Focus shifts to taming PERS costs

The debate over the Student Success Act's passage dragged the Public Employees Retirement System into the fray. The historic act is on its way to generating $1 billion a year for education, but the Legislature is still working on how to blunt PERS’ effect on school funds.

Republicans’ frustration over the Student Success Act stemmed partly from the fact PERS diverts a huge chunk of the State School Fund away from classrooms. They have said PERS needs to be contained before increasing business taxes to provide education funds.

Senate President Speaker Courtney and House Speaker Tina Kotek have released a new plan, replacing Gov. Kate Brown’s proposal last month for tackling the $27 billion PERS debt. The legislators’ plan would hold rates to around 27% of payroll costs for the next few years and then slowly push them under 25% by the end of the next decade.

Brown, Kotek and Courtney all propose employees share some of the pension system costs. Employees who entered the PERS system before 2004 would have 2.5% of their salaries diverted from their retirement account into helping to pay off the debt. Those who entered the system after 2004 would face a diversion of 0.75%. Employees who make $30,000 or less would not be affected by these diversions.

Adding to the financial discussions, the economy performed better than expected in the 2017-19 biennium, and there was record growth in personal income and corporate income taxes. With tax revenue up by more than 50% compared with this time last year, the recently released forecast showed that lawmakers will likely end up with $876 million more in the General Fund than economists had predicted, and taxpayers are estimated to see a record $1.4 billion kicker refund next year.

The outlook for economic growth is stable, although the economy is slowing following last year’s tax cut-fueled growth. Legislative leadership is warning that the state must still prepare for an inevitable economic downturn.

Economic growth for the next biennium is projected to be in line with underlying growth in the labor force and productivity. Growth in the regional economy is uncertain for the next biennium, although it is expected to slow to a more sustainable level in coming years.

- OSBA