Former Gov. Ted Kulongoski today filed two 2020 ballot initiatives aimed at addressing the unfunded liabilities of the Public Employment Retirement System, which exceed $25 billion and will require increasingly large payments from state and local government employers over the next decade.
Kulongoski, a Democrat who served as governor from 2003 through 2011, previously oversaw significant PERS cuts during the 2003 legislative session.
Although Kulongoski began his political career as a union lawyer and authored the Public Employee Collective Bargaining Act as a legislator, he has been outspoken in recent years about his concerns that pension costs are crowding out the provision basic government services, such as K-12 education and healthcare.
The initiatives they have proposed would create a new defined contribution plan (think of a 401k) as an option for new employees. That would be different from the current system, which is a defined benefit plan. Current employees would keep their existing plans but Tier 1 and Tier 2 members would gradually assume responsibility for paying the six percent payment that most public employers currently contribute to employees' individual account plans (IAP), which are separate from their pension plans.
The second initiative, IP 20, would require existing PERS members to contribute a third of their pension costs going forward. (This proposal is a nod to previous court decisions which have ruled that pension benefits cannot be cut retroactively.)
The timing of the filing is strategic: lawmakers are considering a variety of new tax measures, while many business groups want to see pension cuts before supporting new revenue. The state's large public employee unions are understandably resistant to agreeing to pension cuts, while the businesses that would likely pay the new taxes are concerned that the new revenue would mostly go the unfunded pension liability, rather than for hiring new teachers or adding other public services.
"I believe the unsustainability of the Public Employees Retirement System is a critical issue and the time to change it is now," Kulongoski said in a statement. "I and other colleagues are offering necessary and responsible changes to PERS, and our proposals are fair to the taxpayers and to the PERS beneficiaries."
The rationale for the ballot measures is spelled out in the draft petitions. Despite previous efforts to slow the cost of pensions, the cost for public employers has doubled from its historic average of 12 percent of payroll to 25 percent currently and will grow to 30 percent of payroll over the next three years.
"PERS costs are climbing for the state, schools and local governments," Telfer added in a statement, "but taxpayers are paying the bill. In 2010, PERS pensions cost each Oregon household about $600 a year. They're now more than twice that – $1,500 a year. By 2022, the yearly cost will exceed $2,200 a year, and keep climbing."
In a statement, Patty Wentz, a spokeswoman for the PERS Coalition, said the ballot measures are bad policy and a political loser.
"These corporate-backed proposals would drastically reduced the promised retirement benefits to working teachers, firefighters and other public employees," Wentz said. "Additionally, they will create more problems than they solve, don't reduce the unfunded liability, and would result in more lengthy and costly legal battles for the state and local school districts."