School districts identified in expected PERS lawsuit
Thursday, August 8, 2019
As soon as the 2019 Legislature passed public pension reforms, a court fight was practically inevitable.
A lawsuit challenging Senate Bill 1049 is expected to be filed Friday, according to attorney Aruna Masih of Bennett Hartman Attorneys at Law. The firm handled the last major case challenging reforms to the Public Employees Retirement System.
The PERS Coalition, a collection of public employee groups, said it would issue a news release Friday.
Hillsboro and Molalla River school districts and Mt. Hood Community College would likely be among the public employers named in the lawsuit, according to OSBA Executive Director Jim Green on Thursday. Molalla and Mt. Hood were named; Hillsboro was not.
Plaintiffs must be public employees to have legal standing. Opponents will pick employees whose personal stories make the most compelling cases that the law harms them. Employees from a variety of public agencies will represent different unions and retirement benefit levels.
The June 11 signing of SB 1049 set up an Aug. 12 deadline to file a lawsuit. The law requires challenges to go straight to the Oregon Supreme Court. PERS staff members are already under tremendous time pressure as they try to rewrite rules and set up systems to implement SB 1049’s sweeping changes.
SB 1049 is an attempt to rein in employers’ soaring PERS costs. The Legislative Fiscal Office estimated the law would lower employer 2021-23 rates 5.4 percentage points. The bulk of the employer cost savings come from refinancing PERS’ debt over a longer period.
The lawsuit, however, will likely focus on SB 1049 provisions that will affect employees’ benefits. The law uses a portion of employees’ required personal account contributions to pay off PERS debt, which reduces employees’ eventual retirement benefits. Milliman, PERS’ actuary, in its rate calculations has treated that change as a direct offset of employers’ rates: 2.5% for Tier 1 and 2 employees and 0.75% for Oregon Public Service Retirement Plan members.
The Supreme Court’s Moro decision in 2015 said the Legislature couldn’t change benefits already earned but indicated the court would allow changes to benefits going forward, including the employee contribution. The lawsuit will likely test that understanding.
The law also places a $195,000 cap on salary for benefit calculations and changes the rules for retired workers returning to public employment.
“The Legislature set out to help us with our rates,” Green said. “If the court throws it out, we have to deal with those rising costs and that will cut into what we can offer students.”
Green said OSBA’s Legal Assistance Trust will be meeting after the lawsuit is filed to discuss covering litigation expenses for the education defendants. The trust was established to help districts with cases that have statewide impact, and Molalla and Mt. Hood are members.