Gov. Kate Brown (right), greeting KGW anchor Laural Porter, counts legislation that established funds to incentivize employers to pay down PERS liabilities among her achievements.
INCENTIVES & INVESTMENTS
One of the things Brown touts in her leadership on PERS was the task force she set up in 2017 to come up with ideas to cut the pension system’s unfunded liability by $5 billion. Essentially, she convened a group of certified smart people over a period of months to brainstorm ideas.
The task force did suggest a dozen things that could generate savings, but most were dismissed as political non-starters. The most significant outcome was Senate Bill 1566, which will redirect a portion of state revenue to establish two new funds. The first is a pooled side account at PERS for school districts that would be invested alongside existing pension assets and drawn down to reduce individual school districts’ pension contributions. The second fund aims to incentivize all public employers to tap their own reserves and make extra one-time contributions to the pension fund. The state would match those extra contributions by 25 cents on the dollar.
“The best thing we can do is pay down the actuarial liability,” Brown said, who signed the legislation in April. “You can tinker around the edges of the system, but unfortunately, we have to tighten our belts, we have to scrape for dollars and pay it down. That’s why I called on [Portland] Mayor [Ted] Wheeler, when the Comcast revenue came in, unexpected revenue, to use it to pay down your (unfunded liability). That’s what we’ve got to do.”
Comcast settled a decade-long property tax dispute in June, agreeing to pay $155 million to local governments. Brown urged the governments to use the windfall to help pay down their pension obligations, and the mayors of Portland, Beaverton and Eugene all said they would support that request.
The school side account and incentive funds have yet to be funded, and one issue is that not a lot of public employers have extra money sitting around to plunk into PERS, whether there’s an incentive available or not. The incentive money will not be granted on borrowed funds.
“It’s political theater that will have minimal impact on our ability to deal with the unfunded liability,” said Buehler, who voted against the bill. “It could even have an adverse effect if we see a market downturn.”
Brown says she has also pushed to give the Treasury more staff to bring additional investment management in-house, versus outsourcing the services to Wall Street banks and paying higher fees. Wheeler, when he was state treasurer, tried to usher the so-called Investment Modernization Act though the Legislature repeatedly, but was rebuffed by Courtney.
“We took component parts of that bill, including increasing staff at the Department of Treasury, and we got that done,” Brown said.
Buehler is nonplussed. “It’s astounding to me that one of the governor’s main proposals here is to hire more analysts at the state treasurer’s office. It’s not going to guarantee a higher rate of return. The Oregon PERS portfolio has been one of the best performing in the nation. I can’t imagine there would be an improvement by hiring more people in the Treasurer’s office.”