Proposed framework protects employee retirement before the next economic downturn
Salem, OR—Governor Kate Brown today unveiled her plan to tackle funding for the Public Employees Retirement System (PERS). PERS is currently funded at 80 percent, while PERS rates continue to increase and are projected to remain high until 2035.
In any economic environment, these increases are not affordable for Oregon schools and will lead to teacher layoffs. However, when another economic crisis inevitably sweeps the country, the increases will be untenable, with cuts to services that no Oregonian will find acceptable.
"Oregon’s public employee retirement system, or PERS, is first and foremost an essential benefit for our public employees. In exchange for dedicating their lives to public service, Oregon has made a promise to provide them a secure retirement after decades of teaching our kids, fixing our roads, keeping our neighborhoods safe, fighting fires, or helping our children in foster care," said Governor Brown.
"We must keep our promise to every PERS member, active and retired, to protect retirement security and the defined benefit plan in Oregon. And every Oregonian must step up to help us keep that promise. Employees should not carry this burden alone. Anything less would simply be kicking the can down the road."
Governor Brown's proposal includes:
• Creation of a School PERS Offset Account to pay for the increase above 2019 - 2021 PERS rates for schools until PERS is fully funded or for 14 years, whichever comes first.
• Beginning PERS stability contribution pension accounts for employees to secure the defined benefit portion of PERS. The contribution will equal 3% of payroll for Tier 1 and Tier 2 members and 1.5% of payroll for OPSRP members, after the first $20,000 of annual salary. With the exemption, the average contribution would be 2.1% for Tier 1 and 2 and 1% for OPSRP. Members will not see a reduction in their current take-home pay as a result of these contributions.
• After PERS stability contributions end, if PERS drops below 90% funded in the future, employees will pay a temporary stability contribution of 3% (after $20,000 exemption), until PERS funded status recovers.
Governor Brown has proposed a number of options to fund the School PERS Offset Account, including:
• A one-time retention of the income tax kicker, after returning the first $100 to each Oregon family, which would raise $400 million to 500 million.
• Using excess surplus from SAIF — Oregon's not-for-profit, public workers' compensation insurance company — above the Board’s target levels, which would bring in $486 million; or an alternative that includes SAIF covering workers' compensation costs for school districts and a smaller one-time transfer
• Repatriation funds already dedicated under 2018 Senate Bill 1566 (and Senate Bill 1529) for a total of $83.3 million
• Windfall revenue from variable sources, including direct, above-trend revenues from capital gains and estate taxes to the account
Read Governor Brown's testimony here.
Additional information can be found here.