Unions prepare lawsuit against PERS reform bill

SALEM - Despite huge outcries and the threat of a lawsuit by organized labor, the Oregon Senate passed a bill May 8 that rolls back the Public Employees Retirement System (PERS). The vote was 19-10.

House Bill 2003 passed in the House May 2 on a vote of 38-20 and Democratic Governor Ted Kulongoski signed it into law May 10.

"We are absolutely being rolled," said Mary Botkin, political coordinator for Oregon Council 75 of the American Federation of State, County and Municipal Employees (AFSCME). "We talk about trains here all the time, but I've never seen one like this," referring to the speed in which the bill moved from committee to the governor's desk.

Public employee unions contend the bill will take away more than $6 billion of benefits promised to employees in their collective bargaining contracts. HB 2003 takes the employees' 6 percent contribution out of PERS and puts it in a 401(k)-type account. It suspends annual 2 percent cost-of-living-adjustments and re-works an 8 percent guarantee in a way that is intended to shrink the overall account of each retiree.

"This definitely is a breach of faith with public employees and changes the commitment," said Greg Hartman, attorney for the PERS Coalition, a group of public employee unions that bitterly opposed the bill.�

In testimony before House and Senate committees debating the bill, Hartman said HB 2003 will go the way of Ballot Measure 8 - which was voided by a court judgment that ruled the reduction of certain promised benefits in lieu of a pay raise was an impairment of the contract. "Once the employee performs services in reliance on the employer's promise to afford a particular benefit on retirement, the employer is contractually bound to honor that obligation," Hartman said.

"PERS is part of employees' overall compensation," said Leslie Frane, executive director of Service Employees Local 503, Oregon Public Employees Union. "Just like it's wrong to cut someone's pay rate for work he or she has already done, it's also wrong to cut pension benefits public employees have already earned."

HB 2003 includes a provision that allows a direct appeal to the Oregon Supreme Court.

�"We are - and have been - ready, willing and able to fight this measure in court, in conjunction with the rest of the PERS Coalition," said Oregon AFSCME Executive Director Ken Allen. "We will not stand by and watch our members' PERS contract rights be violated. We will fight on in court." "This is something the governor pledged he would not do when he outlined his goals for PERS reforms earlier this year and we are disappointed to see he has forgotten that pledge," said Kris Kain, president of the Oregon Education Association.

On May 6 a few dozen members of Laborers Local 483, the American Federation of State, County and Municipal Employees, and other unions placed 100 bowling pins in triangle formation on the front steps of the Capitol, each one bearing multiple messages of opposition to HB 2003 written by members of the various unions. The bowling pins were a takeoff on Kulongski's gubernatorial campaign last year where he used bowling as a symbol for his common touch with the voters. "Remember the Supreme Court overturned Ballot Measure 8 and will do it again," wrote Don Hunter. "Ted. Please be strong enough to make the tough decisions. Don't let others make them for you," was on an unsigned pin.

"Big business gets breaks, but public employees are supposed to make sacrifices," was on another pin, while another asked, "If you won't support PERS then why should single people support schools with taxes?"

One signaled a feeling of betrayal, with a message to Kulongoski by Violet Wilson of the Salem Education Association: "We were there when you needed us; we need you with us now." A set of 10 pins was brought to Kulongoski's office, but the governor did not come out to accept them.

Attorney Bill Gary, who wrote most of HB 2003, called it a "painful process. "But," he said in testimony, "the future of Oregon depends on reining in the cost of PERS, and it is taking a bipartisan effort. The solution is not pain free, but HB 2003 has the best possible chance of surviving judicial scrutiny."

Gary said the new plan was designed to "slow future growth of member accounts and reduce the fiscal impact on the state." He also discussed impact on employer pickups, transition periods for tier one and tier two employees, fund deficits, holding back part of a retiree's benefits until the state is out of a deficit situation, and former court cases he felt would permit the bill as written. "No one can tell you whether all or parts of the bill could be found wanting by a court," Gary cautioned. "HB2003 is not a breach of contract with labor, but a means of keeping retirees from being dependent on the ups an downs of the economy, by having a mechanism to smooth the spikes and drops."

He also said the bill focuses on "excess earnings," while offering certain guarantees.

At a May 6 Senate hearing, Senator Vicki Walker, D-Eugene, cited several recent in-depth articles on PERS in the NW Labor Press and the Salem Statesman Journal, noting "PERS hasn't even been able to compute a fiscal analysis." When she expressed concern that an Oregon Supreme Court judgment against the state could include hefty damages, Gary retorted that "risks and costs are greater if we do nothing."

A negative judicial opinion would not only result in paying retirees what was diverted plus interest, he said, and not be considered a breach of contract, requiring penalties.

And while optimistic the Supreme Court eventually will throw out the provisions of HB 2003, Hartman believes it is "unlikely" a judge will approve a temporary restraining order to keep the measure from taking effect. Unions are cautioning lawmakers to escrow the money saved by HB 2003. If the bill is eventually overturned in court, PERS will owe its members all that money plus interest.

Hartman estimates that even with the direct appeal, it will be at least 18 months before the Oregon Supreme Court issues its final ruling.

Neil Heilpern, AFSCME E-Lert and AFL-CIO Weekly Update contributed to this report

May 16, 2003 issue

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