HOUSE SPECIAL SESSION COMMITTEE ON PERS

 

September 13,  2002   Hearing Room H-174

3:00 p.m.    Tapes  1 – 3

 

MEMBERS PRESENT:            Rep. Carl Wilson, Chair

Rep. Tom Butler

Rep. Mark Hass

Rep. Jeff Kruse

Rep. Jan Lee

Rep. Laurie Monnes Anderson

Rep. Tootie Smith

 

STAFF PRESENT:                  Cara Filsinger, Committee Administrator

Patricia Nielsen, Committee Assistant

 

MEASURE/ISSUES HEARD:            Organizational meeting to adopt rules

SB 1028B – Public hearing

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 1, A

005

Chair Wilson

Calls the meeting to order at 4:10 p.m.  Opens organizational meeting.

ORGANIZATIONAL MEETING TO ADOPT RULES

010

Rep. Butler

MOTION:  Moves to ADOPT the proposed Committee Rules dated 9/13/02 (EXHIBIT A).

012

 

VOTE:  6-0

EXCUSED:  1 – Hass

 

Chair Wilson

Hearing no objection, declares the motion CARRIED.

015

Chair Wilson

Closes organizational meeting.  Opens public hearing on SB 1028B.

SB 1028B – PUBLIC HEARING

018

Brian DeLashmutt

Oregon Nurses Association, Oregon Council of Police Associations, Association of Oregon Corrections Employees, Federation of Oregon Parole and Probation Officers, PERS Coalition.  Testifies in opposition to the bill, especially sections 2 and 3.  Objects to ending enrollment in Tier 2 and directing next legislature to create new system.  Recommends allowing the current task forces to continue working and exploring options.

040

Rep. Kruse

Asks for comments on Section 4.

042

DeLashmutt

Responds this concerns crediting the gain-loss reserve, which is what the Public Employees Retirement System (PERS) Board would already do until the debt is erased.

050

Rep. Butler

Asks about status of litigation his organization is involved in.


 

055

DeLashmutt

Answers collective suit by PERS Coalition is awaiting decision by Judge Lipscomb, and there is a potential for litigation over the implementation of updated mortality tables.

075

Rep. Butler

Asks about tort claims pending rule adoption.

080

DeLashmutt

Advises none at this time.

085

Rep. T. Smith

Asks what harm might be done.

095

DeLashmutt

·         Suggests Sections 2 and 3 are not needed, because current task forces are exploring changes

·         Describes harm due to contract expectations and changed benefits if mortality tables are adopted

120

Rep. T. Smith

Asks what ideas his groups could support.

125

DeLashmutt

Suggests changes:

·       Create incentives for inactive Tier 1 members to withdraw money after they quit, to ease burden on employers.  Refers to fiscal impact statement (EXHIBIT B).

·       Clarify language in the statute, to avoid litigation over meanings.

·       Statutory separation of Tier 1 and Tier 2.

180

Rep. Lee

Agrees PERS system should not be dismantled without a replacement system in place.  Asks if the task forces can suggest real solutions.

200

DeLashmutt

Discusses task force actions, and advises the working groups will present suggestions before next session.

215

Chair Wilson

Refers to Oregonian newspaper coverage of the issue.  Acknowledges the legislature must improve PERS, and expresses concern that PERS members and employers will not participate seriously in negotiations.

245

DeLashmutt

Expresses personal commitment to finding solution.  Discusses prior attempts which were stopped by legislative members.

270

Rep. Butler

Asks for pledge to work toward a solution if SB 1028 fails.

285

DeLashmutt

Agrees and comments.

295

Rep. Kruse

Asks about creation of Tier 3.

310

DeLashmutt

Responds his organizations are open to suggestions.

320

Tricia Smith

Oregon School Employees Association (OSEA).  Submits written testimony (EXHIBIT C).  Testifies in support of genuine efforts of the task forces.  Urges positive changes that bring health and solvency to the system.  Suggests not abolishing PERS without a successor plan.

400

Tricia Smith

Expresses concern that the bill doesn’t address the problems causing the unfunded liability.  Suggests Tier 2 may already have fixed some problems.  Warns against unintended consequences. 

TAPE 2, A

020

Tricia Smith

Takes no position on sections relating to judges and legislators.  Asks the committee to table the bill, in favor of deliberative approach of the task forces.

055

Rep. Butler

Asks about lawsuits by OSEA.

060

Tricia Smith

Responds her group is an intervenor in the Lipscomb lawsuit brought by local governments.

070

Rep. Butler

Asks for oath.

075

Tricia Smith

Agrees.

080

Rep. Kruse

Inquires whether PERS Board has historically fulfilled its fiduciary responsibility.

085

Tricia Smith

Responds there have been times when the PERS Board has not acted appropriately.

090

Rep. Kruse

Agrees.

095

Tricia Smith

Suggests the consequences of the bill are not known.

100

Chair Wilson

Comments about eight percent guarantee, and asks for the single best suggestion to ease burden on employers.

110

Tricia Smith

Discusses previous attempts at changes.

115

Chair Wilson

Asks about previous suggestions.

