SALEM, Ore. — Democrats unveiled a plan Friday to rein in Oregon’s rising pension costs, a peace offering to Republicans who have shut down the Senate this week demanding reform to a system that’s racked up over $25 billion in debt.
The proposal, which has been in the works for around two months, relies on mitigating employee contributions and refinancing the state’s pension debt to shield public employers from facing the brunt of upcoming rate hikes.
“It is putting money into the system, which is allowing us to not have to pay such high rate increases,” said Speaker of the House Tina Kotek following a hearing on the proposal.
The proposal was released less than an hour after Republicans skipped a Friday Senate vote on a $1 billion a year increase in classroom funding, which would be paid for through a half a percent tax on some of Oregon’s most affluent businesses.
This marks the seventh time in four days Republicans have denied the chamber enough members to formally conduct business. Republicans say the unusual move, which was last employed by Democrats in 2001, is the only tool they have to air their grievances.
Republicans say they refuse to vote on any new education funding that doesn’t address the state’s Public Employment Retirement System, known as PERS. Teachers are just some of the employees covered by the system, and Republicans claim that any new funding will be diverted to pay down rising pension costs.
For years, PERS has been paying out more in benefits than it has taken in in contributions, causing debt to skyrocket. That has caused rate hikes, forcing public agencies to pay more into the system each year.
Senate Democrats are proposing redirecting some employee benefits to help pay down the funding liability. Employees currently pay 6 percent of their salary into a 401(k)-type retirement plan, a separate account from the public pension fund. Under the Democratic plan, 2.5 percent of the 6 percent in contributions would be used to help fund PERS. Employees on the plan known as OPSRP, which has less generous benefits and makes up the majority of active public employees, will only have to mitigate .75 percent of their contributions.
That idea would mean less money for employees’ individual pension accounts, but it would also lower PERS costs for school districts and other public employers who pay into PERS.
But that’s a no-go for unions, who said it would cut retirement benefits anywhere from 7 percent to 12.5 percent. A coalition of public employee unions said it’s willing to sue the state if the Legislature moves forward with the plan.
