By Jeff Mapes | OPB

A controversial bill to reduce the skyrocketing costs of Oregon’s public pension system narrowly passed the state Senate Thursday as lawmakers debated the fairness of trimming retirement benefits for public employees.

The measure passed on with 16 yes votes – the minimum needed for passage — and 12 senators opposed. The coalition in favor was unusually bipartisan as many Democrats refused to part ways with the public employee unions.

Senate Bill 1049 now heads to the House where a floor vote is expected early next week on an issue that many legislators called the toughest vote of the session.

“My heart is broken today because my back is against the wall,” said Sen. James Manning, D-Eugene. “I have two worlds that are colliding today.”

Manning said it was unfair to take benefits from state, local and school employees. But he also said the $27 billion debt owed by the Public Employees Retirement System posed a major threat to the state’s education system. In the end, he voted for the bill.

The measure would divert some worker retirement contributions from their own accounts and toward paying down the PERS debt. Projections show that most would only see a 1% or 2% reduction in their overall retirement benefits.

But union officials argue that the change unfairly hurts public workers who didn’t cause the problem. They worry that this will set a precedent for lawmakers to seek future benefit cuts.  And union leaders made it clear they’ll go to court if the bill becomes law.

The measure would not affect benefits of current retirees.

SB 1049 is also controversial because nearly three-quarters of the savings come by stretching out the timeline for paying off the state’s pension debt.

“We are pushing this cost off to future Legislatures … hoping at some point in the future we will find something that is politically feasible,” said one opponent, Sen. Sara Gelser, D-Corvallis. She argued that lawmakers should instead keep the $1.4 billion income tax rebate now scheduled to go back to taxpayers next year, better known as Oregon’s unusual “kicker” law.

The combination of benefit cuts and a longer debt repayment period will help lower the rise in employer PERS rates starting in 2021 and into the mid-2030s. But economic downturns – or anything that drives down investment returns – could also send the debt upward again.

“This is not a permanent solution,” said Sen. Tim Knopp, R-Bend. “We will be back in two years and four years, and we will have to address it yet again.”

Knopp was one of three Republicans who joined 13 Democrats in voting for the measure. Five Democrats parted ways with Senate President Peter Courtney, D-Salem, to vote no.

Legislative leaders and Gov. Kate Brown have been under heavy pressure to reduce the PERS debt, both to keep rising retirement costs from draining public services and to gain political support for the $1 billion-a-year tax hike for schools that passed the Legislature earlier this month.