of forty percent of payroll to fund the combined retirement benefits within the next two years. That taxpayer funded contribution could spike much higher if another decline occurs in the investment markets.

The unsustainable cost of public employee retirement benefits is severely limiting the budgets of all levels of Oregon governments. About 27 percent of government employers are state agencies, about 40 percent are city, county and special districts, and the other 33 percent are school districts. Every taxpayer dollar spent to fund retirement benefits is a dollar that cannot be spent to provide critical services such as teachers, police, firemen and medical care.

Governor Kitzhaber has been talking with legislative leaders, behind the scenes, in an attempt to work out another “grand bargain” to fix PERS.

Make no mistake the purpose of the “deal-making” is purely political. I am confident that nearly two thirds of the Senate including all 14 Republicans, and a significant bipartisan majority of the House, would vote in bipartisan favor of any stand-alone bill that significantly restructures the cost of PERS. However, the Democrat legislative leadership is unwilling to allow such a stand-alone bill to come to a vote.

Public Employee Unions are strongly opposed to any reductions in PERS benefits. Those unions actively opposed the reelection of several legislators that voted for the significant PERS cost reduction that was enacted in 2003. They focused their efforts on the Democrat primary elections, and succeeded in unseating Democrat legislators that supported the reform bill.

Governor Kitzhaber is attempting to broker a deal that will reduce the cost of PERS and also raise enough new revenue, through increased taxes, to keep the public employee unions from attacking incumbent Democrats. However, he must have at least two Republican votes, in each chamber, to levy new taxes.

Republicans legislators and their political supporters are generally opposed to increasing taxes. Moreover, the Oregon Legislative Assembly already has more than two billion dollars more in general fund and lottery revenue to spend, than at any other time in Oregon history. So the need for more revenue is difficult to justify.

The third feature of the “grand bargain” is a series of tax reductions for small and mid-sized businesses designed to stimulate much needed private sector job growth. The tax reductions are also designed to help offset the resistance expected from Republican supporters directed at any Legislator who votes in support of tax increases.

In a perfect world, our Legislative Assembly would simply vote to fix the PERS problem. Unfortunately, we live in a state controlled by political pressures and personal motivation. This is the partisan mine-field that the Governor is attempting to navigate.

Perhaps by coincidence, Sept 30th is also the last day of the Legislative authorization for spending to finance the I-5 Columbia River Crossing Bridge. That authorization was enacted in HB 2800 and is specifically dependent upon the state of Washington agreeing to pay their share of the construction costs. The Washington legislature has declined to finance the bridge.

A concerted effort is now being made to build the bridge anyway, and to convince the Oregon Legislature to finance the entire bridge construction project. They are asking for urgent approval of a plan that is still in the process of being formulated. From what I have been able to determine to date, the plan appears to be fiscally imprudent, very likely illegal, and potentially unconstitutional.

My political experience has taught me not believe in political coincidences. We’ll have to wait and see what Sept. 30th brings.

  • Bob Clark

    Kitzhaber may pull a Rudy Crew, and perhaps land in the Obama administration. I haven’t heard a splash for his re-election campaign (Thursday 9/12 was the first day to file for the May 2014 primary). This would bring up Wheeler and Brown to contend for the Dem gov nomination. Wheeler is pushing a new state government fund, which would increase the state’s debt load dramatically. He effectively proposes showering higher education with even more borrowed dollars. Just when higher education is starting to run out of new demand, and might actually have to become more cost conscience and more innovative; along comes Wheeler to serve up a new round of fat consumption for college administrators, tenured professors and college building outfits.
    Wheeler can parade around with his proposal as “proof” of his ingenuousness in finding a way to help the poor college student. People tend to forget very smart people sometimes mastermind some rather large bankruptcies. For example, all the financial engineering that went into the collateralized debt obligations and mortgage back securities in the financial crisis of 2007-2009. And before this, 1998 and Long-term Capital which had a Nobel Laureate economist, Myron Scholes (modern day option pricing theory) as a chief advisor; and it was bailed out and liquidated by Alan Greenspan as it was about to file for bankruptcy.

    • oregongrown

      Before the 2010 election, Wheeler said Oregon’s “credit card” was maxed out. Since the election he has been mute. And that’s after passage of the biggest bond in Oregon’s history, the PPS gluttonous half billion dollar bond passed after spending millions more in 2012 to get it passed after the voters turned it down in 2011. All campaigns funded by the govt unions for every single tax increase foisted on the private sector.

      When are people going to get a clue, that we have trusted the wrong people? I mean really the wrong people. Kitzhaber has sold Oregon citizens out, and he started doing that decades ago with his initial approval for the PERS debacle and his continual perpetuation of the fraud.

      And make no mistake, PERS is a fraud. I have been all over that database and those percentages of PERS Tier 1 retirements are fantasy land numbers, not of this real world. Every bit as stupid at “fabulous Fab’s,” fake derivatives. That “smart” Stanford grad that pushed those billions of fake crap, same as the PERS fake crap.

      We always hear about PERS recipients suing the people, for the “promises made,” when we should be suing PERS, the govt unions, every single politician still alive today that was a part of the swindle, and Kitxhaber should be the lead defendant named. His hands are all over that filth. It should be a class action suit from the people against the state.

      But we will never hear Kitzhaber admit his part in the fraud. And here he is calling a special session, “for the children.” Again, using the most overused, trite, phrase to pitch us higher taxes. Gag me. It is beyond pathetic. He is the debt addict king.

      No NEW taxes for business. None. Zero. Businesses has been hammered all during the recession that was and is a private sector recession.

      And the public sector unions, I have no more respect for them. The teachers union has voted down every single PERS reform. Nothing they do is “for the children.” I’ve seen the numbers. And they are ugly and they will be with us for the next 30 years. It should be a crime to do that to the people.


    Yes, it would be nice if one party could get a vote on just it’s priorities. But, as Sen. Whitsett alludes to…..this is politics. And part of politics, and democracy, is being able to make compromises where everyone gets something. And the truth of the matter is, there are PERS beneficiaries who are willing to adjustments. But to ask that, and then add on top a reduction in the top tax rate for people with INCOME of millions or dollars per year, as Sen. George proposes, is unrealistic.

    And…I’d like to repeat….The Oregon general fund budget is not out of control. When you put it into historical perspective. I’ve yet hear anyone dispute the actual TABOR like adjusted figures I’ve presented. But, if I got them wrong, please let me know. Accurate facts, plus values equals public policy. We can argue about values, but we shouldn’t be arguing about facts. Those are discernible.

  • concretehart

    hopefully Kitz will follow the current constitution and call the shot on one item to be worked on by legislature during a special session

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