Oregon pension recommendation quite similar to CORE's Dave Parshall's suggested plan to STRS to protect the lowest pension recipients....except.....Oregon IS seriously listening!
From John Curry, December 7, 2010
From John Curry, December 7, 2010
"Limiting cost-of-living adjustments to the first $24,000 of a retiree's annual benefits."
"The Reset Cabinet also recommended that any COLAs be applied only to the first $2,000 per month that any retiree receives. That way, they figured, low-income state retirees would be protected while retirees with more generous benefits would receive some increases for inflation."
State Government PERS PERS study picks apart suggested pension cuts
Moves would lower pay for state workers by at least 6 percent
Statesman Journal, December 7, 2010
Cuts to Oregon state workers' pension plans that have been recommended by Gov. Ted Kulongoski's Reset Cabinet could result in more than $511 million in savings to the state during the 2011-13 biennium.
But they also would create sharp reductions in public employees' pay and retirees' benefits, according to an analysis produced by the Oregon Public Employees Retirement System.
The PERS report concludes that the steps set forth by the Reset Cabinet would:
-Lower state workers' annual wages or total compensation by 6 percent or more.
-Reduce annual benefits of the 15 percent of state retirees who have relocated out-of-state by about 6 percent.
-Cut annual cost-of-living adjustments for about 42 percent of all state retirees.
The two major state workers' unions already have come out against the Reset Cabinet's recommendations, arguing that the experts have mistakenly offered draconian solutions for a budget deficit created by a economic down cycle.
"We will want to sit down and work with the governor and the Legislature to figure out ways we can get from here to there," said Ed Hershey, a spokesman of Service Employees International Union Local 503. "Some of those ways will involve short-term or sunsetted sacrifices. We're not buying into the argument that this is a systemic problem."
Officials from the unions have said they do not expect incoming Gov. John Kitzhaber to follow the Reset Cabinet's lead.
However, the budget-cutting ideas offered by the panel are included in a number of possibilities that PERS staffers decided to analyze for the pension system's board.
PERS staffers wrote the report independent of the Reset Cabinet's work, spokesman David Crosley said. They performed the analysis to provide the PERS board with context regarding proposals that have been circulating throughout state government.
Board members received the analysis at November's regular meeting, but it since has been updated.
The Reset Cabinet recommendations for the pension system include:
-Elimination of the 6 percent pickup and the Individual Account Program.
State employees are required to contribute 6 percent of their pay to PERS. Agencies have been making this contribution on their workers' behalf since 1979, when this arrangement was agreed to in lieu of a pay raise.
The nature of the pickup changed in 2003 when the Legislature passed PERS reform measures. Agencies still pay the 6 percent pickup, but the money now is routed not into the PERS pension fund but into an Individual Account Program more akin to a private-sector 401(k).
The Reset Cabinet recommends eliminating both the 6 percent pickup and the Individual Account Program, arguing that the state "can no longer afford to maintain two retirement programs," according to its report.
If both the IAP and the legally required employee contribution are eliminated, then state employees' take-home pay will remain the same but their total compensation will decrease by 6 percent, the PERS report says.
But if only the IAP is killed off, state workers could face a double-whammy. They would lose 6 percent of their take-home pay, which would go to the PERS pension fund, as well as the additional 6 percent that had been going into the IAP.
-Halting income tax offset payments to PERS retirees who live out-of-state.
Oregon began taxing PERS pension benefits in the early 1990s, PERS Actuarial Services Manager Dale Orr said. But after a series of lawsuits, the Legislature passed statutes that boost state workers' pay to cover the amount due in taxes.
The Reset Cabinet suggested eliminating the tax remedy payments for any PERS employees who have established residence in another state. The move would save $5.9 million for state general-fund agencies and $17.9 million in the state's support for schools and community colleges in 2011-13, according to the Reset report.
However, as many as 15,000 retirees who now live outside of Oregon would find their pension benefits reduced by about 6 percent on average, PERS estimates.
-Requiring a minimum 10 years of service to be eligible for annual cost-of-living adjustments to pension benefits.
Retirees currently need to have served at least five years with the state and become vested in the PERS pension plan to be eligible for annual COLAs for their retirement benefits.
The Reset Cabinet suggested the minimum service required for COLA eligibility to 10 years, arguing that such a move would save the state about $7.4 million in 2011-13 for state general-fund agencies and $22.4 million in the state's support for schools and community colleges.
It also would mean that the purchasing power of a small number of retirees would decrease over time, as inflation eats into their fixed pension benefit. About 7 percent of PERS members who retired in 2009 had less than 10 years of service, the agency's report said.
-Limiting cost-of-living adjustments to the first $24,000 of a retiree's annual benefits.
The Reset Cabinet also recommended that any COLAs be applied only to the first $2,000 per month that any retiree receives. That way, they figured, low-income state retirees would be protected while retirees with more generous benefits would receive some increases for inflation.
This change would produce big savings in 2011-13: $47.3 million for state general-fund agencies and $143.5 million in the state's support for schools and community colleges.
But it also would cost a large number of public retirees. PERS estimates in its report that 58 percent of its members receive annual benefits of $24,000 or less.
The other 42 percent of retirees would receive lower COLAs, allowing their purchasing power to falter in the face of inflation.
Crosley was careful to note that the PERS report should not be considered an endorsement of any particular budget-cutting notion.
"We want to provide a framework so people can understand what that discussion is," Crosley said. "These are things we've heard about. The report is not anything we're advocating or saying this should or should not happen."
dmthomps@StatesmanJournal.com or (503) 399-6719
posted by Kathie Bracy at 11:43 PM
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