By Don McIntosh

It was a chaotic scene on the floor of the Oregon House May 30. A controversial public pension reform bill — proposed by Democratic Senate President Peter Courtney and Democratic House Speaker Tina Kotek, but opposed by public sector unions—had come up short. The vote was 29 for, 31 against. But instead of announcing that tally, Kotek directed the chamber to stand at ease while she summoned Rep. Andrea Salinas, (D-Lake Oswego), and Rep. Mitch Greenlick (D-Portland) to her office for a private meeting. Half an hour later, they emerged, Salinas in tears. Kotek returned to the dais and called for Greenlick and Salinas to announce their votes: The two “nay”s became “ayes,” and Senate Bill 1049 passed.

With the Senate having passed it 16-12 one week earlier, it’s set to become law as soon as the governor signs it.

Union leaders denounced the vote. Oregon AFL-CIO President Tom Chamberlain called it “anti-worker.” Teachers union president John Larson called it “unconscionable.” Service Employees Local 503 Executive Director Melissa Unger called it “a step backwards.”

“Public sector workers across Oregon deserved better,” said Oregon AFSCME Executive Director Stacy Chamberlain in a public statement. “The state should expect a lengthy legal battle in defense of our members.”

The politics of SB 1049 are complicated and counter-intuitive. All but three Republican legislators voted against the bill, because they didn’t think the cuts went far enough. Democrats, all of whom were endorsed by public employee unions, led the charge and provided the votes. Even Democrats who come out of the labor movement voted for SB 1049. Tiffiny Mitchell is a public employee herself and just won office last November with the help of her union, SEIU Local 503. State Rep. Rob Nosse, a union rep at Oregon Nurses Association, voted for it even though it meant cutting his own members’ compensation.

State Sen. Michael Dembrow — a public employee and longtime former officer in American Federation of Teachers-Oregon — also voted for it, even though it cuts his own compensation.

In an email to constituents, Dembrow explained why he and other Democrats voted for it. Employer contributions to Oregon’s Public Employees Retirement System (PERS) have risen steadily because Oregon is working to reduce the funding shortfall created by the 2008 financial crash. Those increases have pinched public budgets. Democrats wanted more revenue, but a three-fifths supermajority vote requirement made that challenging. Lawmakers got over that three-fifths hump earlier this year in a vote to increase K-12 funding by raising taxes on big corporations by a billion dollars a year.

But Dembrow explained it was a package deal: “In order to get the necessary votes, to get Senate Republicans back into the building (they used their constitutional ability to deny a quorum), and to get business to stand down, there was an implicit understanding that we would follow school funding with PERS reform in short order, and that the changes to PERS would need to include contributions from current public sector employees.”

What SB 1049 does

The bill is meant to lessen the burden the PERS system is placing on public budgets.

• Allow a longer catch-up period The bill gives public employers more time to restore the investment value that was lost in the 2008 crash. It changes that “amortization period” from 20 to 22 years starting in 2020. This generates two-thirds of the bill’s savings.
• Divert public worker compensation Current retirees won’t be affected, but beginning July 1, 2021, public sector employers will “redirect” part of the 6 percent of salary that’s now being contributed to public employees’ 401(k)-style retirement savings plan – to reduce PERS’ unfunded liability. Employees with annual salaries under $30,000 won’t be affected. For those above that, the reduction will depend on which PERS tier they’re in. More senior employees who are in the more generous PERS Tiers 1 & 2 will see a redirect of 2.5 percent of salary. Tier 3 employees will see a redirect of 0.75 percent. The diversion will continue until PERS is 90 percent funded, which is projected to take 10 to 15 years. [Currently the PERS system is considered around 80 percent funded.] If employees want to keep 6 percent of salary going into their retirement savings accounts, they can opt to put their future salary increases into the fund. This provision of SB 1049 accounts for about 20 percent of the savings.
• Welcome retirees back Starting January 2020, restrictions on retired public employees going back to work will be eliminated. They just won’t accrue new pension benefits if they return; instead, whatever the employer would otherwise have paid into their retirement will go to shore up PERS.
• Cap PERS benefits Effective 2021 the earnings that generate PERS benefits will be capped at $195,000. The change will only affect top-paid government executives, coaches, and doctors.
• Transfer public funds $100 million in unanticipated General Fund revenue will go to reduce the unfunded liability, and 80 percent of annual revenues from a new lottery sports betting program will go to incentivize public employers to make additional payments.

