Grand Bargain sees five bills passed covering PERS, tax cuts and hikes

by: JOSH KULLA - State Rep. John Davis, right, voted in favor of Gov. John Kitzhaber's Grand Bargain. But he has reservations about some of the elements involved. Hby: JOSH KULLA - State Rep. Bill Kennemer, left, likens the recent legislative special session to the spicy nature of goulash. ow grand a bargain the five-bill package approved by the Oregon Legislature to wrap up last week’s two-day special session is actually depends on perspective.

“Essentially it was a five-point bargain, under threat of veto,” state Rep. John Davis, R-Wilsonville, said Saturday at a public meeting for constituents at the Wilsonville Public Library. “It was an all or nothing deal, where the governor said, ‘If you don’t pass one of them, I’m not going to sign them.’”

Whatever the motivation, Republicans ultimately joined a Democratic majority in voting to cut cost-of-living increases for some public pension recipients, raise taxes on some corporations as well as cigarettes and eliminate some tax exemptions for high-income residents. To help make that easier for conservatives to swallow, there also were tax cuts for small businesses included in the package.

In addition, the Legislature voted to pass on to public schools some of the estimated $400 million the measures are projected to bring in annual savings. Extra money also was earmarked for public universities to help stem rising tuition costs, while additional funds also will go toward senior transportation and community colleges.

Finally, the bargain also involved an unrelated bill that reserves the right to regulate genetically modified or any other type of seed. It prohibits Oregon’s counties from enacting their own GMO bans, as two counties already were in favor of doing.

The so-called bargain involved plenty of compromise, as well as some tough decisions, said Rep. Bill Kennemer, R-Oregon City.

“I think the outcome was that three of those bills were very controversial,” said Kennemer, who, like Davis, voted in favor of all five bills.

The seed bill, PERS reform and a tax increase on certain high-income corporations all fit this bill, he said.

“With PERS, some just said, ‘Right, it’s not enough,’” he said. “The unions and most of the PERS people were adamantly opposed to a change that would decrease the annual increase, but we’re up against the reality that the program is not solvent long term. You have over a $15 billion liability, and frankly, this was heartburn, and this and what was done in the prior legislative session amounts to about $5 billion out of the $15 (billion) that needs to be taken care of.”

Kitzhaber called the special session in September without knowing whether he would have the votes for the package that ultimately was approved. Much of the package failed in the regular session earlier this year when presented as individual bills.

To drive home the importance of the agenda, Kitzhaber had vowed to veto the bills if any of the five failed to pass.

The issue gaining the most publicity is the Public Employee Retirement System, or PERS. By reducing the annual cost-of-living adjustment for PERS recipients, lawmakers hope to dramatically reduce the current liability facing the state.

According to documents from the Legislature on Senate Bill 861, those now receiving $20,000 or less a year from PERS will see a 1.25 percent COLA increase annually, down from 2 percent. Pensioners getting between $20,000 and $60,000 will also see their annual COLA cut to 1.25 percent, while PERS recipients earning $60,000 or more annually will see their adjustments reduced from 0.25 to 0.15 percent annually.

“These reductions might seem small," Davis said. “But we’re talking in terms of a 30-year time horizon, so that $15 billion liability goes down to $10 or $11(billion); a slight change makes a huge difference down the road.”

The PERS bill is automatically being referred to the Oregon Supreme Court in anticipation of legal challenges that are likely to be raised by public employee unions. In the past, courts have quashed other legislative attempts to retroactively restrict pension benefits, saying such action is a breach of contract.

“A lot of experts think these are likely to pass muster,” said Kennemer, who likened the legislative package to a “grand goulash.” “But that’s one more wild card in the equation, and that’s one more assumption that our budget is based on.”

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