SALEM, Ore. - The battle over public pension funding in Oregon is advancing fast. Unions began a series of legal challenges the day after a controversial ballot initiative went into effect.
A coalition of the state's largest public employees' unions filed suit Dec. 9, challenging the constitutionality of Measure 8. That constitutional amendment radically alters the funding mechanism for the $17.3 billion Oregon Public Employes' Retirement System.
Union leaders also threatened to strike over Measure 8, if demands for public employee pay rises are not met during next year's contract talks. Measure 8 passed by a margin of 984 votes, following an acrimonious campaign spearheaded by Oregon Taxpayers United.
Gov.-elect John Kitzhaber has asked public employees and Measure 8 backers to cool off. "It's in the best interest of future negotiations between the legislative leadership, myself and the public employee unions that all parties stand down," Mr. Kitzhaber said.
Mr. Kitzhaber's comment came after state Rep. Bob Tiernan, one of the primary proponents of Measure 8, said he was ready to file an election law complaint and a lawsuit. Rep. Tiernan said he would hold off because Mr. Kitzhaber had agreed to mediate the dispute between measure backers and public employees.
The election complaint would charge public employee unions with violating a law against inflicting economic harm for supporting a political cause. The lawsuit would accuse the unions of racketeering by a pattern of boycott conduct.
The unions deny calling for boycotts, claiming only to have distributed lists of Measure 8 contributors from public records.
The measure, which took effect Dec. 8, requires state employees make a 6% contribution from salary to the state's pension system beginning Jan. 1, unless they are covered by a previous contract agreement. (Most union employees are covered by previous contracts, which expire in mid-1995.)
Measure 8 also prohibits state agencies from increasing salaries or other benefits to compensate for the contribution in contracts negotiated after Jan. 1.
Meanwhile, Lame-duck Gov. Barbara Roberts postponed the first contributions from 21,000 management employees.
"We cannot fairly insist that some workers begin in January and others get a reprieve until July - it all has to happen at the same time," the governor said. Her order also decreed that once the 6% contributions begin, they will be taken from pre-tax income, which generally reduces the workers' tax liability.
Senate President-designate Gordon Smith denounced Gov. Roberts' move. He called on Mr. Kitzhaber to rescind the order when he takes office Jan. 9. Mr. Kitzhaber, who opposed the ballot measure, called Gov. Roberts' action "a responsible way to maintain equity among state workers while implementing Measure 8."
The state had been paying the 6% contribution on behalf of each of its nearly 140,000 public employees. Under the terms of the 1979 agreement, the benefit pick-up was made in lieu of wage increases.
Other provisions in Measure 8 eliminate the application of accumulated unused sick leave to boost the final average service used to calculate benefits, and prohibit public employers from contracting to provide a guaranteed rate of return for the fixed-income portion of the fund.
The coalition of the three unions representing public employees in the state plans further legal challenges to Measure 8.
"We will also deal separately with contractual issues, such as the question of unused sick leave, the 6% pick-up, and whether any additional economic benefit should be provided by the state to offset the loss of salary and accrued benefits," said Mary Botkin, political director of the American Federation of State, County and Municipal Employees in Portland. That union represents about 15,000 state and local workers.
The Oregon Education Association, Tigard, with 20,000 state employee members, and the Oregon Public Employees Union, Salem, with about 37,000 members, are part of the coalition.
Advocates of pension reform in the state indicated they don't intend to stop with Measure 8. Legislation is expected later this year to introduce a two-tiered public pension system, change benefit funding formulas, raise the retirement age, cap the amount of replacement income at retirement and change the composition of the board of trustees.
"It's safe to say that everything is on the table for consideration," said Fred McDonnal, executive director of the Public Employes' Retirement System.
Many municipalities and local employers are moving to approve before Jan. 1 new contracts that grant salary increases to compensate for the 6% contribution.
A survey by the newspaper The Oregonian indicated nearly every major city and county government and large school district has taken or is considering action to offset salary reductions. Other agencies are extending the length of negotiated contracts from a typical two-year period to three-year periods. The Eugene school district, for example, approved a 10-year pact and Columbia County agreed to 20 years for its new contract.
In the meantime, staff at the Portland administrative office of the retirement system try to cope with the realities of Measure 8. About 13,000 active employees are eligible for retirement now without a reduction in benefits. Many have elected to retire before Jan. 1 in the face of the uncertainty over pension formula components like unused sick leave.