I wish I had waited an extra couple of hours yesterday before posting my brief message. By mid-afternoon the Bad Moon had already risen. The Oregon Republicans in the Legislature used a lazy Thursday afternoon, very late in the month of May to announce their newest "compromise" proposal on PERS Reform. I'm not going to bore you with too many details; you can read the proposal for yourself here http://oregonpers.info/Library/Download.aspx?docid=1542 . What's notable about the proposal is that it contains every element of the former SB 754, with just a few of them scaled back in their extent. From here on out, I will refer to the new proposal as "SB 754 sorta lite". The hands behind this bill are principally the Oregon School Boards Association (OSBA) and its umbrella group "Fix PERS Now" (see yesterday's post).
The bill is audacious in its scope, revisiting the retiree COLA even more punitively than before, it goes after inactives by proposing a cut to the Money Match annuity rate from the current 8% to 4% (the PERS Board will take up the assumed rate at today's Board meeting and will undoubtedly cut it to 7.5% in July, to be effective for all retirements after December 1, 2013), "fixes" the Judges pension (how isn't clear), ends pension spiking without completely eliminating sick leave (I guess you can have 40 hours) and vacation time, it redirects 1% of the IAP to the PERS fund your own retirement, offers flexibility to employers to renegotiate the 6% pickup, removes Legislators and other statewide elected officials from PERS, and creatively goes after OPSRP members (Tier 3) by reducing the accrual rates by 25 basis points going forward. It also raises the retirement age for OPSRP by 2 years.
There are a number of things in this bill that are very deeply concerning, not only for their scope, but their sheer chutzpah. While all of the savings for non-state employers (local governments, school districts, etc) will be sent back to those employers in the form of money they aren't required to spend, the state's share of the "savings" are redirected to pay down the UAL. In other words, if you state employees thought that somehow this might result in some salary relief for you, a better contract, more employees hired, whatever, fuggetaboutit. The money state agencies would get is going to PERS to pay down the UAL.
The second issue is something that isn't there. Everyone assumes that the Dems will blithely dismiss this as more posturing by the Repubs and relax their guard. Unfortunately the Rs didn't include the "or else" in their proposal. It is easy to think that the Rs would cave in to reality that the Dems have the votes to close up and go home. Actually, the Dems don't. While they have a majority, they lack two needed votes in the Senate to pass the renewal of the Hospital Provider tax ($1.3 billion and change). The bill passed in the House 54-5 about two weeks ago, but two additional R votes are needed in the Senate for the bill to pass and go to the Governor for signature. That's assuming the bill isn't amended and sent back to the House where the Rs would get a chance to revote. So, there is a very large piece of the 2013-15 budget that needs R approval to finish up. And the Rs have already said earlier that they were inclined to hold those two votes hostage for more PERS reform. So, if you think you are out of the woods yet, think again.
The legal issues with the proposal aren't much different than they've been before. The COLA reductions are already approved, so piling on doesn't really change the legal arguments. The Dems aren't likely to go along, but their is no assurance they won't.
The reduction in the Money Match annuitization rate for inactives probably won't fly legally, but that leaves the Rs with the delicious possibility of trading the retiree COLA (or something else) for adding the actives into the mix. If you are going to go to court anyway, my motto is "in for a penny, in for a pound."
The anti-spiking measures appear to written to mollify legal concerns by not completely eliminating sick-leave, just reducing its ability to affect FAS by more than a week's worth of salary. The court may find that satisfies the intent, but hardly the spirit of the law. Sick leave accruals have already been tested in the Supreme Court, and the court said you can't take them away. Why the Rs think the court will overrule itself this time is beyond my thinking capacities.
The cuts to OPRSP are a nice touch. No flies on those Rs. Everybody gets taken for a fleece.
In the final analysis, this proposal is a calculated bargaining chip in an escalating game of high stakes poker. The Rs know they can't get everything they want, but they want something significant to crow to their constituents and business patrons and lords. If they just gave in on the hospital tax and everyone went home, they'd have nothing to say except "we really tried hard but those nasty Dems are beholden to the crooks in the unions and all public employees continue to be greedy, freeloaders". Where would the fun be in getting to claim the moral high ground?
The timing is spectacular. Today is the last day for anyone hoping to escape any further Legislative tampering to get completely out of the system effective June 1. Any additional changes to PERS, if they are going to occur, will happen between now and July 1 (or maybe July 13). The Dems are anxious to get the budget settled and move on. The OSBA isn't satisfied with anything less than the total annihilation of PERS. Between those two extremes someone will find the Rosetta Stone that interprets all the differences and bring on sine die. If not, there's always the possibility the Governor can call the members back for a Special Session about a week after the main session ends. Or there is next February, or just about anytime in between. The Rs have not said whether they want an emergency clause, but it would be the icing on the cake by trapping everyone who didn't retire by today between the proverbial rock and a seriously hard place. It would probably totally trash many people's retirement plans, and it would put a serious damper on contract negotiations.
This is going to be the first time that Dr. Kitzrobber (aka Dr. No) hasn't gotten his way.