Legislature explores proposals to lower PERS rates
Friday, May 10, 2019
Sen. Betsy Johnson (center) questioned Oregon PERS Director Kevin Olineck about the technical challenges of proposed changes to the Public Employees Retirement System to lower employer rates. Unions have fought PERS changes, and International Association of Fire Fighters members in yellow shirts were a sizeable portion of the hearing audience. (Photo by Jake Arnold, OSBA)
Measures discussed Friday could lower statewide uncollared public pension rates by 6.33 percentage points in 2021-23, according to legislative testimony.
Senate President Peter Courtney and House Speaker Tina Kotek are the sponsors of Senate Bill 1049, which if amended would adjust five Public Employees Retirement System calculations. The combined changes would soften the expected rate jump in 2021 and hold rates lower than current projections through 2037.
The Joint Ways and Means Capital Construction Subcommittee brought in Oregon PERS Director Kevin Olineck to walk them through the proposals. The subcommittee includes Courtney and Kotek, as well as Sen. Betsy Johnson, a key swing vote on financial matters, and Sen. Chuck Thomsen and Reps. Greg Smith and Nancy Nathanson of the Joint Committee on Student Success.
Thomsen was not present, as Senate Republicans continued their walkout to prevent a quorum for a vote on the Student Success Act, House Bill 3427.
The Student Success Act would dedicate roughly $1 billion a year to an education-only fund. Objections to the Student Success Act have included fears that any new money for schools would be eaten up by rising PERS costs, which are expected to climb above 30 percent of state payrolls for 2021-23.
Schools would not be able to use the new money for PERS costs, but they might be forced to backfill programs with the money as PERS costs reduced State School Fund money available for classrooms.
Work on a PERS solution could help unstick the Senate, and SB 1049 is scheduled for a public hearing and possible vote Tuesday.
The legislative proposal would redirect Individual Account Program contributions, lengthen the payback period for Tier 1 and Tier 2 debt, allow work after retirement, change the annuitization rate for the money match calculation and cap the final average salary.
Lengthening the payback period would account for more than half the rate savings, according to Olineck’s report. The changes would also increase PERS’ unfunded liability over current projections and keep rates beyond 2037 higher than they would be under current rules.
OSBA is still considering the proposals’ specifics, according to Legislative Services Director Lori Sattenspiel, but OSBA has pressed for cost containment measures this session.