How they voted

It was Democrats who provided the votes to divert public employee compensation into pension reserves.

Senate: Passed 16 to 12

The Ayes — 13 Democrats, 3 Republicans

• Lee Beyer (D-Springfield)
• Ginny Burdick (D-Portland)
• Michael Dembrow (D-Portland)
• Lew Frederick (D-Portland)
• Fred Girod (R-Stayton)
• Bill Hansell (R-Athena)
• Mark Hass (D-Beaverton)
• Betsy Johnson (D-Scappoose)
• Tim Knopp (R-Bend)
• James Manning Jr (D-NW Eugene)
• Laurie Monnes Anderson (D-Gresham)
• Floyd Prozanski (D-Eugene)
• Chuck Riley (D-Hillsboro)
• Arnie Roblan (D-Coos Bay)
• Elizabeth Steiner Hayward (D-NW Portland/Beaverton)
• President Peter Courtney (D-Salem)

The Nays — 5 Democrats, 7 Republicans

• Herman Baertschiger Jr (R-Grants Pass)
• Cliff Bentz (R- Ontario)
• Brian Boquist (R-Dallas)
• Shemia Fagan (D- Portland)
• Sara Gelser (D-Corvallis)
• Jeff Golden (D-Ashland)
• Dallas Heard (R-Roseburg)
• Dennis Linthicum (R-Klamath Falls)
• Kathleen Taylor (D-Milwaukie)
• Kim Thatcher (R-Keizer)
• Chuck Thomsen (R-Hood River)
• Rob Wagner (D-Lake Oswego)
• Excused: Alan Olsen (R-Canby)
• Jackie Winters (R-Salem)

House: Passed 31 to 29

The Ayes — 31 Democrats:

• Teresa Alonso Leon (D-Woodburn)
• Janelle Bynum (D-Clackamas)
• Julie Fahey (D-Eugene)
• David Gomberg (D-Lincoln City)
• Mitch Greenlick (D-Portland)
• Ken Helm (D-Beaverton)
• Paul Holvey (D-Eugene)
• Alissa Keny-Guyer (D-Portland)
• Tina Kotek (D-Portland)
• John Lively (D-Springfield)
• Pam Marsh (D-Ashland)
• Caddy McKeown (D-Coos Bay)
• Susan McLain (D-Hillsboro)
• Mark Meek (D-Gladstone)
• Tiffiny Mitchell (D-Astoria)
• Nancy Nathanson (D-Eugene)
• Courtney Neron (D-Aloha)
• Rob Nosse (D-Portland)
• Carla Piluso (D-Gresham)
• Karin Power (D-Milwaukie)
• Dan Rayfield (D-Corvallis)
• Jeff Reardon (D-Happy Valley)
• Andrea Salinas (D-Lake Oswego)
• Tawna Sanchez (D-Portland)
• Sheri Schouten (D-Beaverton)
• Barbara Smith Warner (D-Portland)
• Janeen Sollman (D-Hillsboro)
• Marty Wilde (D-Eugene)
• Anna Williams (D-Hood River)
• Jennifer Williamson (D-Portland)
• Brad Witt (D-Clatskanie)

The Nays — All 22 Republicans, plus these 7 Democrats:

• Jeff Barker (D-Aloha)
• Brian Clem (D-Salem)
• Margaret Doherty (D-Tigard)
• Paul Evans (D-Monmouth)
• Chris Gorsek (D-Troutdale)
• Diego Hernandez (D-Portland)
• Rachel Prusak (D-Tualatin / West Linn)