Challenges to PERS bill filed, implementation issues mount

Public employee unions have filed a lawsuit challenging portions of SB 1049, the Legislature’s PERS reform bill from the 2019 session.

As reported by OSBA last week, and also by a number of news outlets, the lawsuit was filed by attorneys representing members of organized labor associations to overturn portions of SB 1049. Named as defendants were a variety of government entities, including two OSBA members, Molalla River School District and Mt. Hood Community College. 

The suit’s basis is that some portions of the bill, specifically the IAP redirect and $195,000 salary cap, are illegal takings, essentially saying that these benefits are part of the contract between the district and employee and the employee has a right to them. The last major court decision about PERS, Moro v. State of Oregon, in 2015, similarly addressed contractual rights, but it is unclear how that case will affect the current one.

At least 70% of the rate reduction changes for employers caused by SB 1049 are attributed to essentially extending the PERS debt by another two years – from 20 years to 22. While the suit’s issues target a relatively small portion of the bill’s cost savings, there does exist a danger that the entire measure could be overturned.

The lawsuit’s timing coincides with a strong push by the PERS agency to implement SB 1049 on Jan. 1, 2020, as required by law. The bill changes multiple policy areas, and the agency has been putting out general information, as well as specific information on policy areas including work after retirement and salary limit changes. 

One area of concern for school districts is the so-called “600 hour” rule, which was not included in SB 1049. Traditionally, under PERS retirement rules, employers were not required to track hours worked by retirees until the total accumulated work time reached 600 hours in a calendar year. This exemption was not included in SB 1049, and could be a major headache for school district tracking of substitute teachers. OSBA is working hard to find a solution. This problem wasn’t anticipated in the 2019 session, and may need a legislative fix in 2020.

- Richard Donovan
Legislative Services specialist