A contentious bill to blunt the impact of Oregon’s rising pension costs appeared to have failed in a dramatic House vote Thursday afternoon.
Then Speaker Tina Kotek got involved.
In a standoff that was tense even by the standards of the Capitol, Kotek called the House into recess following an unexpected vote that saw nine members of her own party join Republicans to vote against Senate Bill 1049.
That 31-29 outcome would have sunk Democrats’ best hopes of effecting some change on the state’s unwieldy public pension debt this session. It would also have created a troublesome dynamic around a $1 billion per-year tax for schools that leadership has already muscled through.
But it didn’t come to pass.
Rather than gaveling the bill down as failed, Kotek spent half hour working other Democrats in her office. On the floor, state senators speculated with House members about whose vote might change, as public employees and other spectators looked on from the gallery.
Eventually, the speaker re-emerged and two lawmakers, Rep. Andrea Salinas, D-Lake Oswego, and Rep. Mitch Greenlick, D-Portland, signaled they’d change their votes. The bill passed 31-29, and the chamber went into recess.
Salinas, her face streaked with tears, declined afterward to comment on why she changed her vote, but confirmed she’d been meeting with Kotek about it. One lawmaker gave Salinas a hug. Another thanked her.
Gov. Kate Brown is expected to sign the bill. She offered up a different approach to tackling the PERS problem earlier this session — her plan focused on driving down PERS costs for schools — but legislators didn’t embrace it. In a statement released by the governor’s office, Brown praised the final bill for reducing costs to employers through the “shared responsibility” of public employees, taxpayers and others.
Reflecting the bruising battle over the pension reductions, the statement said: “Going forward, Governor Brown will not look to public employees for further contributions.”
Thursday’s drama highlighted the fraught nature of SB 1049, which some lawmakers have called the toughest bill they’ve ever had to vote on.
The proposal is aimed at reducing the effects of ballooning debt from the state’s pension fund, known as the Public Employees Retirement System, or PERS. As it stands, the system’s $27 billion unfunded liability has resulted in ever-increasing costs for public employers, who need that money to provide basic services.
Senate Bill 1049 will theoretically ease some of that pain — both by putting more money into the system and stretching out the timeline for paying off the state’s pension debt. The latter provision accounts for nearly three-quarters of the savings anticipated under the bill, a point that has led some to criticize it as “kicking the can down the road.”
All told, the measure is expected to save schools and other public agencies up to $900 million a year in PERS rates through the mid-2030s. Those projections could go awry if future investment earnings take a big hit in a recession or for other reasons. Business groups and many Republicans have sought to make much more dramatic changes to pensions, including requiring new workers to shift to a 401k-type savings plan.
The most controversial part of the bill — and the reason for Thursday’s chaotic vote — is a provision that requires state employees to divert some money that would otherwise go into a personal retirement account, and put it toward PERS debt. Public sector unions have relentlessly railed on that idea, saying it amounts to lawmakers breaking a promise on employee benefits.
Projections suggest most workers only see a 1% or 2% reduction in their overall retirement benefits, but union advocates have fretted that legislators could seek further cuts in future sessions if this bill becomes law.
“Public sector workers across Oregon deserved better and the state should expect a lengthy legal battle in defense of our members,” said Stacy Chamberlain, executive director of the Oregon chapter of the American Federation of State, County and Municipal Employees, in a statement.
“We have worked together with the state in good faith towards the shared goal of a better Oregon for all,” said Melissa Unger, executive director of the state’s largest public employee union, SEIU Local 503. “Today’s vote to cut worker’s retirement again does not represent us working to shared goals and it is a step backwards for our state. The fight is far from over.”
Several other labor leaders also denounced the bill.
As in a Senate vote a week before, lawmakers Thursday expressed serious reservations including public employees in the deal.
“We made a promise to those employees,” said Rep. Gary Leif, R-Roseburg. “That promise was important. It would be like buying a house and 20 years later all of a sudden the bank taking it back … that’s not fair.”
Rep. Paul Holvey, D-Eugene, the only lawmaker to speak in favor of the bill during a brief debate, acknowledged it was a tough call. He said he “couldn’t stomach” other proposals for addressing PERS, but that SB 1049 offered a balanced approach.
“It’s a difficult choice to make, but if we’re really serious about funding education, funding public services and controlling the costs, we have to do something like this,” Holvey said.
Changes to the PERS system are always a topic of debate among lawmakers, but they took on a more urgent tone this year. That’s largely because of a gross receipts tax on businesses lawmakers passed earlier this month, hoping to inject $1 billion a year in to the state’s K-12 schools. (A business group filed paperwork Thursday to attempt to refer that tax, known as the Student Success Act, to voters.)
The tax has been criticized as possibly ineffective, since without pension changes much of it could be eaten up by rising PERS costs. One lawmaker, Sen. Betsy Johnson, D-Scappoose, hinged her vote in favor of the tax on a promise Democrats would also tackle pensions.
Now they appear to have done so, and may suffer politically for it.
Once the House chamber had cleared out after Thursday’s vote, House Minority Leader Carl Wilson returned to his desk briefly. Asked what he made of it, Wilson said: “Don’t bet against Tina Kotek.”