Friday, September 21, 2012

The next PERS Battle

Among the several issues which are being discussed as potential amendments to PERS in the 2013 legislative session is the idea of lowering or capping COLA increases for retirees. There have been suggestions that a lowering of COLA which does not do away with COLA altogether would more likely be sustained by the courts. As such, there is talk of pursuing legislation to restrict COLA to those retirees who receive up to $24,000 per year. This would save 3.2% of payroll, would save about $576 million per year and would total $3 billion of savings.

The idea that a partial COLA change would be any less unlawful than the full change sought and resolved in the Strunk case is puzzling. In the Strunk case, the Supreme Court specifically addressed the question of whether the COLA promise was contractual in nature and decided that it was. Oregon’s COLA, which has been in place for almost 40 years, provides for a cost of living adjustment capped at 2% with the remaining amounts of inflation banked to be used for future increase. The Oregon Supreme Court held quite clearly that this is contractual in nature and therefore cannot be amended by the legislature.

Now some proponents of change have argued that while the COLA cannot be eliminated altogether, it can be lowered. Exactly why a smaller breach of contract and/or constitutional violation would be treated any differently from a complete breach of contract is left unexplained. Interestingly, in Strunk the court was addressing a temporary suspension of COLA rather than a complete elimination.

The PERS Coalition believes that such legislation would likely not stand. Oregon has had COLA legislation in place for 40 years. The proponents may try none-the-less. We know PERS change is on a lot of people’s minds and we’re likely to face many legislative proposals this year.

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