Knute’s Proposed Reforms to the Public Employee Retirement System (PERS)
The reform of Oregon’s public employees retirement system (PERS) is one of the most pressing financial issues facing the state. It impacts every level of government. The costs have been increasing yearly. The increased costs lead to fewer teachers in our classrooms, fewer police in our neighborhoods, and reduce services across all sectors of government.
As Secretary of State, Knute Buehler will use his position to introduce and advocate for needed reforms of the PERS system.
1. Eliminate tax refund for out of state residents
There are an estimated 14,000 to 16,000 PERS retirees living in other states who are not subject to Oregon income taxes. They receive an additional benefit from the state of Oregon equal to the amount of their Oregon tax liability. We should eliminate the additional benefit for out of state retirees. The benefit to Oregonians from the $72 million per biennium savings is equivalent to 450 more teachers in our classrooms each year.
2. Eliminate the practice of ‘double dipping’
We must also limit the practice of “double dipping” whereby an employee retires, collects PERS, and then returns to work on contract. A retired employee should be limited to a 2 year maximum contract in their previous job. While a former employee likely has expertise that is hard to replace in the short term, 2 years provides for sufficient time to find and train a replacement.
3. Cap the Cost of Living Adjustments (COLA) to first $24,000 of benefits
Currently, all COLAs are directly tied to the increase in the consumer price index (CPI) and capped at 2 percent for some recipients. Others are allowed to bank the ‘in excess’ amount for years when CPI is not above 2 percent. This allows them to almost always get a 2 percent COLA even across years with a low CPI. Knute supports the proposal from Rep. Jason Conger to cap the COLA adjustment to the first $24,000.00, which is the average PERS benefit. This would save an estimated $576 million per biennium, the equivalent of 3,600 teachers.
4. Reduce the Guaranteed Rate of Return to 6 percent
The Guaranteed Rate of Return (GRR) is currently set at 8 percent for Tier 1 PERS employees, while actual return has only been 4.43 percent over the last 5 years. We need to decouple the GRR from the Assumed Earnings Rate (AER). Decoupling, before decreasing the GRR, allows the GRR to be lowered without triggering a short-term increase in the amount local governments would need to pay due to a decreased AER.
5. Redirect Tier 1 and 2 employee contributions away from the IAP and into the PERS fund
Redirecting the mandatory 6 percent pickup for Tier 1 and 2 employees from the Individual Account Program back into the PERS general fund would reduce the Unfunded Actuarial Liability of the PERS program. This will help return the program to being fully funded and lower the burden of PERS liabilities passed on to future generations.
6. Remove the conflict of interest for state elected officials
The fox can’t guard the hen house. Legislators who are not also employed by a PERS contributing employer should not be allowed in the system. This allows police officers, fire fighters, and teachers elected to the Legislature to continue working and participating in PERS while also ensuring that, to the greatest extent possible, those who are making policy decisions about the program do not have a vested interest in the outcome of those decisions. All conflicts of interest need to be placed on the official legislative record prior to votes on PERS reforms.
In addition, all future legal cases related to PERS should be handled by judges without a conflict of interest.
Finally, as a statewide elected official, Knute pledges to not become a member of the PERS program.