A Progressive Take On PERS Reform

Nels Johnson

PERS is one of the most important programs provided by the state of Oregon. While corporations have spent the better part of the last 30 years jettisoning their pension systems to cut costs, Oregon has remained steadfastly committed to providing a stable retirement for their employees. Providing a fair retirement compensation package for employees has become a part of our value system as a state, and the way that we care for our employees. However, PERS has not been without controversy, with many groups crying that PERS benefits are too generous and financially unsustainable for the state.

PERS reform promises to be one of the most contentious issues of the 2013 Legislative Session. For years PERS reform was an obsession that consumed only Republicans and the Oregonian Editorial Board. But times and circumstances have changed. Higher PERS costs have cut into education funding at the school-district level and threaten to leave the state with an approximate $16 billion unfunded liability. Now, even Democrats are talking about PERS reform. Governor Kitzhaber has tied additional education funding to PERS reform. The Governor is seeking to cap the annual cost-of-living increase PERS recipients get at $480 per year, excluding those receiving less than $24,000 per year in benefits. Governor Kitzhaber has also proposed ending the practice of reimbursing out-of-state PERS recipients for the Oregon income taxes that they don’t actually pay. The Governor believes these two changes would save $865 million in PERS costs. His proposals to reform PERS are obviously not without controversy.

In broaching the subject of PERS reform, I don’t do so to criticize existing proposals or offer up new ones; instead, I bring up the subject of PERS reform to talk about values. As progressives, one of our most important values is that of fairness. We believe passionately in quality public education because it’s an issue of fairness. We believe in quality affordable health care for everyone because it’s an issue of fairness. We believe in a progressive system of taxation because it’s an issue of fairness. We ought to apply that same value of fairness to our discussions of PERS reform. We believe in a progressive system of taxation because we understand paying 30 percent of one’s earned income in taxes is much easier for the wealthy than for the poor. The same is true of PERS, those receiving $25,000 per year in PERS benefits likely feel a reduction in benefits much more acutely than someone making over $250,000 per year. Governor Kitzhaber somewhat acknowledges the need for fairness in his plan to reduce the annual cost-of-living adjustment (COLA) for PERS recipients receiving more than $25,000 per year and capping COLA increases to $480 per year for all recipients. The average PERS recipient receives $34,000 per year in benefits. The lingering question is whether the Governor takes the value of fairness far enough.

Fairness should also inform the way a recipient’s PERS benefits are calculated. A good example of the need for fairness can be found in an article in last week’s Willamette Week highlighting how the widespread abuse of overtime allows Multnomah County Sheriff’s deputies to basically double their pay. The current PERS calculation allows the deputies to include bonuses and overtime in their base pay, which sets the rate of their PERS benefits. The system allowed a Multnomah County facility security officer who made around $45,000 per year to collect 109 percent in overtime, pushing his base pay to $95,243 for the year. His PERS will be increased dramatically because of the overtime factored into his base pay. Contrast this example with any teacher who works overtime to tutor a student, grade papers or any number of other tasks; teachers don’t get to collect overtime, no matter how many hours they may work. The point isn’t to make a value judgment of the worth of teachers vs. a security worker, but rather to point out the arbitrariness of jobs paid hourly vs. salaried and how that creates inequality under the current funding formula.

Another area of PERS reform that ought to be discussed with fairness in mind is that of overall compensation. Someone working as a cafeteria worker for 30 years is likely to receive about $24,000 a year in PERS benefits, while Mike Bellotti, the former Head Football Coach at the University of Oregon receives $41,341.67 per month, or nearly $500,000 per year. I understand that the job of Head Football Coach at one of the best football programs in the country is not only a very desirable job, but a very challenging one which few people are qualified to perform. However, is a $39,341.67 per month disparity between two full time state employees really fair? Though Bellotti’s PERS account is an extreme example, it does highlight the inequality built into PERS compensation between the few, the rich, the powerful, and the more normal, average, plentiful lower-level civil service worker. We ought to think about fairness when we think about PERS compensation. Maybe a cap on the benefits for the very highly compensated employees is needed.

PERS is a wonderful benefit the state pays workers who have given their professional lives for the greater good of the state; we ought to celebrate that. However, looking at how PERS is hurting school districts state wide, there’s a credible argument that can be made that some sort of change or reform is needed. What exactly such a change might entail is of course, up for debate. Fairness in public policy is important. As we think about reforming PERS, lets make sure we think about doing so in a way that’s fair, just and fits with the progressive values that make Oregon great, for as Plato once dramatically quipped, "…it’s better in fact to be guilty of manslaughter than of fraud about what is fair and just.”

By Nels Johnson Jan. 16, 2013