Judge: Oregon PERS Must Implement Changes

June 12, 2003 (PLANSPONSOR.com) - An Oregon appeals judge has ordered the state's ailing Public Employees Retirement System to begin recalculating retirement benefits and employer rates.

>According to a news story in the Portland (Oregon) Oregonian, Judge Rick Haselton of the Oregon Court of Appeals mandated that the PERS board implement a lower-court ruling that soon could lead to lower benefits for some state and local retirees. The changes could also reduce employer rates for government agencies.

>Haselton rebuffed a request from PERS and public-employee unions to stay a sweeping lower-court ruling on pension benefits and rates.

>Haselton said the PERS board “has not demonstrated that it is reasonably likely to prevail on appeal” and that a stay could cause more harm to PERS recipients and employers.

>Marion County Circuit Judge Paul Lipscomb last year ruled, among other things, that the PERS board had failed to use updated mortality tables that reflected longer life spans, which would have the effect of lowering monthly benefit levels. Lipscomb also said the board failed to keep enough money in reserve during the height of the economic boom, resulting in unjustified increases in employer rates (See  Judge Blasts Oregon Pension Panel ).

>However, it’s unclear how implementing the Lipscomb decision will fit in with legislation passed this year to lower the cost of PERS, which faces a long-term shortfall of about $17 billion (See  PERS Board Implements Legislative Reform Changes  ). About 300,000 workers and retirees are covered by PERS.

More Court Fights Ahead

>Reductions in employer rates or benefits because of legislation or the Lipscomb decision could be overturned by further legal action, said Mary Botkin, a lobbyist for the American Federation of State, County and Municipal Employees. The legislation reducing PERS costs is headed directly to the Supreme Court. A separate bill that also would send the Lipscomb decision directly to the high court is nearing passage in the Legislature. “Our comment for the employers would be the same as it was for legislators (looking for savings in PERS): Don’t spend the money,” Botkin said.

>The legal action came as the Oregon House and Senate continued to fight over whether legislators should continue to be covered by PERS.

>The Republican-led House wants to remove lawmakers from the system. The Senate, which is evenly split between Democrats and Republicans, wants to keep legislators in PERS but at a lower benefit level. On Wednesday, competing versions of the bill were sent to a House-Senate conference committee in an attempt to sort out the disagreement.