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Wednesday, July 3, 2013

Unions Challenge the Pension Reform that Eased Portland's Budget Plight

Posted by Dirk VanderHart on Wed, Jul 3, 2013 at 4:55 PM

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  • Alex Despain

As promised, a coalition of unions are challenging reforms to the state's Public Employee Retirement System passed in Salem this year.

Portland Attorney Greg Hartman on Monday filed a petition for review with the Oregon Supreme Court, asking the court to rule the changes in Senate Bill 822 amount to a breach of a contract the system has with more than 200,000 employees covered under PERS.

The bill, signed in May, reduces short-term costs by more than $800 million, a mixture of reduced cost-of-living increases for pensioners and postponed payments.

It's the more than $400 million in cost-of-living reductions unions take issues with. They point to a 2005 decision by the Oregon Supreme Court—in the case of Strunk v. Public Employees Retirement Board—that rendered a past cost-of-living freeze invalid.

"It's not only similar, it's the same thing," Hartman, told the Mercury in May. "I don't think the Supreme Court is going to be very impressed with arguments that somehow try to skirt the Strunk case."

Lawmakers, meanwhile, have contended the law was narrowly tailored enough to pass constitutional muster.

The union's challenge will be closely watched by municipalities around the state. That certainly includes Portland. As we've reported, the city was happy to figure $3.5 million in savings from pension reform into its 2013-2014 budget. If the Supreme Court rules the deal is no good, the city will have to pay that money back—and at a time when the rates it pays into the system are already expected to shoot up.

Hartman's petition was actually filed on behalf of individual pensioners —both retired and currently employed—represented by a number of unions. The filing argues pensioners had been promised a maximum cost-of-living increase of 2 percent, but that under SB 822 that amount was reduced to 1.5 percent, constituting a breach of contract.

It also includes affidavits from the plaintiffs, complete with actuarial reports that suggest they'll lose tens of thousands of dollars—in some cases hundreds of thousands—as a result of PERS reform. Former Tualatin Valley Fire and Rescue employee Eugene Ditter, the documents say, is potentially losing out on more than $465,000.

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