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Bills aim to reduce PERS costs, but opponents call them unfair, illegal

Lawmakers took the first steps Monday during this year's legislative session to tackle the thorny issue of the state’s Public Employee Retirement System and its financial burden to the state by debating two bills sponsored by a Republican state senator.

Because of the decisions about PERS made in the past, the state is facing at least a $22 billion unfunded liability in the system. But that number could increase, depending on the return of future investments in the system.

The unfunded liability is putting pressure on the state budget, which faces a projected $1.8 billion deficit that’s driven in part by the state’s retirement obligations to public employees at all levels of government.

A major hurdle that must be overcome is whether any changes to the PERS system is constitutional in Oregon. The state Supreme Court struck down a good portion of a law passed by the Legislature in 2013 that tried to save a significant amount money in the system. The court essentially said that the state couldn’t take away promised benefits to members in PERS. But it left open the possibility of tweaking the system for future benefits.

State Sen. Tim Knopp, R-Bend, the chief sponsor of the two bills, said if nothing is done to address the issue, there will be major consequences in the not too distant future.

“If we do not (address PERS) we’ll have a catastrophic collapse of the system,” he testified before the Senate Committee on Workforce, of which he is a member.

He said that catastrophe will come in the form of major cuts to schools, meaning fewer teachers and larger class sizes.

Knopp’s two bills would primarily do two things: The final average salary for public employees would be calculated on three years instead of five years, and employee contributions would be redirected from an individual account to another account that would pay the employee’s pension and retirement benefits.

The bills:

Knopp said with these changes he expected the unfunded liability to be lowered to between $16 billion and $17 billion.

He portrayed his bills as the starting point to a larger discussion about PERS.

Public employee unions fiercely opposed the proposals, calling them unfair and illegal.

“The cost of their retirement is not creating the unfunded liability, yet some would want them to carry the burden of paying for it,” said Melissa Unger, SEIU Local 503's political director.

Watch the Public Hearing on the Bills:

Salem firefighter Brandon Silence said the two bills together would reduce his total retirement benefit by 41 percent, because of the slashes in his individual account and reduction in his monthly pension that would occur if the bills become law.

“I don’t know what I’ll do if these bills are successful. I can’t make up those differences; they’re simply too large,” he told the committee. “I think it’s time for the state of Oregon to once and for all meet its commitment to me and all public employees.”

An actuarial analysis was conducted for Silence and a few other PERS members. Unger said the effects to employees in different situations ranged from 28 percent to 41 percent in a total reduction of benefits.

"I do not see how we would be able to afford to keep teaching," Travis Overly, a high school social studies teacher from Bend, said during a rally at the Capitol. "These kinds of cuts go far beyond breaking the promises made to us when we were hired. This is a state raid on our personal retirement accounts."

"Financially I will have to work until I'm about 77," said Barbara Walsh, an office specialist at a child welfare office in Medford. "If my PERS were to be cut, retirement would not be an option."

Steve Benham reported from Portland.

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