Oregon Pension Reform Squeaks Through Legislature

Bill barely passes both chambers; governor expected to sign into law.

A controversial pension reform bill has passed both chambers of the Oregon state legislature and is expected to be signed into law by Gov. Kate Brown.

The bill was approved by the state Senate May 23 by a vote of 1612, which is the minimum needed to pass a bill in the Senate. It was then passed by the House on May 30 by a vote of 31-29, but only after House Speaker Tina Kotek convinced two representatives who were going to vote against the bill to change their minds.

The bill would redirect a portion of Oregon Public Employees Retirement System (OPERS) employee contributions to an employee pension stability account toward paying down the state retirement system’s debt, which is an estimated $27 billion. OPERS currently has a funded level of 80%, which is considered the minimum healthy funding threshold by the National Association of State Retirement Administrators (NASRA).

The bill directs the OPERS retirement board to apply amounts in the stability account to pay pension costs or other retirement benefits to members who accrue on or after July 1, 2020. It also allows certain participating public employers to make a lumpsum payment of employer contributions, and to choose the year in which to begin using lumpsum payment to offset the required employer contributions.

Additionally, the reform modifies provisions relating to pension obligation bonds, and directs the OPERS board to determine liabilities attributable to benefits to be provided to tier 1 and 2 members, and set employer contribution rates to ensure that liabilities will be funded within 22 years.

The bill is expected to save schools and other public agencies up to $900 million a year in PERS rates through the mid-2030s, according to Oregon Public Broadcasting.

The passing of the bill was done so primarily along party lines with the majority of Republicans against it, and the majority of Democrats for it.

“The outcome of today’s vote will make it tougher on public employees without benefiting all Oregonians,” House Republican Leader Carl Wilson said in a release. “Refinancing the PERS debt will only add to the growing debacle.” 

But not all Democrats supported it.

“Not only am I a NO on this vote, I’m a hell NO,” Rep. Diego Hernandez, a Democrat, said in a post on his Facebook page.  “I believe there are better solutions that are not on the backs of hard working public employees.”

The reform measure was also opposed by the Oregon chapter of the American Federation of State, County and Municipal Employees (AFSCME), which said the bill would cut the individual account programs of PERS members by between 7% and 12.5%.

”The reduction of worker’s retirement benefits is unfair, unconstitutional, and does nothing to address the debt associated with the current retireesthe unfunded actuarial liability and the rising employer rates,” Stacy Chamberlain, executive director, Oregon AFSCME, said in a statement. “Public sector workers across Oregon deserved better and the state should expect a lengthy legal battle in defense of our members.”

Related Stories:

Minnesota Signs Bipartisan Pension Reform into Law

New Illinois Bill Would Consolidate more than 650 Police and Fire Pensions


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