Bill That Would Increase Pension Deficit Moves Forward Despite Unknown Costs

As the 2024 legislative session reaches its halfway point, a bill that would increase pension benefits for public employees who do some of Oregon’s most physically and mentally challenging tasks is moving quickly. State Rep. Dacia Grayber (D-Portland), a firefighter, has convinced her colleagues that the traumatic and dangerous work police and firefighters do merits earlier retirement. And along with that concept in House Bill 4045 come increased pensions for other public employees who are neither firefighters nor police.

What a difference a few years makes.

In 2019, then-House Speaker Tina Kotek (D-Portland) held open a floor vote on controversial pension cuts in order to coerce two additional “yes” votes from state Rep. Mitch Greenlick (D-Portland) and now U.S. Rep. Andrea Salinas (D-Ore.). It was legislative arm-twisting at the highest level, and it worked. The pension cuts infuriated public employee union members who saw their benefits diminished, but Kotek made the tradeoff in order to gain passage of a new, $1 billion-a-year business tax, the Student Success Act.

On Feb. 21, however, Kotek’s successor, House Speaker Dan Rayfield (D-Corvallis), sat among various union leaders as the general government subcommittee of the Joint Ways and Means Committee advanced HB 4045 on a party-line vote.

HB 4045 surrenders some of the cuts legislators made in 2019, increasing pension costs even as the Public Employees Retirement System remains deeply underwater. Before any changes are made this session, the Legislative Fiscal Office says, the system has only 78 cents for every dollar it owes retirees, which translates to an unfunded liability of $22.8 billion. The purpose of making cuts in 2019 was to put PERS on a long-term path to being fully funded.

But advocates have persuaded lawmakers to add to the deficit by lowering the retirement age for people categorized as police and fire members of PERS (a category that includes many other jobs besides chasing crooks and responding to traumatic medical calls, including Oregon Liquor and Cannabis Commission and Oregon Lottery officers, university and airport police, and even Oregon Department of Agriculture livestock police).

HB 4045 would lower the normal retirement age for PERS members classified as police or firefighters who have 25 years of service from age 60 to 55. The change, according to actuaries, would add $110 million to PERS’s unfunded liability.

The other significant change lawmakers considered yesterday: creating a new “hazardous position” classification for 911 operators and workers at Oregon State Hospital. Hazardous position employees would get the same augmented pension benefits as police and firefighters, who get pensions that are 20% higher than standard retirees’.

What will the new hazardous position designation cost? Nobody knows.

“The consulting actuary is currently unable to accurately estimate the unfunded accrued liability impact of the new hazardous benefit plan,” the Legislative Fiscal Office analysis says. That’s because it’s unclear how many employees would get the new designation and what their demographics would be.

One fact lawmakers do know: The hazardous position designation would be retroactive to 2019, a testament to the lobbying might of the two unions that represent state hospital workers: the American Federation of State, County and Municipal Employees and Service Employees International Union.

Another fact: The estimated cost increasing staffing and systems to accommodate the new benefits would itself be an expensive proposition, with a price tag of $22 million. The PERS back office is overwhelmed with previous changes, the agency told lawmakers—it still hasn’t finished implementing the pension cuts embedded in Senate Bill 1049, the fractious 2019 bill that cut benefits. That project won’t be completed until June 2025.

The proposed benefits come at a time when Democrats are on the defensive, both over public concern about law and order, a subject that generally favors Republicans, and on a more granular level, over Oregon State Hospital, where a waitlist and a more dangerous patient population have led to unending bad publicity. In that context, granting first responders and OSH employees bigger pensions is an easy call, especially when a significant portion of the price tag is unknown.

At the Feb. 21 hearing, it fell to a law-and-order Republican, state Sen. Daniel Bonham of The Dalles, to raise concerns. Noting that lawmakers had expanded PERS benefits in 2023 for deputy district attorneys by awarding them the same retirement bonus that police and fire get (the 20% premium), Bonham expressed strong support for public employees who do difficult work but questioned where to draw the line for workers who would get the 20% premium accorded to police and firefighters.

“My struggle is that every year we are asked to make some exception and add more people to police and fire,” Bonham said. “If everybody is special, then nobody is special.”

HB 4045 now moves to the full Ways and Means Committee.