PERS reform will be debated, but what will happen?

By Steve Benham KATU.com Politics Editor Published: Jan 15, 2013 at 5:36 PM PDT Last Updated: Jan 15, 2013 at 9:58 PM PDT

SALEM, Ore. – Reform of the state's public retirement system is on the table for this year’s legislative session but what reforms will look like at the end of it is a big question mark right now.

Lawmakers at the annual Associated Press legislative preview at the Capitol on Tuesday were hesitant to look to into their crystal balls and predict the outcome of any changes to PERS.

Gov. John Kitzhaber, however, has laid out three specific things he wants to happen with the system: eliminate the tax benefit to state employees who are retired but don't live in the state, reduce annual cost-of-living increases and eliminate or reduce the taxpayer "pickup" of employee contributions for their retirement.

The governor wrote the first two ideas into his proposed budget. That last one, however, was not part of his budget, although Kitzhaber has said he still supports moving ahead with it.
 
The Democrats may have a harder time swallowing the pill of reform since many of those who have helped get them elected benefit from the PERS system, namely public employees and unions.

Newly minted House Speaker Tina Kotek, D-Portland, described herself as "cautious" Tuesday about any reforms to the PERS system.

"I'm pragmatic, I'm cautious. I think we need to understand all the numbers in the governor's budget," she said. "You don't put your budget together overnight."

She said she hasn't seen all the numbers related to PERS reforms and is still looking at them.

"We want to make sure whatever we do in that regard is fair, legal and actionable," she said.

Republican House Minority Leader Mike McLane of Powell Butte said he’s generally supportive of the governor’s proposals for reforming PERS and called them "sensible" but "the fact is any new revenues from it doesn't cover the PERS increase just for this biennium. So it doesn't, in essence, put any more teachers into the classroom."

But for the governor, who also spoke to members of the press during the AP's legislative preview, he's betting that his proposed savings not only in PERS but in the health care and the prison systems will enable the state to reinvest that money into education.

And to the concerns that legislators raised, especially Democrats, that education is still not being funded adequately, Kitzhaber said it really boils down to math, but he would support more money for schools.

"I don't believe that the Legislature is going to go out of here with a $6.15 billion school budget. They're going to actually pump that up, and I would support that," he said. "I think we need another 200, 300 million dollars in our school budget this year to actually stop the hemorrhaging."

He emphasized that lawmakers are going to have to find a way to pay for the increased funding.

Kitzhaber said he’s studied PERS reforms for the last six months and asked for options.

"To me this is the only option, to me – or maybe one of the few options – I may not be seeing something – that gives you the latitude to reinvest in schools and if you can find some additional resources through tax expenditures, I think you can address these questions," he said.

Kitzhaber said it's difficult to see "a pathway to an adequate school investment and dealing with the human resource side without making some modifications in the PERS system."

If lawmakers do pass reforms to PERS, many aspects of those reforms will surely be challenged in court. Kitzhaber has said in the past that he's confident his reforms will pass muster because a court ruling left open the possibility of modifying the system. He's said the Department of Justice believes his ideas are strongly defensible.

The legislative and executive branches of state government are now controlled by the Democrats. During the two years of previous legislative sessions, the House was evenly split with 30 Republicans and 30 Democrats. But during last November's election, Democrats regained control of the House by a 34-26 margin and retained control of the Senate, 16-14.

McLane conceded that the end-game for the session will likely look Democratic.

"We accomplished a lot the last two years, but co-governance is over," he said. "In the end this is going to be defined by what Speaker Kotek and the elected Democrats choose to do or choose not to do."

Regardless, the House Republicans laid out their agenda of creating jobs, improving education, creating a "robust" reserve fund and holding government accountable, especially in looking at ways to reduce fraud in state government.

For Kotek and House Democrats, their priorities are much the same: having a strong public education system, putting people back to work and having an efficient state government.

Both parties have different ideas, however, on how to get there, and how lawmakers reach those goals and what they'll look like is what they'll be debating and hammering out in the next six months.