The pivot away from PERS reform and toward tax increases is something to watch for.
Prior to the convening of the 2013 Oregon Legislature, Governor John Kitzhaber submitted a $16.5 billion state budget proposal. Among the highlights of the Governor’s budget was the addition of 500 new K-12 teachers throughout the state.
How were these new teachers paid for in the Governor’s budget? From two very modest Public Employee Retirement System (PERS) reform proposals that would free up $865 million to spend on more government services, including the hiring of more teachers.
The first proposal seeks to limit PERS cost-of-living adjustment to the first $2,000 of monthly benefits. Such a proposal would save about $815 million. The second proposal would eliminate the practice of giving extra benefits to out-of-state PERS retirees who are not subject to Oregon income taxes. This modest proposal saves about $50 million per biennium.
The Governor built his budget on an assumption that the legislature would see the value in modestly shaving PERS costs by $865 million for the 2013-15 budget and redirecting that money to schools and other services.
Without the PERS reforms, there is an $865 million “hole” in the Governor’s budget – and no real way to pay for 500 new teachers.
But despite the urgent need for PERS reform, there is a growing sentiment in the capitol that the appetite for reforming the state’s retirement system – with its $16 billion in unfunded liabilities and ever increasing costs to state and local government – is actually diminishing.
This raises the question: What does the legislature intend to do to fill the $865 million “hole” in the budget that will be created if the legislature does not reform PERS?
Over the past few weeks, the Oregon business community has caught a glimpse of what might be on the horizon.
Our Oregon – a non-profit research and political organization funded by Oregon’s public employee unions – has announced a list of proposals aimed at business and “the rich” that would fill this budget gap by:
- Eliminating home mortgage interest deductions for mortgage interest over $400k;
- Creating a new 1% gross receipts tax on companies with $100 million in revenue;
- Limiting tax deductions for the “wealthy,” presumably Oregonians with wages of $125,000 or more; and
You can see the proposals here.
AOI members should be aware there is a real possibility that the legislature will abandon meaningful PERS reform and look instead to build on Measure 66 and 67 tax increases to find the revenue to cover the $865 million in savings the Governor anticipated from PERS reforms.