A new PERS Bill has emerged in the legislature. The Oregonian had a recent article about the idea and while the reporting was misleading, it is generally accurate. We have been engaging members in a discussion of this idea to make sure everyone understands what it would mean for their retirement and for PERS system overall.
We knew this idea was coming and while we do not support it, we tried to give input and make it more tolerable. Along with that, we have helped kill numerous bad PERS ideas this legislative session. Here are a few of them:
- 6% Diversion moved entirely out of the IAP
- Cap on final average salary at $100,000
- Increase of retirement age
- Changing the FAS from Best 3 years to last 5 years
Let’s also be clear, having any discussion on PERS reform is impossible without revenue on the table. Oregon has the lowest corporate tax share in the country, only 6% in total, as a percentage of total state revenue. That is down from over 18% thirty years ago. We can no longer cut our way to a solution and the people of Oregon cannot and should not take an increase in their personal income tax. Public sector workers across the state have mounting workload problems, we need to turn that around, revenue from profitable corporations is only long-term feasible solution to this problem.
So, what is the new PERS concept?
The idea is that over the next several years there would be a shift on to employees to cover more of their retirement. That shift will come from a percentage shift from members’ individual accountants that they receive in addition to your pension, called the IAP. In basic terms starting July 2018, 1% of the money going into an employee’s IAP would be redirected and go into a fund that would cover the employer’s PERS rate. Then in the 2019-2020 budget cycle another 1% would be diverted. After that, it would depend how much the rate employers have to pay to cover the cost of PERS. If the rate increases another 2% then that is on the employers. Any increases above that would be split 50/50 with members but never more than a total of 4% out of the IAP and never more than 1% a year. In addition, if the employer rates for the normal cost of PERS drops then members would get money back into their IAP.
Some Issues to note:
- It would not take effect immediately and that would allow us to bargain the impacts of the diversion out of the IAP. You could bargain to keep your IAP whole and sacrifice a COLA or not depending on what you decide.
- This would be a direct reduction of what employers pay into PERS. So, employers would have 1-2% more money to spend on services. We have to recognize that right now employer have less money because of the high employer rates into PERS and this would relieve some of the at pressure.
- The money diverted will go to pay the portion of the employer rate that is attributed to current workers and it will make PERS a more stable system. The money they are taking from you is going to pay your pension when you retire.
- This is a cost shift on to members. We will not pretend that this will not cost you money. We only want to make sure you understand why it being discussed.
There is a budget crisis in this state right now, we have to acknowledge that. It is a state and local government problem, and while PERS is not the chief driver, as many in the media would have you believe, it is a significant factor. All public employers have to pay a much larger portion into PERS to keep it stable. It will grow over the next few budget cycles by over a billion dollars for all public employees. Most of this problem is from the over 20 billion debt that is owed to people that have already retired. That money was earned fairly and according to the Oregon Supreme Court those benefits cannot be touched, nor should they for the vast majority of retirees. However, there is still a problem and there are not enough votes in the House and Senate to solve that problem solely with revenue, as has been our desire through ballot initiatives and lobbying.
With session going into its last few weeks we have to make sure this problem is not solved exclusively on the backs of workers. As distasteful as this plan is, it may be the best vehicle to prevent much worse solutions this session and in the future. Make no mistake, we will continue to fight but we also have to be smart and strategic. Our council will be holding a second PERS Teletown Hall on Wednesday, June 21st at 7 P.M. to discuss this and more PERS related news.