The decision in the Moro case, issued this morning (April 30), rejects the vast majority of the 2013 Legislature’s so-called “Grand Bargain” that saw lawmakers trade cuts to PERS for some higher taxes aimed at education. The PERS Coalition, of which AFSCME is a founding member, immediately filed suit contending the actions were unconstitutional. To a large degree, the high court agreed.
The key point of the court’s decision is that no changes may be made to the benefits of PERS members that were accrued before the 2013 legislative action. That means:
• For those already retired when the legislation took effect in 2013, they will receive a full 2 percent COLA on those benefits annually. PERS will now need to administer a repayment process for increases missed the past two years.
• It’s more complicated for those currently working. Those yet-to-retire will be eligible for a 2 percent COLA on any money accrued in PERS up to the legislation date. Money accrued after that date will be subject to the new standards. For example, someone who retires this year with 30 years of service will see a 2 percent COLA on the first 28 years of their earnings and the new, lower amount on their final two years of employment.
In total, the “Grand Bargain” took approximately $5 billion away from PERS members. The Moro decision restores $4.6 billion of that amount. With this decision and others from the past two decades, Oregon AFSCME and the PERS Coalition have now returned over $8 billion into the pockets of PERS retirees.
“The state made a good-faith deal with these employees, who devoted so much of their working lives to serving their communities,” said PERS Coalition lead attorney Greg Hartman. “The Supreme Court let them know that they can count on a secure retirement, and will be able to afford groceries, medical bills, car repairs and other day-to-day living expenses which rise with inflation.”
As part of the decision, the court ruled legislators were correct in taking away the out-of-state tax offset to retirees who do not reside in Oregon. That practice stopped with the 2013 legislation. Retirees who received such payments over the year will not have to repay those benefits.
The Moro decision would appear to close the door to major future “PERS reforms” by the Legislature. The Strunk decision, issued regarding the 2003 reforms, protected the benefits — in particular, the assumed earnings rate — for Tier 1 PERS members. Moro has clearly told lawmakers that they cannot retroactively change the benefits of those already retired. Those two areas represent the bulk of the money in PERS. While lawmakers could make any number of changes prospectively — create a lesser Tier 4, for example — the system would not see cost savings from such actions until years down the road.
“This decision is a victory for working families,” said Hartman. “Oregon continues to carry the lowest corporate tax burden in the nation. The state needs to find a way to honor its contracts, so that means it’s time to have a meaningful conversation about real economic solutions that will help protect all vital services and build a better Oregon.”