Democrats Ready to Deal

We owe a great debt of gratitude to Oregon's public employees and retirees, from the prison guard keeping peace in a noisy cell block to the weary teacher who spent 30 years grading papers, counseling students and earning a secure retirement.Unfortunately, we also owe them $16 billion more than we have in their retirement fund. Making up that shortfall has become a grave burden that threatens our ability to provide vital public services.

Oregon's Public Employees Retirement System evolved over decades through legislative deals, court battles, and contract agreements that seemed like bargains for public employers when they were struck. Some of its terms have had powerful unintended consequences; notably, the state's guarantee of an 8 percent annual return on investment turned into a money vacuum when the stock market tanked in 2008.

To meet its obligations to the system, public employers have to make ever-greater sacrifices. School districts have to cut school days and teaching staffs; police departments have reduced patrols; libraries have cut hours. Reforming the system is damnably hard, in part because benefits are protected by statutes as well as contracts. Republicans, long the chief proponents of narrowing PERS obligations, have been stymied by Democrats, who not only champion public employees but rely on their unions for campaign contributions. Democrats—who will dominate both chambers of the Legislature come February—can no longer get away with protestations of helplessness. This year their leader, Gov. John Kitzhaber, has made PERS reform one of his chief legislative goals. He has stated that unless the PERS obligation on our resources is significantly reduced in the coming years, we will be unable to build a vigorous state economy or thoroughly prepare our children for a challenging economic future.

In his 2013-15 budget proposal, released last week, Kitzhaber sketches a plan to reduce PERS spending by $865 million by making two changes in the system: limit cost-of-living increases to the first $24,000 of retirees' benefits and stop reimbursing out-of-state PERS beneficiaries for Oregon income tax payments that they don't actually make. Because the first change protects the most economically vulnerable retirees and the second harms only those who no longer vote here, the proposals have a fair chance of success if Kitzhaber can marshal a determined coalition in Salem.

Even such modest changes will be fought hard by employee unions, and if enacted they're sure to be challenged in court, but it is important that the effort prevail. It is possible to give public employees and pensioners a square deal without treating every hard-won provision of their package as sacrosanct. At the same time it's crucial that Democrats deal with the issue on their terms while they have the legislative authority. So while Gov. Kitzhaber will need sturdy boots when he leads the charge up this hill, today we're giving him a glass slipper.