SALEM, Ore. (AP) — Oregon Gov. Kate Brown unveiled a plan on Friday to pay down rising debt from the state’s public pension costs, which have ballooned past $26 billion.
The proposal expects to bring in $3.3 billion over the next 16 years and is meant to insulate Oregon schools from the brunt of rising rate hikes affecting the state’s public employees.
Whether lawmakers will approve the plan is another question, as many of the core tenets of the governor’s proposal are politically unpalatable. Among other things, the governor calls for teachers to pay more into their pension fund and proposes siphoning money from a popular income tax rebate program unique to Oregon.
“I know this is very difficult. There’s something for everyone to both love and hate in this plan that I’ve introduced,” she testified in front of legislators. “But make no mistake: By stabilizing PERS rates for schools, we also stabilize jobs for teachers and educators.”
The state’s Public Employee Retirement System, or PERS, has been paying out more in benefits than it has taken in in contributions, causing debt to skyrocket past $26 billion. That has caused rate hikes, forcing public agencies to pay more into the system each year.
The state’s unfunded liabilities are only set to get worse, especially as Baby Boomers continue to age out of the workforce. Around 30% of employees in the system are eligible for retirement, according to state estimates.
Brown wants to manage rising costs by shifting some of the pension responsibilities to educators. She’s asking for teachers to contribute between 1.5% and 3% of their pay to the state’s pension fund, depending on when they were hired. The first $20,000 in salary would be exempted. Teachers hired before 2004 –when the pension plan had more generous benefits — would pay the higher rates.
The Oregon Education Association, the largest teachers union in the state, slammed the idea, saying it diminishes teacher salary at a time when educators across the country are going on strike over low pay. Oregon teachers are planning a walkout in May to bring attention to what they say is the state’s disinvestment in the education system.
“This proposal takes Oregon backwards and will harm students and schools by making it more difficult to recruit and retain qualified educators and increasing teacher shortages,” said Jenny Smith, communications consultant for the Oregon Education Association.
But the executive director of the Oregon School Boards Association, Jim Green, seemed more encouraged. He said Brown offered a solution to mitigate rising costs without taking money from classrooms.
“She has at least put a plan forward that we can begin discussing this legislative session as opposed to no plans being put forward and everybody pointing fingers while students are left to suffer the costs,” Green said.
Brown’s plan also calls for $800 million in one-time payments, either through a temporary surcharge on all state fees or by taking money from existing revenue funds, including from the state’s workers’ compensation company and from lottery and general funds.
Another option could dip into the state’s so-called “2% kicker” rebate program, which returns excess funds to taxpayers when Oregon has at least 2% more in revenue than what state economists forecast. This year’s kicker, which comes in the form of a tax credit, was expected to be the highest in state history at $748 million, with an average payout of $367 per taxpayer. That number already went down to $640 million after Brown signed a bill to take $108 million from the kicker fund.
She’s now thinking of giving taxpayers the first $100 of their rebate, sending the rest to the pension fund. That would require a two-thirds vote from the legislature, likely a heavy lift.
“We are all in this together: taxpayers, elected officials, school board members, and public employees,” Brown testified. “If we don’t make the difficult decisions now, things are only going to get worse. I am not willing to kick the can down the road to a future legislature or governor.”
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