Taming the PERS beast, Round Two: Editorial

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Steve Rodeman, executive director of the Oregon Public Employees Retirement System, speaks at the Oregon Leadership Summit in Portland last December. Rodeman appeared last week, in Salem, at Sen. Betsy Johnson's work group session to explain the mechanics underlying PERS' $22 billion unfunded liability.

(Stephanie Yao Long/Staff)

Editorial Agenda 2016

Whether to reform Oregon's Public Employees Retirement System produces many responses, but only two that matter politically. The first is that an unfunded liability approaching $22 billion might not actually pose risk to future generations, particularly in a year when a ballot measure would, if OK'd by voters, bolster state coffers by $6 billion in the next biennium alone. And the second, common among statehouse leaders, among them the governor, is that no changes to PERS proposed thus far would withstand a test in court, so why bother?

Both positions are wrong. The first is a dreamy form of denial, fed by errant thinking about where Measure 97 money would go - again, if it even passes. PERS's unfunded liability is so all-consuming to future generations that basic services statewide, among them public education, would be hollowed from budget cuts. The second answer is wrong, because the justices who nixed PERS reforms passed by the Legislature in 2013 made clear that while an Oregon retirees' benefits cannot be altered after-the-fact, changes to the pension plan could be made that affect current and future public employees, driving costs down.

Last week a work group met at the statehouse in Salem to address recent but familiar calculations that PERS would eventually walk Oregon off the fiscal cliff. Sen. Betsy Johnson, D-Scappoose, led the discussion in an effort to hear any solutions from anyone. The two-hour meeting was sparsely attended, ignored by the do-nothing crowd.

A few intriguing suggestions were heard. Significantly, Johnson's hearing followed a recent meeting of the Oregon Investment Council at which the council's vice chair, the finance professional Rukaiyah Adams, was plainly frustrated as she spoke of passing $22 billion in unfunded promises to future taxpayers, Ted Sickinger of The Oregonian/OregonLive reported.

"This is becoming a moral issue," Adams had said. "We can't just talk about numbers anymore." But it was the council's chair, Katy Durant, who raised the stakes further after the meeting by describing a pension system "beyond crisis" that's "a little bit like a Ponzi scheme."

Full stop. PERS reform must happen in the 2017 legislative session. Only the Legislature - not cities, not counties, not other jurisdictions - can do this. The fortunes of the state ride on it. Lawmakers preparing now for the session should think hard and show that they can summon the political will and creativity to take on the PERS beast: again.

In an interview with The Oregonian/OregonLive Editorial Board, Johnson explained that she needs time to process the possibilities of her group's work. But she was characteristically blunt about her purposes: "This is a very complicated issue. But do we have the option of doing nothing? No. I do not believe we have the option of doing nothing."

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That sentiment places her and some significant Republicans, Sen. Ted Ferrioli among them, squarely at odds with quite significant Democrats. Gov. Kate Brown told Sickinger she was concerned about pension costs but that she felt a handful of PERS reform ideas floating about were "not legally viable and not likely to result in significant financial savings." Ditto Senate President Peter Courtney, D-Salem, and House Speaker Tina Kotek, D-Portland.

Saying no is easy. Getting to yes is hard. Undaunted is Tim Nesbitt, a former adviser to Governors Ted Kulongoski and John Kitzhaber and past president of the Oregon AFL-CIO. He goes to the heart of the challenge in declaring the PERS crisis a matter of fairness as much as it about numbers. He delivered comments he'd prepared last year for business leaders at Johnson's hearing last week and, in an interview with the editorial board, echoed Adams' moral concern: "It's a promise we kept but cannot afford. Some solutions may not feel fair. But the legacy cost problem is itself unfair: to young employees, to school kids, to young and growing families."

Nesbitt suggests focusing on the second of two PERS retirement plans, in which 6 percent of an employee's earnings are placed in an individual account, and directing much of those contributions to help reduce PERS' liability. At this point it's just an idea, one among a few needing refinement and dollar calculation.

But it's also another start. And the problem deserves as many starts as required to stave off fiscal calamity. Deniers, wake up. Fatalists, re-engage.

-The Oregonian/OregonLive Editorial Board