PERS Payments Weigh On Contract Talks

A sleeping giant awaits labor unions on campus. Oregon public employers, including the University of Oregon, face significant expenditure increases during future years. The problem stems from the Public Employees Retirement System or PERS, and it could severely hamper our progress toward fair labor contracts.

UO Chief Financial Officer Jamie Moffitt told the Eugene Register-Guard newspaper that the problem is the high cost of wages and benefits; that is why student tuition continues to increase. There is more to it.

Saying labor costs are too high when some administrators make more than four or five times the amount of money classified workers do is a weak argument. Don’t forget: most administrators reap double or triple the amount of benefits you and I can expect.

Anti-PERS groups continually point to some retirees who receive six-figure payments from the system annually. To be clear, none of them are classified workers; some might receive benefits equal to their final salaries, but most collect pensions of about $20,000–$30,000 per year; it depends on their hire date.

PERS has three tiers, which people fall into based upon their hire date. Each reduced workers’ retirement benefits.

  • Tier One—before 1996
  • Tier Two—1996–2003
  • Tier Three—2003–presently called Oregon Public Service Retirement Plan

Tier One employees were promised a 7.7 percent annual increase in their PERS account. The high rate of return was meant to attract and retain employees when wages weren’t competitive. In essence, the state told employees their retirement benefits would make up for their low regular income. During the ’90s, stocks hit all-time highs and the amount of money in most PERS accounts more than doubled; some people retired with benefits larger than their final salaries.

PERS costs also increased, because more people lived longer than the state initially assumed. As a result, the state legislature changed the program, which made it less valuable to employees. They called it Tier Two and

  • increased the retirement age from 58 to 60,
  • changed the projected earnings for each PERS account to the amount it actually earned,
  • and eliminated the guarantee of earnings if the market didn’t perform.

In 2003, the state legislature made further significant reductions when it established Tier Three. This was the start of the Individual Account Program, a defined contribution retirement program. Legislators again increased the retirement age, this time from 60 to 65, and they discontinued a feature of the plan for calculating payments called the Money Match Method.

Since 2003, the costs of providing PERS benefits continued to increase. Legislators passed two laws during 2013
to reduce the costs, but most of their provisions were declared invalid by the Oregon Supreme Court during 2015. The court essentially said the state can’t reduce the benefits it promised to employees; it can only make changes to the benefits it intends to offer future employees.

Expect major attempts during the 2017 legislative session to further reduce PERS benefits. Those efforts will affect those of us who are still working. Expect the universities to fight us during contract negotiations, set to begin in January. To be successful, we need to be strong, and we need support from our United Academics, Graduate Teaching Fellows Federation and student allies. Together: that’s how we keep what we have, secure a fair cost-of-living increase and hold back the sleeping giant.

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SEIU Local 503 Sublocal 085: University of Oregon
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