Oregon AG Says PERS Measures Won't Pass Muster

June 9, 2003 (PLANSPONSOR.com) - Oregon state legislators may think they have patched up the troubled state employees pension system, but state Attorney General Hardy Myers doesn't think it will hold.

In a written opinion made public Friday, Myers says that the Oregon Supreme Court probably will rule that some key parts of the Legislature’s public pension overhaul are unconstitutional, according to published reports.  

Specifically cited were new laws updating the life-expectancy tables used to calculate retirement benefits in the Public Employees Retirement System (PERS), the temporary suspension of some retirees’ annual cost-of-living increases, as well as other revisions that slow or stall the growth of retirement accounts, according to the Oregonian.   Governor Ted Kulongoski signed the new changes into law late last month (see  PERS Board Implements Legislative Reform Changes ).  

Citing recent court decisions in 1992 and 1996 that involved the pension system, Myers’ 53-page opinion examined three areas of benefit changes that could come under fire:

  • First, Myers says a so-called “look back” provision in the new law to update the life-expectancy tables used to calculate pension members’ monthly benefits “does not adequately guarantee contract rights” because pension accounts won’t continue to grow for workers who continue past July 1.
  • Second, Myers’ opinion says the courts will likely find that the “cessation of employee contributions to the PERS plan constitutes an impairment of some PERS members’ contract rights.”
  • Finally, the opinion said eliminating the 8% annual return guaranteed to workers hired before 1996 will likely be viewed as “an unconstitutional impairment of contract rights.”

Governor Confident

Myers had offered his assessment to legislators before the matter came to a vote last month, but proponents remain confident that the measures will hold up under judicial scrutiny.   The governor, who is both a former attorney general and a Supreme Court justice, shares that confidence.

Public employee unions have indicated they plan to challenge the changes this summer, and those would go straight to the Supreme Court because of fast-track provisions in the bills.

PERS, which has about 300,000 members, had projected its assets would fall $17 billion short of meeting its long-term obligations before the legislative changes were made. Taken together, the reforms shaved about $9 billion from the long-term shortfall facing the PERS system, while also freeing up hundreds of millions of dollars that school districts and local governments can use over the next four years.

Although it’s normally his job as attorney general, Myers may not defend the state against the PERS challenges. Outside counsel can be used, and lawmakers, recognizing that there could be a conflict, have already directed Kulongoski and Myers to determine whether outside lawyers should be hired to defend the PERS bills.

“There are sometimes different opinions between a governor and an attorney general,” Mary Ellen Glynn, Governor Ted Kulongoski’s spokeswoman told the Associated Press. “But as a former attorney general himself, the governor believes the bills are constitutional.”