Today was "PERS Day" at the Oregon House. As expected, only five bills were considered. Two were disposed of quickly (HB 2113 and HB 2114) by referring them on to the House Ways and Means Committee without discussion. These two bills were "housekeeping" bills introduced by PERS and don't seem to make a lot of difference to most people. Mostly they were intended to keep PERS legal with changes to the IRS code made over the past two years. Two more bills, those dealing with eliminating the requirement for the 6% employee contribution to PERS, and a bill that would alter the requirements for the 1039 hire back were considered. Since the 6% "pickup" is a centerpiece of the Governor's negotiations with state employees, no action was taken on this bill. Similarly, the 1039 rule changes received tepid support and it is believed that this bill will die without further issue.
The surprise was the introduction of multiple amendments to HB 2456, the bill pertaining to the tax subsidy for out of state retirees. In its original form, the bill would have changed benefits retroactively for retirees currently living out of state, and had the unintended consequence of placing in state retirees whose income is so low that they don't currently have to pay Oregon Income taxes. The key amendment was introduced by OPRI, which would make the bill apply ONLY to retirees who retire on or after January 1, 2012 and who subsequently move out of state. While this eases the burden somewhat in that no current retiree would be affected by this punitive bill, it appears that both OPRI and the PERS Coalition sold out future retirees to stave off litigation costs. I fail to understand why this compromise was introduced when the original bill was effectively DOA.
What puzzles me is that now HB 2456-3 will get a work session, which is the necessary prelude to moving the bill out of committee and onto the House floor for a vote. The original bill was estimated to have saved employers $72 million dollars. However, because of the language of SB 656, passed in the 1991 Legislature, less than 2/3 of the $72 million would actually be saved. A better figure was about $48 million. Then, there would be administrative and enforcement costs expected to cost about half of what the savings were. This left only about $24 million in actual savings from the bill. The majority of the savings would have come from current retirees. By eliminating them from the mix, the net savings from this bill are probably more like $3-$5 million. In a budget with a $3.5 billion shortfall, saving $3-$5 million dollars is hardly enough to keep the lights on for one day across the state.
I'm also disappointed in OPRI and the PERS Coalition for their complicity in making a dead bill come back to life. Maybe I don't understand the calculus of politics in the Legislature, but it strikes me that the long term ill will of this eats at OPRI's future seed corn. This is an organization that needs to grow to stay relevant. The older generation decreases with time and you want new retirees to form the backbone of your membership. By taking this position and resurrecting a bill that was probably dead, they have sold out a whole generation of retirees who were actually qualified for this benefit by virtue of the two main settlements that put the package together. While it is true that future retirees will continue to get the benefit IF they remain in Oregon and IF they had work prior to 1991, it still seems like a bad political decision to anger and constrain future membership growth by taking actions that explicitly harm future members. Maybe I'm naive, but I think that OPRI may have bought itself a cup of sorrow with this decision. OPRI may have calculated that this would affect only a small number of future retirees, but the truth is that you never know when circumstances might force you to move from Oregon when you hadn't planned on doing so. If I were planning to retire after 12/1/2011, I would be really pissed at OPRI for removing a degree of freedom in my retirement planning. Even if I weren't planning on moving, stuff happens and I wouldn't want to have my benefit at risk for any cut just because I moved out of state.
I'm hoping that OPRI understands the damage they may have inflicted on future membership. You have a hard sell when it is known that you willingly and complicitly aided in the "take away" of any benefit.
Finally, it needs to be understood that there are somewhere in the vicinity of 58,000 currently active or inactive PERS members who are age and/or service eligible to retire. I know many of the inactives live out of state. If I were one of them, I'd be planning to retire before December 1, 2011. Otherwise, the mere fact of living out of state could cost you a couple of percent of your retirement benefit.