City Club throws support behind PERS reform report

Margin of victory means group will urge lawmakers to approve plan's changes

Portland City Club voted by a strong supermajority Friday to endorse a report calling for dramatic rollbacks in Oregon public employee pension benefits.

The club adopted the 49-page report on a 120-22 vote. The report calls for reforms to the Oregon Public Employees Retirement System, according to Tony Iaccarino, City Club research and policy director.

Under club policies, when a report gets more than 80 percent support at a meeting, as occurred Friday, the club will form an advocacy committee to promote its recommendations. That likely would mean briefing state legislators, the state PERS Board and other groups, Iaccarino says.

The full City Club has about 1,300 members.

The report's main recommendations:

• For workers joining PERS before fall 2003: redirect annual payments now going to their individual account program - a 401(k)-style plan that gets the equivalent of 6 percent of their salaries each year - and use the cash to reduce PERS long-term deficit, which now stands at $7 billion. That would save Oregon state and local governments a combined $312 million a year, while reducing worker pensions.

• For workers who joined PERS after fall 2003: reduce the guaranteed portion of their pensions so it equals 30 percent of their final salary after 30 years, instead of 45 percent.

• Raise the retirement age by two years for workers hired since fall 2003.

• For all future retirees: Reduce the money match benefit, one of two methods used to set worker pensions, so it's calculated based on worker accounts growing by 6 percent a year, instead of 8 percent. That could save state and local governments $1.7 billion long-term. Many workers would get reduced pensions.

• For about 15,000 retirees who settled in Washington or other places that don't charge state income taxes: Cut their benefits by about 9 percent. The Legislature added about 9 percent to their pensions when it started taxing PERS benefits, so they wouldn't lose money. But it's a windfall for those who don't pay Oregon income taxes on their pensions. This would save the system $72 million a year, or $450 million overall.

None of the recommendations appears likely to pass the 2011 Legislature, despite skyrocketing PERS costs that are forcing belt-tightening throughout Oregon's public sector.

The main PERS reform being discussed in Salem is at the bargaining table. Gov. John Kitzhaber went into bargaining with state employees seeking to halt or reduce government payments of the 'employee contribution' to PERS, which equals 6 percent of workers' salaries.

In a half-hour debate on the City Club report Friday, there were some who argued that public employees in Oregon often accepted lower pay in exchange for better pensions, Iaccarino says. 'City Club has got a lot of public employees in its membership, current and former, active and retired.'

However, Friday's vote means the city's foremost public policy group, often accused of tilting to the liberal side, is taking an aggressive position in favor of reduced public employee pension benefits.