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Task force mulls options to reduce PERS liability

Gov. Kate Brown has charged the task force to reduce the unfunded liability, by $5 billion.

By Claire Withycombe

Published on September 8, 2017 8:35PM

Capital Bureau

PORTLAND — A seven-member task force Friday discussed different ways to leverage state assets to help pay down the $24.2 billion unfunded actuarial liability in the Public Employees Retirement System.

Gov. Kate Brown has charged the task force to reduce the unfunded liability, the amount by which the state’s obligations exceed its ability to pay the retirement benefits owed to public employees, by $5 billion.

One idea: “sweep” ending balances — money is left over at state agencies at the end of a budget biennium — to pay off part of the unfunded liability.

The Legislature’s budget writers already regularly use this technique to help balance the state’s budget, but the idea is that unspent money could be used to chip away at the unfunded liability instead, if it is legally permissible.

Budget “sweeps” for the 2017-19 budget biennium are expected to be about $111 million.

The task force also discussed enhancing collections of debts owed to cities and counties and dedicating the proceeds to pay down the unfunded liability. The net liability reduction per budget biennium could be anywhere from $5 million to $95 million, according to initial estimates by a task force member.

While the task force is starting to zero in on possible options for the governor to consider, the members emphasize that they are casting a wide net and are looking for creative ideas to tackle a thorny issue that not only represents a financial challenge, but a political one.

Much of the $24.2 billion liability represents benefits already earned by public employees. The Oregon Supreme Court has determined that benefits already earned cannot be reduced retroactively. To save money in the future, the Legislature can only modify benefits going forward.

At the meeting’s beginning, the governor’s chief of staff, Nik Blosser, reiterated the governor’s charge for the task force, which is, Blosser said, one component of the governor’s three-pronged approach to PERS.

Blosser rejected the idea that the state was conducting a “fire sale” to tackle the state’s PERS debt, although it is evaluating how best to make use of existing or unused assets.

Other ideas discussed range from selling unclaimed property and office buildings in Portland, to raising excise taxes on beer and wine.

The other two prongs of the governor’s approach, Blosser said, are potential cost- and risk-sharing by public employees, and policy decisions designed to increase the state’s return on its investments, which pay for the bulk of public employee benefits.

During this past legislative session, the state treasury added investment staff in an effort to maximize returns.

While the governor “didn’t engage significantly” in the cost- and risk-sharing discussions during the legislative session this winter, her workforce and labor policy adviser, Elana Pirtle-Guiney, said at Friday’s meeting, Brown monitored those discussions “carefully.”

PERS is a defined-benefits plan, paying retirees a guaranteed sum.

Although investment earnings on the Oregon Public Employees Retirement Fund are able to pay for most employee benefits, the state and other public entities must make up the rest in order to meet that fixed dollar amount.

It is likely that most, if not all, of what the task force recommends must make it past another hurdle: the Legislature.

The next meeting of the task force is scheduled for Oct. 13.


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