Oregon’s pension crisis: Billions of dollars in the red and still in denial

Pension problems are tough to resolve. As we’ve written, the political imperatives of the present often frustrate attempts to take action that will reduce problems in the future. But, sometimes, things reach a point where they can no longer be avoided, leading to the discussions of employee buyouts to limit future liabilities.

A good story in the Oregonian makes the point. The state faces a major pension crisis. How bad is it?

Bad enough that Rukaiyah Adams, the normally polished investment professional who is vice chair of the Oregon Investment Council, broke down in tears last week as she spoke of passing a record $22 billion in unfunded promises to future taxpayers.

“My call to the legislature and to the governor is for leadership on this, and I mean right now,” Adams said during last Wednesday’s joint meeting of the Oregon Public Employees Retirement System board and the citizen panel that oversees its investments. “This is becoming a moral issue. We can’t just talk about numbers anymore.”

And yet,

But Democratic leaders, including Gov. Kate Brown, so far say they’re not interested. In an interview this week, Brown said she saw pension costs as a very important issue, but “from my perspective, that list [of pension reforms] is not legally viable and not likely to result in significant financial savings.”

It’s a similar story from Senate President Peter Courtney, D-Salem, and House Speaker Tina Kotek, D-Portland. They insist there are no more money-saving moves that could be both legally viable and economically significant.

Remaining pension reforms would also mean cutting pay and retirement benefits for current state workers — which would alienate Democratic benefactors in Oregon’s public employee unions.

Remember the “massive” business tax hike on the Oregon ballot? The Oregonian’s story suggests maybe.

Measure 97 would raise $3 billion a year by taxing 2.5 percent of certain corporations’ sales over $25 million. But Brown also said that revenue should be spent as supporters have promised: to beef up spending on schools and social services.

So back to the numbers.

There’s the sheer size of the deficit – $22 billion – at record heights even after a seven-year economic recovery. It’s no longer a cyclical problem that a string of big investment returns could erase, board members agreed last week. The imbalance of assets and liabilities is now structural.

With interest rates at historical lows, financial markets aren’t delivering the high returns needed to sustain the system. Public employers – financed by taxpayers – aren’t contributing enough to make up the difference. And public employees are no longer required to contribute to their pensions. 

Required payments squeeze other budget priorities and put taxpayers on the hook. We recommend reading the story, if only to remind ourselves of the consequences of decisions made in the short-term that have exponentially larger long-term consequences.

This will not end well.