By Steve Elzinga —
On Friday, legislators unveiled a package of changes to Oregon’s Public Employees Retirement System (PERS) that will actually worsen current problems by intentionally underfunding the system. Senate Bill 1049-1extends the pain of reduced public services, while also risking significantly worse problems if a recession occurs during the next two decades. This is unwise.
Some may say it alleviates today’s problems by slightly reducing PERS rates. However, most of the minimal “savings” will likely evaporate due to loopholes, legal challenges, and behavior changes. The actual debt is not meaningfully reduced—it is just kicked down the road.
The state’s own actuary projects that the proposed changes will actually worsen system funding status for over a decade, starting in 2022. Take a look at this chart from Exhibit III of the actuary’s report. The yellow line for SB1049-1 shows lower/worse system funding than the blue line for current law.
Even this projection assumes highly optimistic returns of 7.2% every year (i.e. no major recession in the next two decades). Using a more reasonable assumption of 5% returns, the actuary projects that the proposed changes will plunge system funding even lower and longer.
We all want to fairly compensate public servants, and retirement benefits that have already been earned should not be taken away. However, continuing to offer generous retirement benefits while shifting costs into the future is the same irresponsible approach that created this fiscal mess in the first place. It harms public employees and taxpayers alike. It endangers critical public services like education and public safety.
Shifting the burden of current PERS problems onto our children and grandchildren is unfair and morally questionable. It is also highly risky and fiscally irresponsible. Oregon can do better.
Steve Elzinga is a Salem attorney who served as Governmental & Legal Affairs Director for Secretary of State Dennis Richardson.