SALEM — Retired and active government employees slammed a proposal to cut their pension benefits, telling Oregon lawmakers Wednesday that the plan pushed by Democratic leaders would be unfair, irresponsible and illegal.
Instead of cutting their pension benefits, workers and retirees urged lawmakers to raise taxes on the rich and sue the big banks they blame for 2008 investment losses that wiped out 27 percent of the pension fund. They also want the state to do a better job going after people who cheat on their taxes.
“When I started at the state, I believed we had a deal,” Lisa Dixon, an office worker at the Department of Consumer and Business Services, told lawmakers. “I’ll show up for 40 hours, maybe more, do a good job...I expected the state in return to honor their end of the deal as well.”
Retirees said they made retirement decisions based on a promise that they’d receive a pension with a 2 percent inflation increase each year.
Democratic leaders have proposed limiting the inflation adjustment in order to boost spending on schools. State and local governments would save about $400 million over the next two years. They also propose eliminating, for retirees living out of state, surplus pension payments that cover state income tax bills, saving another $55 million.
The Senate Rules Committee could vote as soon as Thursday morning to advance the proposal to the Budget Committee.
Criticism of the Democratic proposal came from all sides. School advocates and legislative Republicans said it didn’t go far enough to reduce pension costs for government agencies. Republican leaders and Democratic Gov. John Kitzhaber have their own proposals that would cut deeper into pension benefits.
Public employees told lawmakers the budget shouldn’t be balanced on their backs.
“This stands to be a broken promise to the public employees here,” said Jay Thatcher, a teacher in Corvallis. “What will you do to find good quality public employees in the future?”
Most retirees get a 2 percent inflation increase each year that applies to all or part of their pension check, depending on when they were hired and when they retired.
The Democratic plan would decrease the size of that inflation adjustment on a graduated scale, leaning hardest on higher-earning retirees.
It’s hard work digging ditches for the City of Portland, said Rob Martineau, a Portland Water Bureau worker and union leader, but he accepted the challenge with the promise of a secure retirement after 30 years of hard work.
“It never crossed my mind that this agreement was only good until the Legislature decides they could no longer afford it or the governor decides it’s easier to cut my benefits than raise taxes or even reduce tax breaks on those earning many times what I do,” Martineau said.
Democrats have proposed raising at least $275 million in new revenue by capping or eliminating tax breaks for the wealthy, but they’ll need support from at least three-fifths of the House and Senate. They say the pension cuts would also be needed for schools to avoid even more cuts after years of teacher layoffs and shortened school years.
Some of the workers and retirees who spoke to lawmakers were angry that the issue is presented as a choice between public workers and schoolchildren.
“Why do we need to put the old against the young?” said Tina Turner-Morfitt, a prison worker.
The 2 percent increase has helped retirees’ income keep pace with inflation, although consumer prices have risen even faster. For people who retired in the last 27 years, the average purchasing power of their pension is 94.5 percent of what it was when they retired, according to a 2012 study by Milliman, the pension system’s actuary.
Oregon’s pension fund lost $17 billion in 2008, 27 percent of its total value, creating a big gap between liabilities and anticipated revenue. As a result, the board overseeing the pension system plans to steadily increase pension contributions required from government agencies to an average of 25 percent of payroll. The cuts in the Democratic bill would decrease the target to 22.5 percent of payroll.
The bill is SB 822.
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Copyright 2013 The Associated Press.