Consider this: The PERS unfunded liability has continued to grow despite a 10-year bull market on Wall Street, where much of the retirement money is invested. If Oregon couldn’t pay down the liability during robust economic times, what will happen when the economy and market go south?
Oregonians may be left scratching their heads when they see thousands of teachers protesting at the Oregon state capital in Salem or in their home towns on Wednesday, May 8.
The planned statewide teacher walkout comes after budget writers at the 2019 Oregon Legislature already have given preferential treatment to K-12 education in the 2019-21 state budget. Public schools would receive an increase in dollars, while many other state programs are looking at cuts from their current service levels. Beyond that, lawmakers are discussing whether to give schools even more — a whopping $1 billion per year — through a new tax on business.
So, you’d think teachers would be thrilled with the current Legislature’s direction.
On the surface, the massive walkout is a puzzle. But here is a missing piece: Even with a bump in money for K-12 education, local schools won’t see much in the way of additional teachers or smaller class sizes. That’s because a bigger and bigger chunk of school districts’ budgets is being diverted each year to pay for the Public Employees Retirement System.
Which means the real goal of the walkout is to build support for the tax increase.
Yet, we fear teachers will be disappointed in the long run, even if the $1 billon-per-year increase materializes. Yes, legislators are trying to build a wall around any proposed new funding and ensure that it actually gets used for purposes other than PERS. But we all know that rising PERS rates must be met, and that new money, while helpful, cannot be completely segregated from the overall school budget.
So even if the impressive increase in revenue comes through, it still won’t be enough. It will never be enough without a serious plan to pay down the $26.6 billion unfunded liability for PERS.
We don’t make such statements because we are enemies of public employees. We believe public workers — and specifically teachers and other educators — should be paid fairly and have good benefit packages, including a comfortable retirement. But unsustainable benefits promised to workers in the past are having a corrosive effect on public services today.
For that reason, we are pleased to see renewed efforts on multiple fronts to curtail PERS costs going forward. Gov. Kate Brown has unveiled her PERS solution, which includes the idea we suggested in December to hold back part of the individual income tax kicker. She also wants to dip into the reserves built up by SAIF, the state-owned workers compensation corporation. She would redirect money that comes from capital gains or estate tax revenues that are above expectations, and she would have public employees pay a small percentage of their salary into a PERS stabilization fund.
The idea is to pool this money and use it to slow the escalating PERS rates.
Parts of Brown’s plan we can support, but other pieces — such as the SAIF raid — could set dangerous precedents. Nonetheless, it is a serious proposal deserving serious analysis.
Meanwhile, a former governor is re-entering the political arena to try again to tackle a problem he was unable to solve completely while in office. Ted Kulongoski is working with his former chief of staff and union leader Tim Nesbitt, as well as former state Sen. Chris Telfer, on a pair of ballot initiatives to reform PERS. Backed by business groups, the initiatives would divert some of the money from public employee paychecks to help pay down the unfunded PERS liability.
Not to be left out of the let’s-fix-PERS movement, Oregon House Speaker Tina Kotek and Senate President Peter Courtney also are expected to unveil their own PERS plan soon — details to follow.
These efforts come at a critical moment for state services. Consider this: The PERS unfunded liability has continued to grow despite a 10-year bull market on Wall Street, where much of the retirement money is invested. If Oregon couldn’t pay down the liability during robust economic times, what will happen when the economy and market go south?
The proposals from Brown, Kulongoski, Kotek and Courtney should create pressure in the Legislature to make changes to PERS in conjunction with any new revenue plan. Otherwise, lawmakers will just be feeding more money into the retirement system while falling short of their ambition to improve education. Class sizes will grow larger, services will be reduced and Oregonians could be witnessing frustrated teacher walkouts for years to come.
Editorial | The Portland Tribune