Ways and Means Co-Chair Sen. Betsy Johnson works with Senate President Peter Courtney on the powerful Ways and Means Capital Construction Subcommittee. (Photo by Jake Arnold, OSBA)
An amended public pension cost containment bill rocketed through committees Tuesday and is headed to the Senate floor.
The Public Employees Retirement System changes in Senate Bill 1049 would lower statewide system average rates by 5.4 percentage points a biennium, according to the Legislative Fiscal Office.
That is about equal to the predicted average increase in PERS rates for 2021-23 if unchanged. The changes would also decrease public employee pensions, setting up a tough vote that will split party members.
The Joint Ways and Means Capital Construction Subcommittee, which is packed with legislative leadership, introduced its PERS plans on May 10 and took extensive testimony May 14. Public employers expressed a qualified support; public employees vehemently opposed it.
Tuesday morning, the subcommittee introduced amendments that dropped calls for lowering the Tier 1 and Tier 2 Money Match annuity guarantee, which would have lowered retirement payments, and added a $100 million appropriation for the new Employer Incentive Fund. The fund will match 25% of employer contributions to side accounts that help lower employer PERS rates.
The bill would also redirect some of employees’ contributions from personal accounts to PERS debt, cap the final average salary for benefit calculations, and allow some retirement work. The bill gets most of its rate savings by paying back the PERS debt over a longer timeline.
The subcommittee passed the bill with little discussion in the morning, and the full Ways and Means Committee took up the bill at noon. Committee members struggled with balancing the desire to protect public employee pensions against the need to guard public services from being devoured by rising PERS rates.
Average base PERS rates are predicted to climb above 30% of payroll for the next decade. Average school district rates have more than doubled since 2015.
Although it passed committee easily, many of the votes were courtesy votes so the bill could be debated by the full Senate. Legislators on Ways and Means from both parties and both chambers expressed reluctant support and opposition.
OSBA Executive Director Jim Green testified in support of the bill last week, calling it a needed cost containment measure.
“Anything that lessens the impact of rising PERS rates on school districts so that more school funding can be focused on student achievement, we’re supportive of,” Green said Tuesday.
The speed with which the bill moved through committee suggests SB 1049 has the votes to clear the Senate, although it will likely be close.
Republicans have demanded PERS cost controls as part of education funding negotiations, and Sen. Betsy Johnson, D-Scappoose, tied her yes vote for the Student Success Act to a promise of substantive PERS reform this session.
“It’s not perfect by any stretch, but I think it is a step in the right direction,” said Sen. Fred Girod, R-Stayton, on Tuesday.