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Workers, retirees slam proposed pension cuts

Mar 27, 2013 | 6 Comments


By JONATHAN J. COOPER
Of the Associated Press

SALEM — Retired and active government employees slammed a proposal to cut their pension benefits, telling Oregon lawmakers Wednesday that the plan pushed by Democratic leaders would be unfair, irresponsible and illegal.

Instead of cutting their pension benefits, workers and retirees urged lawmakers to raise taxes on the rich and sue the big banks they blame for 2008 investment losses that wiped out 27 percent of the pension fund. They also want the state to do a better job going after people who cheat on their taxes.

“When I started at the state, I believed we had a deal,” Lisa Dixon, an office worker at the Department of Consumer and Business Services, told lawmakers. “I'll show up for 40 hours, maybe more, do a good job...I expected the state in return to honor their end of the deal as well.”

Retirees said they made retirement decisions based on a promise that they'd receive a pension with a 2 percent inflation increase each year.

Democratic leaders have proposed limiting the inflation adjustment in order to boost spending on schools. State and local governments would save about $400 million over the next two years. They also propose eliminating, for retirees living out of state, surplus pension payments that cover state income tax bills, saving another $55 million.

The Senate Rules Committee could vote as soon as Thursday morning to advance the proposal to the Budget Committee.

Criticism of the Democratic proposal came from all sides. School advocates and legislative Republicans said it didn't go far enough to reduce pension costs for government agencies. Republican leaders and Democratic Gov. John Kitzhaber have their own proposals that would cut deeper into pension benefits.

Public employees told lawmakers the budget shouldn't be balanced on their backs.

“This stands to be a broken promise to the public employees here,” said Jay Thatcher, a teacher in Corvallis. “What will you do to find good quality public employees in the future?”

Most retirees get a 2 percent inflation increase each year that applies to all or part of their pension check, depending on when they were hired and when they retired.

The Democratic plan would decrease the size of that inflation adjustment on a graduated scale, leaning hardest on higher-earning retirees.

It's hard work digging ditches for the City of Portland, said Rob Martineau, a Portland Water Bureau worker and union leader, but he accepted the challenge with the promise of a secure retirement after 30 years of hard work.

“It never crossed my mind that this agreement was only good until the Legislature decides they could no longer afford it or the governor decides it's easier to cut my benefits than raise taxes or even reduce tax breaks on those earning many times what I do,” Martineau said.

Democrats have proposed raising at least $275 million in new revenue by capping or eliminating tax breaks for the wealthy, but they'll need support from at least three-fifths of the House and Senate. They say the pension cuts would also be needed for schools to avoid even more cuts after years of teacher layoffs and shortened school years.

Some of the workers and retirees who spoke to lawmakers were angry that the issue is presented as a choice between public workers and schoolchildren.

“Why do we need to put the old against the young?” said Tina Turner-Morfitt, a prison worker.

The 2 percent increase has helped retirees’ income keep pace with inflation, although consumer prices have risen even faster. For people who retired in the last 27 years, the average purchasing power of their pension is 94.5 percent of what it was when they retired, according to a 2012 study by Milliman, the pension system's actuary.

Oregon's pension fund lost $17 billion in 2008, 27 percent of its total value, creating a big gap between liabilities and anticipated revenue. As a result, the board overseeing the pension system plans to steadily increase pension contributions required from government agencies to an average of 25 percent of payroll. The cuts in the Democratic bill would decrease the target to 22.5 percent of payroll.

___

The bill is SB 822.

Contact or follow Associated Press writer Jonathan J. Cooper at http://twitter.com/jjcooper .

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Comments

07:52 am - Fri, March 29 2013
Don Dix said:
Considering these (union) responses, what have we learned here?

First, those who have retired under PERS with unfair and bloated monthly payments want even more. There are many labels that define such actions.

Second, if the investments lost 27% in 2008, tough titty! Just like everyone else, your retirement should have taken a hit. Contract or not, those investment losses were the result of YOUR reps, not the actions of the state or it's citizens.

Third, it's clear the state budget problems are a direct result of PERS costs. Teaching positions have been eliminated in order to raise benefits and salaries of those who remain (and then they can complain about class sizes).

It's the same in other public employee divisions. The top of the ladder has been slowly eliminating the bottom (to keep raising compensation for themselves). What happens when the bottom (support) disappears? Some who have been 'in charge' may be forced to earn their pay by actually working instead of delegating.

Under these conditions, Oregon will run out of money to pay these people, whether they are retired or not. Then Oregon will have either the smallest state workforce, or just a bunch of retirees who expect everyone else to make sure they are comfortable and content. Please don't count on me for that!

But that's just my observation -- I'm sure there are more.

10:15 am - Fri, April 5 2013
Charlie said:
If I work for 25 years and retire I'll get about 50% of my pay. I pay for a portion of my retirement every month. How can you call this "unfair and bloated"??? there's 2 sides to every story.
01:06 pm - Fri, April 5 2013
sbagwell said:
We're well aware of that. See our Friday editorial, "Open letter to the governor."
Steve Bagwell, Managing Editor
09:47 am - Sun, April 7 2013
Don Dix said:
Well Charlie, when an employee is allowed to to raise his retirement benefit by 'spiking' his final salary, that is 'unfair'. If the final salary number used to determine retirement is 'bloated' by spiking, it is not reflective of the actual salary. Where would one find that option in the private sector?

The money match formula unrealistically 'guarantees' 8% returns. When the stock market dives, IRAs take the hit, but not money match. So when the PERS investments lost big in 2008, the guarantee kicked in, as if nothing happened. Except the employers (city, county, state: read taxpayers)) were required to make up the difference. Please, call that 'fair'!

Yearly retirement COLAs? Why is this even an issue? Live within your means, like others.

When former legislator Margaret Carter left the state house after 25(?) years, her congressional salary was somewhere near $30,000. A new position at DHS was created for her, at $120,000/yr. After 3 years at DHS, her retirement will be around $100K. Her credentials? -- who she knows and who owes her. Not only is the creation of the position 'unfair', but her retirement figure is 5 times what is deserved. And this is standard operating procedure within the government. 'Bloated', wouldn't you say?

At some point, the PERS system will run Oregon out of money. And whether it's a contract or a promise, the payments will cease.

Under those circumstances, how will the PERS beneficiaries fund their retirement -- steal from one another?
08:30 am - Mon, April 8 2013
Don Dix said:
Another point -- working 25 years is not a whole career in the private sector, and unless one is in law enforcement or a fire fighter, neither is the public sector.

Let's say post college age (22) is the normal time to begin a work career. Add 25 years to that and one can retire at 47? In the private sector, a career is closer to 40 years.

So a public employee can work 15 years less on the average than his counterpart in the private sector and retire younger with as good or better benefits. Add to that the fact that most of the money in PERS accounts are funded by the taxpayers, not the employee.

In this case, it seems both sides of the story come to the same conclusion -- PERS is bloated and obviously unfair to anyone that is not vested in the system.
06:38 pm - Tue, April 9 2013
troy prouty said:
Well the government has done such an outstanding job protecting pensions of people and making companies pay into them like they are suppose to....

sorry charlie... but the real world is that you don't always get want you want.

troy*
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