billion one hundred million dollars!
government employers will be required to contribute an
additional $1,100,000,000.00 to their employees’ Public
Employee Retirement System (PERS) accounts during the next
budget cycle. That is an additional $1.1 billion that will
not be available to fund classroom studies, public safety
and services for our most vulnerable citizens. $1.1 billion
is a lot of money and it is helpful to put it into
perspective. For instance, it would pay nearly 8,000
teachers or about 6,000 police or firefighters for two
years. Alternatively, it would fund virtually every state
program designed to help our most vulnerable citizens with
money to spare.
PERS structural funding problem is no surprise. The reports
of huge deficits, and skyrocketing contribution rates are
too numerous to count. The PERS trust fund experienced
nearly $20 billion in losses during the 2007 financial
debacle. The PERS trust fund remains about $13 million short
of full funding to service its liabilities. The $1.1 billion
increase in employer contributions is required during the
next budget period in order to help make up for those
Several changes to the PERS contribution and benefit
distribution system could be made that would help to
stabilize the fund.
PERS was originally structured so that both employers and
employees contributed 6% of salary to the trust fund. About
70% of the government employers now contribute the 6%
employees’ contribution. Each percentage that is contributed
by the employers costs Oregon taxpayers about $125million
each budget cycle. Eliminating this “6% pick-up” would save
Oregon taxpayers $750 million per budget period.
Oregon taxpayers currently pay $36 million per year to
offset Oregon income tax liability for PERS retirees who no
longer live in Oregon and who no longer pay Oregon income
taxes. Eliminating this inequitable offset would save $72
million per budget period and reduce the PERS liabilities by
PERS retirees’ benefits are calculated based on their last
three years of earnings. The Tier 1 employees are allowed to
include both the lump sum of unused vacation and sick leave
pay in that calculation; thereby, significantly increasing
their PERS benefits. Tier 2 employees are only allowed to
include the sum of the unused sick leave in the calculation.
Elimination of both these “perks” would save Oregon
taxpayers $240 million per budget period and reduce the PERS
liabilities by about $400 million.
PERS retirees’ benefits include a cost of living adjustment.
About 7% of PERS members retire with less than 10 years of
public employment. Eliminating the cost of living
adjustments for employees who retire with less than 10 years
of service would save Oregon taxpayers $90 million per
budget cycle and would reduce the PERS liability by about
were introduced to address each of these PERS corrections.
Unfortunately, no action has been allowed on any of these
cost-saving bills. For instance Senate Bill 897 would begin
to address the PERS problem by requiring employees to pay
their own 6% of the PERS contributions that is currently
being “picked up” by about 70% of all PERS employers. The
bill would save Oregon taxpayers $750 million per budget
Unfortunately, this week Senate Democrats voted unanimously
to prevent the Senate from taking action on the SB 897. They
appear to not recognize that PERS expenses are eating our
state and local government as well as our school district
budgets alive. They appear unable to grasp the reality that
the current PERS program is unsustainable.
cost of PERS will increase by $1.1 billion for the 2011-13
budget cycle and nearly that much more during the following
2013-15 budget period. We simply cannot continue to ignore
Hopefully, the legislative leadership will come to their
senses and take action. There is still time remaining to
adopt at least some of these cost saving measures. To do
less will jeopardize our ability to continue to fund
essential Oregon services.
remember, if we do not stand up for rural Oregon no one