Oregon’s highest court curbed, but didn’t eliminate, public-sector pension benefit cuts aimed at saving cities, counties and school districts millions of dollars in annual payments.
Among the changes to the pension benefits, Oregon lawmakers trimmed the annual inflation adjustment. The Oregon Supreme Court said the lower rate could be used going forward but can’t be applied retroactively to benefits earned.
As a result, retired workers are entitled to “blended” cost-of-living increases based on the different rates in effect during their years of employment, the court said.
Insufficient contributions to pension funds by states and cities in the U.S. have led to $1.3 trillion of unfunded liabilities, leaving them struggling to catch up with retirement pledges that in some cases were made decades ago.
States including Illinois and New Jersey are among those seeking to close funding gaps and facing opposition from public employees and retirees.
In Oregon, pension benefits were boosted annually according to a cost-of-living calculation based on the Portland Consumer Price Index. The increase was capped at 2%, although higher Consumer Price Index rates could be carried forward and applied when the CPI was less than 2%.
In 2014, the Legislature implemented a fixed cost-of-living rate increase of 1.25% on the first $60,000 of benefits, and 0.15% on benefits above that amount.
The Oregon court acknowledged the new laws were passed to address legitimate public policy concerns. It said even lofty goals must be pursued consistently with constitutional requirements, including prohibitions against violating contractual obligations.