120

Tricia Smith

Describes:

·       Pooling local government rates

·       Putting employer contributions into money match to allow growth which matched employees’ earnings

·       Stop using PERS in political contests

135

Rep. T. Smith

Asks for specific suggestions to improve PERS.

140

Tricia Smith

Reiterates previous suggestions and agrees with incentives for opting out.  Suggests the task forces should find the solutions.

160

Mary Botkin

American Federation of State, County, and Municipal Employees (AFSCME).  Advocates well-funded and well-run system.  Describes past efforts:

·       Allow employers to use the variable system

·       Worked against taxation of PERS, which created a greater burden on employers

Advises AFSCME is an intervenor in the local government lawsuit being decided by Judge Lipscomb.

220

Rep. T. Smith

Asks for specific ideas for improvement.

230

Botkin

Discusses process of explaining to employees about what PERS is and how it works, as well as what problems there are, in order to discuss needed changes and let members be part of solution.

245

Rep. T. Smith

Asks for input on solving Tier 1 problems.

250

Botkin

Agrees nothing can be taken away from Tier 1 employees, but there may be incentives for them to drop out.

260

Rep. T. Smith

Advises looking at ideas not yet raised.

280

Botkin

Discusses presentations to members.  Agrees the task force should be considering new ideas.

305

Rep. Monnes Anderson

Asks whether there will be lawsuits if the PERS Board changes mortality rates.

315

Botkin

Describes bill in the third special session to implement updated actuarial tables over a staggered period.  Advises she can’t stop lawsuits but can deny access to PERS Coalition lawyer.

380

Rep. Butler

Comments on problems with the previous bill.  Asks for oath.

410

Botkin

Agrees.

TAPE 1, B

005

Rep. Hass

Asks about section 4 language requiring eight percent cap on Tier 1 earnings.

010

Botkin

Discusses limiting Tier 1 earnings to eight percent guarantee and rebuilding the gain-loss reserve.  Recommends extending five-year call if stock market doesn’t recover in time.

030

Rep. Hass

Clarifies reason for limiting to eight percent.

035

Botkin

Suggests the Board will do that because it is the responsible thing to do.

045

Chair Wilson

Asks if she is confident in the task forces.

050

Botkin

Expresses confidence in labor members and PERS coalition members on the task forces.  Continues they don’t know what Tier 2 has done and whether it will solve.

060

Chair Wilson

Asks about other participants.

065

Botkin

Expresses confidence in members working on the problems.

075

Mark Nelson

Association of Oregon Faculties and Oregon Judges Association.  Testifies and describes recruitment as a huge issue in higher education, with PERS as one of the biggest draws.  Testifies in opposition to including judges in this bill, because judges have a separate system within PERS.  Advises there is no conflict deciding cases, because judges are not in that system.

135

Rep. Butler

Asks about defined contribution and defined benefit without money match.

140

Nelson

Discusses.

160

Rep. Butler

Asks if higher education faculty are involved in lawsuits.

170

Nelson

Advises they are supportive but not involved.  Agrees to work positively toward solutions.

175

Rep. T. Smith

Asks for specific ideas.

178

Nelson

Suggests crafting packages to encourage employees to drop out of PERS.

185

Rep. T. Smith

Asks about incentives.

190

Nelson

Suggests a cash buy-out.  Recommends allowing the task forces to work.

210

Chair Wilson

Asks if there is movement coming.

215

Sen. Roger Beyer

District 9.  Testifies in support of SB 1028B.  Explains background of bill, which is intended to bring the parties to the table to negotiate.  Advises this forces employees to discuss changes.  Continues the bill doesn’t stop the Speaker’s or Governor’s task forces, but puts pressure on those efforts.  Explains that the next legislative assembly will need to act.  Clarifies and explains bill sections.

280

Chair Wilson

Asks about PERS Coalition comments stating they are ready to talk seriously.

285

Sen. Beyer

Agrees if the bill passes, the PERS Coalition will be ready to engage seriously.

290

Chair Wilson

Asks whether the bill is inflammatory to employer-employee relationships.

295

Sen. Beyer

Explains this doesn’t change anything in place now, but will set up a new system for new employees hired after December 31, 2003.

325

Chair Wilson

Asks about relationship between bill and task forces.

330

Sen. Beyer

Suggests the task forces will not act unless this bill passes.

335

Rep. Butler

Asks whether the Governor will sign the bill.

337

Sen. Beyer

Responds he doesn’t know.

340

Rep. Butler

Asks about judges being involved in the negotiation.

360

Sen. Beyer

Explains that judges are members of PERS, and decisions by judges about PERS affect them.

380

Rep. Butler

Asks who the highest-paid PERS employee in the state is.

385

Sen. Beyer

Suggests it is an appointed official or department head.

TAPE 2, B

005

Rep. Butler

Asks about head of SAIF Corporation and her retirement benefit.

008

Sen. Beyer

Responds benefits are determined individually.

010

Rep. Butler

Inquires whether the parties work well together and have a mission.

015

Sen. Beyer

Explains the speaker’s task force is moving but this provides a deadline.

