Oregon’s public employee unions filed a lawsuit Friday seeking to overturn the new law that requires state and local government workers to help pay some of the costs of reducing the multi-billion-dollar public pension debt.
The lawsuit argues that the law — passed by the state Legislature and signed by Gov. Kate Brown in June – unconstitutionally reduces the retirement pay of public employees.
“The plaintiffs and all PERS members accepted a job in good faith for a salary and benefits package, did the work they promised to do, and planned their futures based on the package they agreed to accept,” said Aruna Masih, the lead attorney for the nine public employees serving as plaintiffs in the case. “Their service for public employers creates certain contract rights to retirement benefits.”
There was no immediate comment from the governor’s office. But Brown and legislative leaders have said for months that they are acting on sound legal footing. They’ve referred to a 2015 decision by the Oregon Supreme Court that opens the door toward pension reductions for work performed in the future.
Union officials repeatedly made it clear during the last legislative session that they intended to take the issue to court if lawmakers passed Senate Bill 1049. That measure allows the state to divert some of the wages now flowing to the individual retirement accounts of workers.
Workers hired before 2004 – who have the highest pension benefits — face having 2.5% of their salary diverted towards debt reduction. Newer workers are looking at having 0.75% of their salary shifted toward the pension debt.
Overall, those changes would have a relatively small impact on their overall retirement earnings from the state, with projections showing most would only lose 15% to 2% of their benefits.
It does not affect the size of the regular monthly pension check they are slated to receive from the Oregon Public Employees Retirement System. Instead, it reduces the amount of money they will someday receive quarterly from their individual account program.
SB 1049 also includes a number of other provisions aimed at tackling the state’s $27 billion debt. The measure is chiefly aimed at stretching out the period of time the state has to pay down the pension debt. That reduces the hike in the rates that state and local governments — particularly school districts — have to pay in retirement costs. But it raises the financial risks for ensuring that the state is able to get out from under the debt.
Under the terms of SB 1049, the lawsuit now goes directly to the state Supreme Court. The court has twice previously struck down legislation that it said violated the contract rights of public employees.