Schools, cities and counties struggle under increasing PERS costs

Rep. Dennis Richardson

Rep. Dennis Richardson

The cost of Oregon’s public employee retirement system (PERS) is rising again.  The increase primarily results from legislative decisions granting extravagant retirement benefits for many employees hired before Jan. 1, 1996 (Tier 1). For the current 2011-13 biennium, PERS employer costs increased by $1.1 billion, and PERS employers are facing an additional $900 million increase for the 2013-15 biennium.

Consider what it means to take $2,000,000,000 from budgets for a small state like Oregon.  That $2 billion would otherwise have been spent on our schools, local police, sheriff and fire protection, libraries, road maintenance, parks, etc., and there’s no end in sight to the PERS increases.

From which budgets will the additional $900 million in 2013-15 PERS employer payments come?  Four hundred million will be paid by schools, $260 million by cities, counties and other units of local government, and the remaining $240 million will come from state agencies and programs.

The governor recommends that $810 million be restored by limiting the PERS retiree 2 percent  cost of living allowances (COLAs) to the first $24,000 of annual retirement benefits. Another $55 million could be saved by restricting Oregon’s Tier 1 income tax restoration benefit to only those retirees who still live in Oregon and pay Oregon’s state income tax. These suggestions are controversial and are a first step toward stabilizing PERS and restoring money desperately needed by our schools and local government units.

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