Kulongoski report takes aim at state employees’ compensation


At his Dec. 1 “Reset Cabinet” press briefing, Gov. Ted Kulongoski (left) proposes cuts to public employee compensation. Looking on is his chief-of-staff Tim Nesbitt, former president of the Oregon AFL-CIO.
At his Dec. 1 “Reset Cabinet” press briefing, Gov. Ted Kulongoski (left) proposes cuts to public employee compensation. Looking on is his chief-of-staff Tim Nesbitt, former president of the Oregon AFL-CIO.

SALEM — Gov. Ted Kulongoski and his Reset Cabinet issued an updated “budget framework” document Dec. 1 that they will pitch to the 2011 Oregon Legislature. And while Kulongoski took great pains to say the state’s budget issues could not be resolved on the backs of public workers, the Reset report goes into great detail in its effort to cut back on state employee compensation.

“He’s certainly got some interesting ideas for a guy who used to be a labor lawyer,” said Oregon AFSCME Executive Director Ken Allen, in reaction to the recommendations.

It should be noted that, as a lame-duck administration, Kulongoski’s committee will have no official “juice” when the 2011 Legislature is gaveled to order on Feb. 1. Democrat John Kitzhaber will again be seated in the governor’s chair, and Kitzhaber is in no way bound by anything Kulongoski and the Reset Cabinet (a hand-picked team of Kulongoski advisers) are proposing. However, there will likely be some interest by at least some lawmakers to the Reset Cabinet’s proposals, which include the following:

  • Eliminating the state’s 6 percent employee pick-up on PERS (Public Employees Retirement System) and the Individual Account Program that money is funneled into.
  • Creating a lower-quality, lower- cost health insurance plan for state employees and having them pay for a portion of the premiums.
  • Viewing state employees from a “total compensation” perspective and restricting growth in compensation to no more than 3 percent per year under any circumstance.
  • Requiring 10 years of service in PERS, not merely vesting (five years), to qualify for retirement cost-of-living adjustments (COLAs) in the future.
  • Limiting COLAs for all PERS retirees — including current retirees — to the first $2,000 per month of a retiree’s benefit.
  • Looking at privatizing state services where possible.

Kulongoski and his Reset Cabinet contend that Oregon will suffer through a “decade of deficits” unless the Legislature takes action to drastically cut the state budget. Legislators face a $3.5 billion budget hole for the 2011-2013 biennium. If all of Kulongoski’s proposals were enacted, there would still be a $1.3 billion deficit.

The current governor says he’s trying to help create a “roadmap” for the incoming governor. Whether Kitz-haber, long noted for his independent streak, wants to follow a map drawn up by Kulongoski remains to be seen.

Public employee unions will certainly urge Kitzhaber to forge a different path.

“We don’t find much value in a report provided by folks not responsible for negotiating or legislating the changes they suggest,” said Allen. “In fact, I don’t think it’s particularly responsible for him (Kulongoski) to issue this kind of report when he’s not going to be around to work on it.”

Arthur Towers, political director for Service Employees International Union Local 503, told the Salem Statesman-Journal that the Reset Report “proposes exactly the wrong thing for our state’s economy — an across-the-board approach that doesn’t set any priorities.

“We’re really looking forward to working with the incoming governor, who has fresh ideas for balancing the budget while protecting services,” Towers said. “I know how hard it is for Gov. Kulongoski to be relevant at this point in his tenure. We really need to hit ‘Refresh’ rather than ‘Reset.’ ”

Noting that numerous studies show public employees’ compensation is slightly less than the equivalent private sector workers, Allen said the union “will certainly fight” the idea of the state unilaterally killing the 6 percent pickup.

Negotiations begin soon on new state contracts, and Allen is AFSCME’s chief negotiator. He said Kulongoski has essentially “thrown a bomb” on negotiations that haven’t started yet and that he won’t ultimately be party to. Allen said the union will listen to any offers from the state, including offers that substitute something for the 6 percent PERS pickup, but warned, “We will fight tooth and nail before we take a 6 percent reduction in total compensation.”

Union officials noted that state employees have already been fair in sharing the state’s burden in the current contract, taking wage freezes, step delays and numerous furlough days to help the state balance its budget.

On the PERS issues specifically, PERS Coalition attorney Greg Hartman said the Reset Cabinet’s retirement system proposals ranged from “curious” to blatantly unconstitutional.

“The governor continues to call for elimination of the 6 percent pick-up as well as the Individual Account Program; however, there is no specific proposal mentioned in the report,” said Hartman. “Bill Sizemore tried to do away with pick-up back in 1994 with Ballot Measure 8, and the Supreme Court held that to be unconstitutional. At the same time, we acknowledge that pick-up has always been an item subject to bargaining, so I’m not sure which end of the spectrum the governor’s proposal will ultimately fall on. “Then there are the two new proposals in the governor’s report,” Hartman continued. “The first is to modify the current PERS plans to provide that you don’t get any COLA increase upon retirement unless you have completed 10 years of service. The second is to modify COLA for retirees so that COLA is only paid on the first $2,000 per month of benefits.

“It’s difficult for me to understand how the governor could suggest these with a straight face,” said Hartman, explaining that the Oregon Supreme Court ruled (in the Strunk decision) that “the COLA promise is a contractual promise. It has long been the rule in the State of Oregon that you can’t change a pension promise once someone has commenced work, and it has certainly been the case in the State of Oregon for many years that you can’t change the benefits of someone who has already retired,” he said. “It would appear to me that both of these proposals are clearly and unequivocally unconstitutional and, therefore, hopefully would not find any support in the Legislature.”

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