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Monday, April 15, 2013

The Weight

Much confusion, anxiety, anger, and doubt continue to flood the Oregon Capitol as SB 822 passed through the Senate on a strict party line vote of 16-14.  The vote was delayed 2 days because Senator Richard Devlin, one of the Bill's sponsors was in the hospital for chest pains.  (This is probably the signal that Devlin may not run again, something that may energize those on the PERS side who are angry with Devlin for his sponsorship of SB 822).

The issue now is that the entire Co-Chairs' budget depends on savings from SB 822, which include COLA cuts for PERS retirees, removing the income tax subsidy for 19,000 PERS retirees living out of Oregon, and from a delayed billing of employers for $350 million of due and payable PERS payments.  The delay will end up costing employers more than they save because the interest on the obligation will continue to accrue until the money is repaid.  Moreover, the budget also includes approximately $275 million in revenue increases that require a 60% majority in the House to pass.  The D's on the House side are not as enamored with SB 822, but they don't want to cut as deeply as the R's on either House or Senate side.

This has created consternation and anguish and some conflicting rumors emerging out of Salem.  According to one set of rumors, the Ds have lined up enough support from the needed Rs to pass SB 822 as is, as well as to enact the $275 million in revenue measures.  On the other side, there are rumors that the Rs will not agree to the additional $275 million in revenue without more significant cuts to PERS.  

So, at this point in the game, the safest suggestion is to watch closely what goes on in the Legislature and not stop writing legislators.  The game is far from over; indeed, it MAY just be beginning and if that is the case, the weight retirees may carry might get larger.  The next three or four weeks will be critical to the outcome of the session.  Anyone who suggests that the Legislature is "done" with PERS for this session hasn't been paying close attention.

31 comments:

Unknown said...

You are absolutely correct. As I previously mentioned a lobbyist told me the R's delivered a message to the D's they were not budging until the D's moved closer to their positions. There are some bills that need R support so there will be lots of negotiating to come.

janedoe said...

what is your opinion about the likelihood of the sick/vacation "spiking" bill being passed?

mrfearless47 said...

The sick leave/vacation "spiking" bill is meaningless right now. So few people actually are able to "spike" that the Legislature's concern is misplaced. In the past 20 years, less than 10% of all retirements were from a method affected by Final Average Salary. The major method has been Money Match, which isn't influenced one iota by salary. That said, the Legislature is concerned about a future in which Full Formula dominates. In this case, the issues relate to FF retirements. If this bill passes, which might be necessary to secure R votes on SB 822 and HB 2456, the unions will simply come back with salary proposals that effectively negate the impact of the lost "spikers". But right now, it is premature to think about the spiking bill. It is a solution in search of a problem.

mpguy said...

You're venturing into dangerous territory there, mrfearless47, in two ways.

First, you're daring to employ those little things we call "facts." You're also using "math." Neither of these seem to have much place in the debate over this issue--either in the legislature or in the media.

I hope you keep that up. Maybe, at some point (yes, I know I'm dreaming), those things will take their proper place in the consideration of SB 822.

janedoe said...

so if the sick/vacation "spiking" thing is not going to gain traction, then what other areas of PERS do you think the R's will succeed in messing up?

mrfearless47 said...

The r's are looking for more money, which the spiking bill doesn't raise for quite awhile. I see them focusing on all of the potential retirees with less than 10 years of service and try to force them out of money match. I see attempts to alter the actuarial rate used for calculating money match retirement methods. Look at SB754 for a capsule summary of what the Rsvwant to do.

Kolbs said...

The BIG money is in the 6% pickup.

janedoe said...

mrfearless47,heartfelt thanks for your answer, you will never know how appreciative i am. also,thank you so much for all you do to help all of us keep informed. it's so demoralizing to see the constant flood of public vitriol from all quarters against middle class PERS retirees. it makes me ill to observe all the efforts to reneg on promises that hard-working people base their lives on.

Unknown said...

More 'news' to back up what you are saying, Marc. Oregon's largest school district, Portland, announced just this morning their first "No Teacher Cuts" budget in a number of years. A prime 'reason' is the promised increase in fund because of the PERS cuts. My guess is that the timing is not happenstance. This press release is perfectly timed to keep up the pressure on the Oregon House to pass SB 822.

peg

CW NP Trip said...

My wife has been employed for 29 years with one single PERS employer, and is about to retire but has not set a date. Our biggest fear is that the legislature will revisit cutting the Money Match assumed rate from 8% to 4%, like SB 754 proposed. It seems no one talks much about this Money Match cut. Several sources say that cut would result in a benefits cut of 29% to 34%. Such a cut would be a disaster for us. My questions: What are the chances this ugly option will be revived? If it were revived, when would it take effect? Would there be any last minute chance to bail out/retire before it effected my wife's retirement? Or even if she had already retired, could PERS cut her future benefits by that amount? Thanks

mrfearless47 said...