030

Rep. Butler

Asks how long an appeal to the Oregon Supreme Court would take, and how much it would cost.

035

Sen. Beyer

Explains Legislative Counsel sees no challenge with standing for a long time, though a legislator or the Governor could challenge after 2003.

050

Rep. Butler

Suggests asking Legislative Counsel about cost forecast.

065

Michelle Deister

League of Oregon Cities (LOC).  Testifies in favor of bill.  Explains goal of good benefits and stable sustainable costs.  Comments this provides incentive and a deadline for fruitful discussions.

075

Chair Wilson

Asks about necessity for deadline.

080

Deister

Explains about amendments put into place to accommodate employees’ concerns.  Describes financial pressure on employers and priority for cost containment.

100

Chair Wilson

Clarifies that employers wish to preserve relationship with current employees.

105

Deister

Agrees.

107

Rep. Butler

Asks about involvement in lawsuit.

108

Deister

Advises some member cities are involved, but LOC is not.

110

Rep. Butler

Asks for oath to work for solutions.

115

Deister

Agrees.

120

Rep. T. Smith

Asks whether employer groups have suggested solutions.

125

Deister

Explains there is no agreement among cities and employers.

130

Rep. T. Smith

Suggests coming to the table with real solutions.

140

Deister

Responds.

145

Chair Wilson

Clarifies.

150

Maria Keltner

Association of Oregon Counties (AOC).  Testifies in favor of bill.  Recalls that counties working on this issue are also PERS members.  Describes ideas:

·         Successor system, either for all members or for new hires

·         Option to opt out of PERS and develop local plans

·         Cap earnings at eight percent to Tier 1 members

205

Rep. Monnes Anderson

Asks about cap on earnings.

210

Keltner

Explains and continues describing ideas:

·         Expedited review to Supreme Court

·         Funding source for unfunded liability

220

Rep. Lee

Asks if there are independent financial advisors working with the task forces.

225

Keltner

Explains several members have financial backgrounds.

240

Rep. Butler

Asks about lawsuits.

245

Keltner

Advises AOC is not a party but individual counties who are members are parties to the Lipscomb lawsuit.

260

Rep. Butler

Asks for oath.

265

Keltner

Agrees.

275

Joe Schweinhart

Associated Oregon Industries (AOI).  Explains his members are business people and taxpayers.  Testifies in favor of bill, because costs are spiraling out of control.  Asks legislature to take control of the process.

310

Rep. Butler

Asks about lawsuits.

315

Schweinhart

Responds AOI is not a party to the Lipscomb lawsuit.

320

Rep. Butler

Asks for oath.

325

Schweinhart

Agrees.

340

Jim Green

Oregon School Boards Association.  Explains his association is not part of Lipscomb lawsuit.  Agrees to participate in negotiations.  Testifies in favor because the bill imposes a deadline.  Discusses language on page 2, lines 36-39, requiring the PERS Board to “attempt to insure” the reserve account is funded.  Contrasts language on page 2, lines 40-45, and page 3, lines 1-6, which says the PERS Board “shall” credit only the assumed earnings rate.  Points out this clarifies the discrepancy and requires the Board to repay the deficit and re-fund the reserve.  Urges the committee to put the plan into statute.  Takes no position on judges or legislators.  Describes suggestions.

TAPE 3, A

005

Jim Green

Continues and describes attempts to fix PERS during special sessions.  Encourages efforts to create a new system with cost containment.  Approves having a deadline for changes.

030

Rep. Kruse

Asks about change suggested in Section 4, and what effect it would have had over the past 15 years.

035

Green

Declines to question the Board’s prior decisions, but encourages the limitation on earnings in future.

065

Rep. Butler

Asks about the value of an agreement to agree.

070

Green

Answers it depends on ability to enforce the agreement.

075

Rep. Butler

Inquires about enforceability of an agreement to agree, without a time certain.

080

Green

Responds it is probably not enforceable.  Continues a time certain is needed to get people to the table, to effect future savings.

085

Rep. Butler

Asks about value of an agreement to agree, with enforceability and time certain.

090

Green

Discusses.

100

Rep. Butler

Asks for oath.

105

Green

Agrees.

110

Rep. Kruse

Discusses burden on small school districts due to rising costs of PERS, health care and energy.

120

Rep. Butler

Describes assessments on cities and special districts in his district.

155

Rep. T. Smith

Asks for testimony from Oregon Education Association (OEA).

160

BethAnne Darby

OEA.  Testifies and echoes concerns of colleagues.  Advises OEA is an intervenor in the Lipscomb lawsuit.  Continues OEA is willing to come to the table, and is participating in both task forces.

170

Chair Wilson

Closes public hearing on SB 1028B.  Adjourns the meeting at 6:14 p.m.

 

Submitted By,                        Reviewed By,

 

 

 

Patricia Nielsen,                        Cara Filsinger,

Committee Assistant                        Committee Administrator

 

EXHIBIT SUMMARY

 

A – Proposed rules, staff, 1 p

B – SB 1028B, fiscal analysis, staff, 2 pp

C – SB 1028B, written testimony, Tricia Smith, 3 pp