Kevin Stine: Jessica Gomez is "stupefyingly wrong."

Kevin Stine:  

"Jessica Gomez is correct politically to put PERS cuts on the table, but absolutely stupefyingly wrong if she honestly believe that any of those cuts will survive a court challenge."

Jessica Gomez, a Republican candidate for the State Senate seat for Medford-Ashland, put forward two proposals to fix the PERS problem in Oregon.  

Kevin Stine

Kevin Stine says Democrats already tried this and the courts shut it down. He says Gomez is doing good politics not good government.

Oregon received national attention for its public retirement system, not because our problem is the worst but because the original PERS formula allowed a few beneficiaries, most famously former Oregon head football coach Mike Bellotti, to receive sky high pensions. Bellotti receives $46,000 a month for life. A retired physician receives $76,000 a month.

Kevin Stine, a Medford City Councilperson vying for the Democratic nomination for the Senate seat, recognizes the power of the PERS issue for Republicans attempting "to put all the PERS problems onto Democrats." He wrote:

"Likely Gubernatorial Republican nominee Knute Bueller says that he will lead on PERS where Governor Kate Brown has failed. Knute also offers absolutely zero hard plans on what he'll do."

Stine says it is a misplaced target, but he recognizes it is a good one for politicians who are willing to campaign on false promises.

Pay our debts.

Many Republican incumbents and candidates point to those payouts as flagrant examples of government waste and incompetence, generalizing from this to all government employees, then to government in general. It fuels public discontent and enables a broader GOP policy position and narrative: cut taxes, because after all, look at all the money that is being wasted by Democrats and their union buddies.

In Oregon public employee unions generally support Democrats.  Republicans generally campaign opposing those unions.

Stine does not defend the Bellotti payouts, but he does say that he accepts the reality of the PERS situation, and that he isn't playing political games with it. Gomez is, he says. Stine acknowledges that we have a debt to pay off over the next thirty years. The courts decided it.

The PERS problem was bi-partisan in its creation. In the 1980s it was tempting to pay then-current employees with promises of future benefits. It meant lower taxes and more services right then. Political leaders of both parties imagined investment growth as the magic that would pay the bills. Democrats liked the extra service; Republicans like the low taxes. Presumed Wall Street investment gains--"free future money" --would replace tax payments.

Readers should be cautious in condemning the political cowardice and foolishness of those who agreed to this back in the 1980s. This is not simply some sort of Democratic Party lunacy or a mistake we know better than to make now. No. It was bi-partisan in creation, and we are still spending now, paid for by borrowing. The United States Congress, with near unanimous Republican votes and Republican majorities, just passed--at the top of a business cycle, no less--a Tax Bill with tax cuts and spending increases that increase the deficit even more than before. Spend now, pay later. Former deficit hawks now assure us that those debts will be paid by "future growth." The allure of painless "free future money" continues to drive politics.

Eventually we will work this out, if we can afford it during this long payout period. Oregon already "fixed" PERS for employees hired after August 29, 2003. The assumed retirement age was moved to 65 (up from 58 and 60) and the formulas are much less generous. The resulting pension benefits are likely to achieve the intended policy result: lifetime income of about 45% of the employee's final years of income.  

The problem is the legacy formulas from before 2003, which are locked into place. Eventually the beneficiaries will grow old and die, and in the meantime we will pay our debts.  That is the actual solution.  Of course, the people who are beneficiaries of those formulas don't consider them a "problem," and are, of course, in no rush to die. They consider it a deal that worked out great, and only fair. Others feel it is exactly how public employees ought to be paid--well--and that higher progressive tax on the wealthiest Oregonians would--and should--cover the deficit. 

Stine acknowledged that Gomez's first proposal, financing a voluntary early payout option for Tier One and Tier Two eligible employees, might be legal and could save the state money. He has observed a similar program with military retirement pensions. 

Stine says her other suggestions are a re-hash of things Democrats had already tried. Stine said that in 2013 Democrats exercised political courage by disappointing their own base with proposed reductions in the cost of living formula in the PERS contract, and did so without any Republican votes. Union were upset with Democrats, he said, and it was all for naught. 

The courts said no, Stine noted. A contract is a contract. A pension benefit is property and the state cannot confiscate any of it by changing the rules.

Julian Bell

Julian Bell, another Democratic candidate for the seat, wrote that PERS is "badly designed" but that in any case the Oregon Supreme Court "prevented the state from changing existing contracts, which is why they have not already been changed."  He said "we bought a lot of employment on credit."

"It doesn't seem ethical to try to back out of the contracts" and those high pensions for Bellotti and the physicians are the exception. Besides, Bell said, most PERS payouts are in small pensions as originally intended, and that money "is recirculated directly back into the economy."

Jessica Gomez posited a problem and a solution. It put the issue on the table. Kevin Stine and Julian Bell said her solution has been tried and found to be illegal. She may choose to defend her position. A good discussion of this would benefit the voters.

Stine and Bell's comments may not hurt her in the Republican primary. Indeed, she may be helped by having Democrats criticize her. [Post revised. I have removed all references to any Republican opponent Jessica Gomez may have.]

Kevin Stine says her proposal is built on a political narrative that sounds good to Republicans, but it is simply untrue. He said "Republicans say to elect them so they can pass huge PERS cuts. This makes no sense. . . . She's giving people what they want to hear, not anything that can pass legal muster. Maybe she truly is a Republican after all."
                                                          
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[Readers have inquired who I favor in this and other races. I like government that works and deals with problems. I consider myself open minded about this State Senate campaign. I see things to like about each of the candidates. I have made multiple political contributions in a variety of races, signifying not always who I favor or plan to vote for, but instead my sense of obligation to help any candidate who dares to ask me for money. Back when I was a candidate for office in 1980 I wished there were more people who made campaign contributions and I am trying to be what I longed for back then, a politically interested guy with a checkbook.]