PERS task force solutions have uncertain future
SALEM — A task force appointed by Gov. Kate Brown has come up with some early ideas for reducing the state's unfunded pension liability, but it's not yet apparent how far they could go.
Some proposals floated at the task force's most recent meeting last week involve substantial policy changes, and Oregon's House Republican leader has already criticized certain proposals.
Brown, a Democrat, has asked the task force, which includes representatives from both the private and public sector, to reduce the unfunded actuarial liability of the Public Employees Retirement System by $5 billion.
The unfunded actuarial liability is the amount by which the pension system's future obligations exceed its ability to pay.
Most of the $24.2 billion unfunded liability has already been earned by public employees. According to a 2015 Oregon Supreme Court opinion, benefits already earned cannot be modified by the Legislature.
So the state must pay down most of that sum by cutting costs elsewhere in the budget or raising revenue.
Suggestions from the task force have included using some of the state's reserves and rethinking how certain parts of state government, such as educational institutions and the state's liquor control commission, are run or structured.
While some of the ideas task force members floated at the most recent meeting Monday involved reducing costs, such as consolidating some of the state's public universities and community colleges, many ideas involved raising new revenue to help pay off the unfunded liability, such as a placing a surcharge on liquor or on certain state-issued licenses and permits.
Some of the ideas may require legislative approval, and indications are they may face some pushback. However, the task force has about two more months before its final report is due to Brown Nov. 1, and task force meeting materials note that "there is significantly more work to do between now and then."
The governor, in turn, is expected to choose which proposals to bring to the Legislature.
House Minority Leader Mike McLane, R-Powell Butte, voiced disapproval of some of the early proposals in a prepared statement.
McLane claimed the task force was signing on to a "myth" that the way to reduce the unfunded liability is by raising revenue and argued instead for having state employees contribute "their fair share toward their retirement accounts."
However, attempts at curtailing public employees' retirement benefits going forward stalled out during this year's legislative session, despite an early session effort by state senators on both sides of the aisle.
State Sen. Mark Hass, D-Beaverton, an advocate for revenue reform, said the state has already attacked the "low-hanging fruit" when it comes to PERS, such as in 2003, when the Legislature created a new tier of retirement benefits that were scaled back from the plans offered employees who had been hired earlier.
Hass did not comment on specific proposals from the governor's unfunded liability task force, but said he believes the unfunded liability problem could be addressed with tax reform.
Despite failure of revenue reform in the most recent session, he thinks with a different approach, "evening out" the tax code could allow the state to devote more money toward paying down the unfunded liability. In particular, Hass has been critical of the volatility of the income tax — the state's primary source of general fund revenue — and its property tax structure.
Hass pointed to this session's transportation package as an example of how an agreement on taxes could be reached: a bipartisan group of legislators hosted a series of public meetings across the state and ended up with policy proposals that weren't "conspicuous" back in 2015, when an attempt at a transportation package failed during that year's long session.
"When the transportation package in 2015 was on deck, it looked a lot different and actually less ambitious than the one we actually passed," Hass said.
Hass acknowledged differences between transportation and taxes — especially when it comes to public opinion. But Hass believes legislators recognize the obstacles in place, and that they are not "insurmountable" in the face of the unfunded liability issue.
"It doesn't mean we'll just throw up our hands and never fix it," Hass said.