Grappling with Oregon’s $22 billion public pension debt has always involved difficult tradeoffs — such as cutting pensions or pouring more tax money into shoring up the system.
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But a former union leader and an eastern Oregon school official are working on an idea they say could actually be a win-win for both workers and taxpayers. It’s far from a cure-all. But officials have long said there’s no single solution to the financial problems of the Public Employees Retirement System, often known as PERS.
“This is a concept that we’re kind of excited about,” said Mark Mulvihill, superintendent of the InterMountain Education Service District in Pendleton, “and it’s gaining a little bit of momentum because of its pragmatism.”
Mulvihill and Tim Nesbitt – the former Oregon AFL-CIO president who is now a consultant for the Oregon Business Council – presented their proposal at the Oregon Leadership Summit on Monday.
The two told attendees at the annual business gathering that they first began sketching out their idea a year ago on the back of a napkin while at Starbucks.
Unlike most other PERS reform proposals, this idea is voluntary for both employers and workers.
They say that under their plan, workers eligible for retirement could start collecting their pension while continuing to work for up to five years.
During this period, 6 percent of the worker’s salary would go toward paying down the pension debt. And the employers PERS payment would also go to debt reduction.
Workers would be trading away a higher pension in future years in exchange for getting a bigger surge of cash as they collect both retirement and work pay. But they could potentially come out ahead if they invest much of that extra income – or use it for something compelling, like putting a child through college.
Given the high PERS rates – they now average 21 percent of salary and are set to top 25 percent next year – Nesbitt said the savings could be substantial.
If an employee who earned $90,000 annually entered such a program, it could produce $20,000 a year in debt-reduction payments, he calculates. If 10 percent of eligible workers participated, that could amount to $20 million a year system-wide.
Mulvihill said employers could also find this approach attractive because they might be able to retain experienced workers for additional years. That’s a big deal because he said it’s getting harder to attract qualified teachers and other education professionals to replace everyone reaching retirement age.
Nesbitt called it the “working retirement/payback” plan, and he said he expects it to be included in a package of PERS proposals the business council will present to the Oregon Legislature.
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But the plan might not be so simple. The two acknowledged that IRS regulations governing retirement plans might get in the way. PERS officials have also raised a number of other potential obstacles.
And the public employee unions – who have fought any attempt to cut pensions – could be a hard sell.
Bob Livingston, president emeritus of the Oregon State Fire Fighters Council, has long worked on the issue, including serving on a gubernatorial task force on PERS.
Livingston said he hasn’t studied the proposal but is initially skeptical that it can really be a win for both sides.
“This is a very complex system,” he said. “We have to be very careful with these proposals. They may sound good but can be very deleterious.”
The proposal could also easily get lost in the infighting over the business council’s other proposals to revamp PERS. Those take clear aim at reducing the pension benefits of new and existing public employees and would have a much larger financial impact.