slides: Oregon’s Most Expensive Supreme Court Decision - What is Next?

Friday, May 08, 2015

GoLocalPDX News Team

Last week’s decision by Oregon’s Supreme Court reversing PERS reforms may be the most expensive of the State’s Supreme Court in history. The fiscal impact may be as high as $1 billion as some GOP legislators claim. Regardless, the decision by the Oregon Supreme Court has created a bit of a crisis.

Education Hit and Uncertainty

Just as the Oregon economy was rebounding and a consensus was building about investing in improving Oregon schools, the decision has created tremendous uncertainty. According to Education Weeks’ ranking of the schools in each state, Oregon ranked 41st in the United States with an overall grade of C-.

“Diving into the findings for the three graded indices, Oregon earns a C in the Chance-for-Success category and ranks 36th. The average state earns a C-plus. In School Finance, Oregon receives a D-plus and ranks 36th, while for the K-12 Achievement Index it finishes 40th with a grade of D. The average state earns grades of C and C-minus in School Finance and K-12 Achievement, respectively,” wrote Education Week.

For many, the Pension reform legislation provided the opportunity to remove the weight of the pension costs and the opportunity to refocus priorities and invest more in education and infrastructure.

As Scott Bruun, a GoLocalPDX MINDSETTER™ wrote this week, “The question is, ‘what do we do now?’ How does the State of Oregon ensure that it can deliver the services that it promised and that the people of Oregon pay for? In light of a giant step backward with PERS, how do we keep the lights on at schools?”

Fiscal Impact

“The non-partisan Legislative Fiscal Office estimates that the cost increase for that budget period will be well more than $1 billion dollars. About $360 million will be charged to school districts, about $420 million to local governments, and the rest will be paid by state employers,” claims Sen. Doug Whitsett (R-28) in a blog.

The 2013, pension reform legislation was hailed by legislators and the business community after adoption. But the passage sparked a visceral reaction and a legal challenge by unions. As Greg Hartman told Kyle Curtis in a piece published in Blue Oregon in 2013, “These reforms violate past contracts.” Hartman has been the longstanding attorney for PERS Coalition.

Now, Governor Kate Brown seemed to be caught off guard with the high courts decision. The new Governor who has surprised many by her seamless leadership, appeared to be ill prepared by the decision — her statement issued the day of the decision appeared to demonstrate a lack of preparation for the different in potential outcomes, “I will be reviewing the ruling and assessing next steps, including the short and long term fiscal needs of PERS, and I will be working with the PERS Board to determine what next steps they will take.”

In the past week the fiscal impact of the decision has begun to take hold on decision-makers.

See what leaders in Oregon say are the next steps in the slides below.

Related Slideshow: Oregon Leaders React to PERS Ruling

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Oregon School Boards Association

"Clearly the court’s decision is going to have enormous impacts on school budgets from 2017 and beyond, unless the Legislature addresses the situation," said OSBA communications specialist Alex Pulaski. "We have all seen the Legislative Fiscal Office’s estimates that school districts will face an additional PERS bill of about $358 million total in 2017-19. If districts have to cut their budgets as a result, as they have done repeatedly over the last 10 years, that would likely lead to teacher layoffs, larger class sizes and lost teaching days.

After talking with our legislative team, it appears we are not in a position to predict what path legislators might take to resolve the situation. First, we all need more time for PERS to determine precisely how much rates will go up and whether any other changes will be taking place as a result of the decision. Although we expect to be working with legislators on a solution to mitigate the effects of this ruling, it’s unclear at this point what forms that might take."

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House Republicans

"It’s clear that we need to focus on growing and strengthening our economy to cover the costs of these ballooning pension liabilities since the Supreme Court reversed much of the work the Legislature undertook to address this fiscal crisis facing Oregon. Local governments and school districts across the state again face massive uncertainty and risk as they struggle to adequately fund schools and critical public safety services, said House Republicans communications director Kara Walker.

"Given the Supreme Court decision’s implications for any future attempts at PERS reforms, the Legislature must take steps to foster growth in Oregon’s private sector and also enact legislation that protects and promotes Oregon employers. Creating permanent, family-wage jobs and increasing incomes and wages across the state will help to stabilize local governments and also work to address the PERS costs that we and future generations now face because of decisions made in the past."

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Representative Tobias Read, (D-Beaverton)

“This bill would help earn money to fill the gap by cutting Wall Street fees instead of cutting public services. It upgrades and modernizes our investment programs and practices while improving oversight.”

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Senator Tim Knopp (R-District 27)

“As far as what the Supreme Court ruled in regards to the Public Employee Retirement System I believe that we have to focus on three things: Redirecting the 6% IAP member contribution, setting the amortization rates for money match at a level that will reflect the private sector rates, and placing new employees in contribution plans similar to those in the private sector.”

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Governor Kate Brown

“I will be reviewing the ruling and assessing next steps, including the short and long term fiscal needs of PERS, and I will be working with the PERS Board to determine what next steps they will take.”

Melissa Navas, Press Secretary for Governor Brown:

"The opinion leaves a lot of questions about implementation. Governor Brown has asked PERS and DOJ to analyze the opinion and provide advice for implementing it."

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Senator Chris Edwards (D-District 7)

"I'm not aware of any immediate solution to the PERS issue. Oregonians have a choice to either continue underfunding public services, or to get real about revising the tax system. It's not going to be easy. This was devastating to Oregon's budget."