I think the notion of cutting the money match annuity rate from 8 to 4 has virtually no chance of surviving in a democratically controlled house, senate, and governorship. While I think the current crop of D's are corrupt little (as oppose to BIG) liars, I don't think they are suicidal. Nevertheless, if your wife is considering retiring anyway, why not go as soon as possible, like May 1, before any bill like that could pass. Guessing on the outcome of this legislature is like trying to bet a million dollars on the outcome of a game of Irish football, where you neither know the players, nor the rules of the games.

the thom41 said...

If SB822 passes, does the out of state subsidy provision apply to ALL persons retired already and contemplating moving out of state?
I retired Dec 1, 2011 to be able to move out of state and keep my tax subsidy and avoid the 2011-13 legislature bill that effected retirees after Dec 1, 2011 moving out of state...

mrfearless47 said...

thethom41: The short answer to your question is: YES. But only after you move, not before. No penalty for thinking about moving, only a penalty for actually doing it.

the thom41 said...

So. The 2011 Bill (Statute, if you will) would be rendered null and void in effect, if SB822 passes as written, since it shielded any retiree moving out of state from that cut IF they retired by that 12/1/2011 date.
Thanks so much.

mrfearless47 said...

That is correct.

butterfly said...

I am totally confused by the syntax in the latest comment by the thom41. Can someone please explain how SB 822 will affect the subsidy for those who moved out of state prior to 12/2011. Thank you.

mrfearless47 said...

If you live out of state, regardless of when you moved, the income tax subsidy will be removed from your benefit if SB 822 passes without further amendment. Is that clear enough?

mrfearless47 said...

One more thing. The tax subsidy is only part of retiree benefits, IF the retiree had credited service prior to October 1991. Not all Tier 1 members are eligible for the tax subsidy - a misperception on the part of the general public.

bobbie bogdanovich said...

Does the fact they are set to vote of both the pers bill and the revenue bill the same day Tina kotek has the necessary republican votes to pass the revenue bill?? I believe they needed two republicans to pass a tax increase.

mrfearless47 said...

I don't know what the status of the vote count on HB 2456 is. I know that Kotek will need 2 Rs and hold on to all the Ds to pass the bill. SB 822 doesn't need any R's to pass.

rkgernhart said...

I am a PERS retiree and have a question regarding the COLA and the proposed changes to it. Is the change to COLA in SB822 illegal because it reduces the COLA or it it illegal because it has diferent COLAs for different income levels? If the latter is true - could PERS simply not allow a COLA for anyone or reduce it to say .5% for everyone?

Les Willett said...

If the legislature or PERS board decided to go after the Money Match assumed rate, wouldn't something like that occur on January 1 of next year?
Can they pass a bill or policy that takes effect the day it is signed?

mrfearless47 said...

@les. The PERS Board won't decouple the rates. If they change the overall assumed rate, it would take effect on 1/1/14. If the legislature were to get involved, they could declare it an emergency and it would take effect the moment the governor signs the bill.

mrfearless47 said...

@rkgerhart. IF the change in SB 822 is illegal, it is because it alters the terms of ORS 238.360, section 2, which sets the maximum rate at 2% and ties the COLA to the PDX CPI.

Gcat said...

I am a tier one employee that would retire under formula plus annuity . In trying to weight the effects of potential legislation such as elimination of sick leave or the annuity rate change, how would I find a private consultant knowledgeable enough to help me analyze the alternatives. If necessary I would retire before the bills go into effect

ellena mcclain said...

I just received a phone call from OPRI asking for a PACC contribution to their legal fund.
Do you think this is a good move? I noticed you don't have a link to OPRI on your sidebar.
Thanks for your thoughts.

mrfearless47 said...

I think a contribution to the OPRI Legal fund is a useful idea. They are the only group representing retirees.

mpguy said...

Ellena and Mr. Fearless47 . . . A contribution to the OPRI PAC is a VERY good idea because it doesn't actually cost you anything unless you have already used (or were planning to use elsewhere) your Oregon State Income Tax political credit.

This isn't a deduction; it's a full credit. The money comes back to you--up to $50 for someone filing as single or head of household, or $100 for those filing jointly--when you file your 2013 Oregon income tax return.

Since you get everything up to those limits back, it's not a bad idea to contribute that full amount unless you have other 2013 "political spending" to do.

mrfearless47 said...

mpguy: The OPRI PAC is NOT the OPRI Legal Fund. While a donation to the OPRI-PAC is a straight tax credit, the donation to the legal fund, is not eligible for the credit. Right now, I think OPRI needs more money for the legal defense fund than for the PAC. The PAC hasn't done too much (IMHO) this year, but the legal defense fund is going to need the money to fight what the Legislature has already done, and may still do before this session is over.

JOHN said...

Would appreciate someone posting the website for the ORPI Legal Fund. Thanks.

TruthSeeker said...

I have automatic deduction of $25.00 per month to the OPRI Legal fund. Started that when the Windows payback scam started years ago. I recommend it to all.