Portland State University is facing a new budgetary challenge in the form of increased costs in connection with the Public Employee Retirement System (PERS).
How to fund a projected PERS deficit, a hot issue during last November’s gubernatorial race, is heating up this legislative session.
The program, begun in 1948 and serving more than 150,000 state employees, is governed by a network of legislative and judicial decisions.
The complexity of PERS prevents any clean-cut solution for any problem that arises, of which are many.
PSU, in the face of general funding woes, is looking at an unfunded increase in PERS benefit costs for the next fiscal year.
Kulongoski’s proposed budget offers roughly a 3 percent increase in state funding over the last fully-funded biennial budget, as the percentage of employee earnings that the university is required to pay increases from 16 to 23 percent.
That increase will be used to fund currently retired employees receiving benefits, as well as to help pay for future retirees.
The state isn’t picking up the bill for that increase this year due to budget constraints following measure 28 and the general state of the economy.
“It’s basically because the money isn’t there,” Kathy Dyck, vice president for budget and planning, said.
In addition, activities on campus funded by student fees, including the Vanguard, are feeling a crunch.
While the PSU Student Fee Committee has more funds to distribute to student organizations this year, there are also new expenses spurred by PERS increases.
State agencies across Oregon are feeling the pressure from PERS, and the cities of Portland and Eugene along with Multnomah and Lane counties initiated a proposal to change the way cost-of-living increases are distributed to retired employees.
What’s being called the “Employer’s Initiative” was approved Tuesday by the PERS board.
The parties who drafted the change are looking to recoup money from PERS beneficiaries to make up for alleged mistakes that the PERS board has made in the past.
But no change to the PERS system comes without a cost.
According to Marc Feldesmen, professor and chairman emeritus of anthropology, few PERS decisions are made without spurring a lawsuit, and a serious reduction in benefits could cause a brain drain among universities.
“Because PERS has been such a good system for so long, if they start tampering with the last piece of the system you’re going to start to see some serious flight of faculty,” Feldesman said.
Many PERS employees have dealt with lower wages in order to maintain their higher than normal benefits.
“The PERS problem was not created by us, and the PERS system was offered to us when we first came to the university for a substitute for sub-market salaries,” Feldesman said.
“The faculty at PSU are either in the lowest quartile or lowest quintile of faculty wages nationally,” he added.
Oregon Public Employee Union representative and painter Zoe Birkle concurs.
“When things were good through the 90s we all stayed here for lower wages than what we would be making on the outside because we had our benefits and retirement programs,” Birkle said.
PERS employees aren’t at a loss for options.
“What I noticed in my last two years as department chair before I retired was the dramatic increase by other institutions to poach the good faculty members from PSU,” Feldesman said.
Relocating to another state and losing PERS benefits is not a choice that many workers would like to make, but eliminating or significantly lowering benefits, Feldesman believes, would reduce Oregon’s draw as the relatively low pay offered would no longer be mitigated by high benefits.
Last Spring, PSU laid off a significant number of the grounds workers in Facilities.
The layoffs came as a shock to Birkle and other Facilities workers, and she is hoping that working closely with university administration will lessen any shocks to come.
“There’s some old distrust that needs to go away because we have a whole different group of people now,” Birkle said.
What action is taken to address the PERS shortfall on the state or university level has yet to be determined, but it is unlikely the solution will be painless.
“The solution they’re trying to find is the one that generates the most cash and hurts the least amount of people,” Feldesman said.
While Feldesman sees a few ways that PERS issues could be addressed prudently, he remains skeptical of the legislature’s current plans.
“I feel like they’re rearranging deck chairs on the Titanic.”