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Governor right to tie PERS reform to school funding


Oregon Gov. John Kitzhaber’s proposed budget for the next biennium represents a challenge to his own party — which soon will be in complete control in Salem — to prove it can govern with this state’s long-term interests in mind.

The governor’s 2013-15 general fund budget, unveiled last week and weighing in at $16.5 billion, wisely avoids assumptions about new revenues and instead focuses on controlling costs and setting firm priorities for spending. In the case of education, Kitzhaber makes his priorities clear by proposing that savings from modest and equitable PERS reforms be reinvested in public schools.

Such reform of the Public Employees Retirement System, however, will require that Democratic legislators push their natural allies — public employee unions — to accept PERS changes that are necessary to free up money for other vital state services. Kitzhaber is not proposing draconian reductions in PERS benefits. He suggests putting limits on annual cost-of-living increases for PERS retirees. He also proposes that PERS retirees who live out of state no longer be reimbursed for Oregon income taxes that they don’t actually pay.

These PERS changes would save $865 million, of which $253 million would come back to schools. It’s a smart tradeoff that’s fair both to public employees and to children in school today. If accepted by the Legislature and upheld by the courts, it also would begin to bend the PERS growth curve into a more sustainable direction.

Beyond schools and PERS, Kitzhaber is suggesting reasonable changes to the state’s public safety system that could save $600 million over a decade. Even more significantly, Kitzhaber projects the state can save $11 billion in health care costs over the next decade through specific reforms.

Overall, the governor’s budget makes good choices. He gives high importance to education and infrastructure, including replacement of the Interstate 5 bridge over the Columbia River.

This budget could help put Oregon on a better path to economic growth by investing in those things that employers also value. Democrats — who, after the November election, are in charge of both the House and Senate — will feel pressure to reject some of Kitzhaber’s reforms. They should keep in mind, however, that their majority position is tenuous — as easily forfeited in the next election as it was attained in the last.

If they overreach on taxes or stall on needed reforms, they risk a backlash similar to the one that cost them a firm majority in the House just two short years ago.