Oregon Pension Reform Already in Place, We Just Need to Use It
Everyone knows that PERS, Oregon's government-employee pension program, is in serious financial trouble. Word has filtered in from across the state in recent weeks of coming significant layoffs, tuition and fee increases, and potentially huge tax increases to pay for constitutionally inalterable pension benefits. There is, we are told, no other way.
This is wrong.
For decades, the Oregon Supreme Court has barred pension reform. Its interference began in 1996, when it blocked the implementation of three provisions that voters had added to the state constitution. These amendments, which appeared in 1994 as Ballot Measure 8, remain in the Oregon Constitution as Sections 10 through 12 of Article IX.
Ballot Measure 8 would have ended guaranteed-minimum pension increases and the use of accumulated sick days to pad pension benefits, while requiring public employees to contribute six percent of their salaries to help fund their benefits. It's a fair bargain that would have reduced costs for their government employers -- and taxpayers.
But the provisions never took effect. In a 1996 case known as OSPOA v. State, the court suppressed them. It reasoned that the Contract Clause of the U.S. Constitution forbade the people of Oregon from reducing any pension obligations to present government employees, even for work that had not yet been done -- and in some cases wouldn't be performed for decades -- and so for benefits not yet earned.
OSPOA completely misinterpreted very old and clear Contract Clause jurisprudence, as a dissenting judge then recognized. But it remained basically unchallenged for two decades, fueling the massive pension-funding crisis that the state suffers today.
In 2015, in a case called Moro v. State, the Oregon Supreme Court explicitly recognized the errors of its reasoning in OSPOA, and renounced its old conclusion. It failed, though, to grapple with the consequences of the initial error, leaving Measure 8 in the same position.
Improperly suppressing the will of Oregon voters for more than a generation has permitted huge, unconstitutional pension overpayments and credits that have drained state, municipality and school boards coffers of billions of dollars in much needed funds. These funds would have prevented the painful cuts we're experiencing today.
This is a travesty, and much of it cannot be undone. No court would permit, and no legislature would undertake, to cut off pensions to retirees or to long-serving workers. We owe workers the money they have constitutionally been promised -- but we can't apply overly generous promises to every worker in perpetuity.
As soon as the court is presented with the issue, it must recognize that the logic of Moro extends to Measure 8's provisions and restore them as a valid part of the Oregon Constitution. From a legal standpoint, the legislature should then be able to recoup these overpayments -- a tricky proposition in practice, but one that should provide the necessary flexibility for further improvements to the pension system.
By following our constitution, without impoverishing any workers and retirees, Oregon can defuse much of its present pension nightmare.