Uneasy Rhetoric

Daniel Weintraub’s column in today’s Bee suggests that California should look to Oregon for its pension solutions. Weintraub jumps the gun, however. He fails to mention that Oregon’s legislation is still in the courts.

Like California, Oregon has a pension problem. State worker pensions were always generous — employees hired prior to 1996, called “Tier 1″ employees, are guaranteed eight percent interest in their regular retirement accounts. When the stock market took off in the mid-90s, Oregon’s Public Employee Retirement System made very generous contributions, well above the guaranteed eight percent, to retirement accounts. Unfortunately, that meant that, when the market went down, Oregon did not have enough reserves to continue meeting the guaranteed growth rates or other benefits.

In 2003, the Oregon Legislature made a number of changes to the Public Employee Retirement System (PERS), including stopping the guaranteed eight percent interest while the pension system was in deficit, and reducing the percentages used to calculate the pensions public employees will receive. Public employee unions are challenging the 2003 legislative changes in court, claiming that they violate contracts between the state and its workers.

The unions have a good case because the Legislature does not have the unilateral authority to change the terms of contracts between the state and its workers. To say otherwise would set a dangerous precedent and weaken the power of a contract between labor and management.

Should the unions win their case (and I will admit they may not), Oregon, which has already begun implementing the 2003 changes, will likely be liable for the contributions it has not made to current retirement accounts. This will add to the state’s already serious pension problem.

Weintraub jumps the gun when he suggests that California look north. Good or bad, a solution that won’t pass judicial muster will be no solution at all.

(Additional reference from The Oregonian.)