Oregon Democrats Offer Pension Peace Treaty to Revolting Republicans

Newly proposed pension reform offers a new path to funding the troubled PERS.

Oregon Democrats unleashed a pension reform bill this month that in very small ways compares to Gov. Kate Brown’s “Robin Hood” solution that would essentially pin higher taxes on wealthier entities in the state and redistribute the earnings amongst its relatively poorly funded pension plans. 

The new move was provoked after a walk-out from state Republicans, who argued they wouldn’t address any new education funding that doesn’t address the state’s public employees’ retirement system (PERS), which is spiraling into more than $25 billion in debt. The Republicans have repeatedly maintained a choreographed absence from the state Capitol in protest of the pension’s dire situation, encouraging Democrats to prioritize the issue.

The proposed bill would redirect 2.5% of the 6% that employees pay to their 401(k) plans to help fund PERS, which stands at about 80% funded today. It would lead to less funds for individual pension accounts, but would simultaneously mitigate the amount that school districts and other public employers contribute to the retirement plan.

The redirect would only apply to members who earn $30,000 or more in a year, and would be indexed in future years.

The plan earned a swift rebuttal from unions. President of the Oregon Education Association John Larson said, “Oregon educators have shown time and time again that they will stand up for their students. If lawmakers turn their backs on educators and cut retirements, we will see them in court.”

Under current circumstances, contribution rates are projected to increase until 2035. Employers can expect a 5.5% rate hike in 2021, an obstacle that Democrats said could be averted with the adoption of their plan.

Under Brown’s proposed plan, funds would be sourced from the income tax kicker rebates, which she claims disproportionately benefit wealthy Oregonians. She said she would give everyone the first $100 of the rebate and retain the rest. Transferring surplus funds from the state-owned insurance company was an additional proposal she put on the table.

Sponsors of the plan didn’t respond to requests for comment.

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