Lawyers representing Oregon public employees went to the state Supreme Court Tuesday to argue the Legislature went too far in reducing their pension benefits. What they did not find was a justice who seemed clearly sympathetic to their arguments.
Instead, Justice Thomas Balmer, the longest-serving member of the court, said the justices made it clear in a previous ruling that “detrimental” changes can be made to pension benefits as long as they only affect the compensation that employees receive for future work.
“We have never bought into the strong theory of pension rights,” which is that they can never be weakened during a worker’s entire tenure, Balmer said.
Aruna Masih, the Portland lawyer representing workers in the Oregon Public Employees Retirement System, argued that the Legislature promised workers they would give workers a certain benefit level when they revamped the system in 2003, and “that is a promise that needs to be honored.”
Chief Justice Martha Walters countered that the Legislature gave a starting date for those changes but that “doesn’t tell you when you are going to end doing that.”
As a result of the pandemic, only three of the justices were in the court's Salem chambers during the oral arguments while the other four justices participated by video — and those four asked few questions.
The oral arguments only offered a glimpse into how the justices might be thinking. And the tenor of their questions may not reflect how they come down in their written decision.
Oregon’s high court has frequently dealt with pension issues as PERS has periodically faced big financial shortfalls over the last two decades. At the end of last year, the system had a long-term debt of about $24 billion, and that shortfall is likely to rise because of the economic downturn.
To grapple with the debt, state and local governments and school districts have been forced to pay higher PERS rates for their workers over the past several years. Those PERS rates now average 25% of payroll.
In 2019, lawmakers passed a bill aimed at capping the rise in employer rates. The biggest change the Legislature made was to stretch out the repayment period for the pension debt. But under political pressure from major elements of the business community — which wanted PERS reforms in exchange for not fighting new taxes on business for schools — legislators also agreed to trim pension benefits.
The measure diverted some money out of individual retirement accounts and put it toward paying down the debt. Projections showed this would only cut overall benefits by about 1% to 2% for most workers. Another provision in the bill lowered to $195,000 per year the amount of salary that a pension could be based on. So higher-paid workers could see a bigger impact.
Public-employee unions fought hard against the bill, which passed the Democratic-led Legislature by narrow margins. And several unions refused to financially back Democratic lawmakers who voted for the measure before the May primary.
Masih argued that the Legislature unfairly took benefits from workers who aren’t responsible for the pension shortfalls, which are largely due to benefits being paid to already retired workers. Benjamin Gutman, the solicitor general for the state Department of Justice, countered that workers may expect to receive a certain benefit, but that doesn’t mean they have “earned or accrued that yet.”
The court has no deadline for deciding the case.