Oregon’s Public Employees’ Retirement System (PERS) funding crisis has our state on the brink of a public services’ catastrophe with the potential for major public- and private-sector job losses.
The system’s official funding shortfall (debt we contractually owe) stands at a rising monolith of $24.1 billion.
If we are honest with ourselves, however, looking at the system’s actual investment returns versus its targeted investment return (which is used for calculating funding requirements), we unofficially owe closer to $50 billion.
That means, using a back-of-the-envelope calculation, with a state population of 4 million residents, each and every one of us today owes approximately $12,500.
Despite whatever you may have heard from my Republican governor candidate colleagues, there is no magic cure to be found within the current PERS benefit structure, which can be legally implemented to dramatically reduce the funding crisis.
Even with the inclusion of wishful-thinking, “side-bet” accounts and collaring (a fancy term for pretending we owe less than we really do), the officially stated increase in the “required” amount of funding from the last biennium to this biennium went from approximately $2 billion to nearly $3 billion, or an astounding, approximately 50 percent increase.
It is only going to get worse from here. Budgets across the spectrum of public employers will be devastated if required PERS funding payments actually have to be made, resulting in layoffs and a dramatic fall-off in public services, including education.
Since a big part of our state economy comes from public employment, the private sector will also be taken down with it. This is what the fallout from a massive, public fiscal disaster looks like. Freeing ourselves from this threat of destruction, therefore, rests entirely upon paying down the $50 billion PERS debt we owe without crushing our economy and our livelihoods along with it.
Short of declaring insolvency and defaulting on our obligations, a number of ideas have been suggested to solve the crisis, from increasing marginal income tax rates, from 9 percent and 9.9 percent to 10.5 percent and 11.4 percent, respectively, to instituting a 3.5 percent gross receipts’ tax on corporations, to a franchise tax or a commercial activities tax.
None of these options provide any incentive to adds jobs or to pay higher wages, and each of them would likely result in actual job losses, especially at a time when we desperately need additional and growing businesses for more jobs and for the increasing wages that come with the competitive demand for our labors.
A new idea is needed.
To resolve this crisis, therefore, I propose a temporary, non-permanent, single-purpose, dedicated, automatically-declining, PERS debt-payoff sales tax. The structure of this solution is simple, fair, appropriately sized to the problem, and requires no political orientation.
Ultimately, starting at 1.5 cents on the dollar and declining from there, this plan eliminates our PERS debt while at the same time taking the least possible amount of capital out of the economy and out of our wallets.
This plan gives us the greatest possible degree of economic upside-potential, not only for delivering ourselves out of this mess but also perhaps by achieving it within a far earlier time-frame than we could have ever hoped for.
Brett Hyland is seeking the Republican nomination for governor in Tuesday’s primary election. Read more about his proposal at https://bretthylandforgovernor.org/solving-oregons-pers-debt-problem/.