Rep. Richardson's Newsletter
March 4, 2011

Citizen Action Could Save Oregon

$584 Million

As an Oregon State Legislator, I am writing this newsletter to help educate and empower Oregon citizens regarding financial issues facing our state.

In last week’s newsletter, “Wisconsin Turmoil—Lessons for Oregon,” we read about the overwhelming support Wisconsin citizens have for increasing the contribution of their State’s employees toward group health and retirement benefits. Since then, readers have sought further information on whether or not Oregon pays 100% of the costs for group health insurance and retirement benefits.

The heart of last week’s newsletter was the message that Oregon and Wisconsin are in similar situations with severe revenue deficits and the need for State employees to pay their fair share of high group medical insurance and retirement plan costs. It ended with the question of whether Wisconsin’s problems are a precursor for Oregon. I believe Wisconsin continues to be embroiled in deep controversy because its new Governor got too far ahead of Wisconsin’s citizens. I believe Oregon will choose a better path for reform than Wisconsin has chosen, and you can help make it happen. Please read on.

This newsletter is intended to give Oregon citizens the information and opportunity to promote long over-due reforms with a “citizen up” approach, instead of using the controversial, politically charged “top down,” Wisconsin model. This newsletter is not about politics, it is intended to motivate Oregon citizens to make politics subservient to the needs and will of the people. We AreThe People, and today we will address two issues that demand the attention of our Legislators.

Oregon’s State Employees’ Health Benefits. The group health medical benefit package for State employees is quite generous and is paid entirely by the State. Oregon is the only state out of the 50 states in the USA that continues to pay 100% of the medical benefits for its employees and their families. These benefits are not cheap.

The average monthly cost per State worker is $1,263.13 and the total cost for the current biennium (with annual premium adjustments) is about $1.37 billion.   For the upcoming 2011-13 biennium, including anticipated premium increases, the total cost of State employee medical insurance benefits will be $1.65 billion.

I support having good medical benefits for all workers. As a State Legislator, I am a State employee and I am grateful for good medical benefits. The issue is the appropriateness and financial consequences of Oregon paying 100% of the costs, instead of requiring each of us, State employees, to pay a portion of our group medical premiums, as is usual and customary with other states.

State                          Employee Pays % of Premium

Washington                                            12%

California                                             18.9%

Idaho                                                  12.7%

Montana                                              24.5%

Nevada                                                  17%

Utah                                                       5%

Arizona                                              11.5%  

                                                Average: 15%

Oregon                                                  0 %

Every dollar of group medical insurance premiums paid above what is fair and reasonable is a dollar that cannot be used for educating our children, paying the costs for public safety and providing life-saving benefits for our most vulnerable citizens.

If Oregon’s State employees paid the western states’ average of 15% toward their own medical insurance benefits plan, it would save the State $250,000,000 in the next budget. That is $250 million of precious revenue in the 2011-13 State Budget--$250 million that could be redirected for purposes other than maintaining an unjustifiably expensive benefit package for our State employees. (Note: State Employees do not include teachers, whose benefit packages are set by their local school districts.)

To avoid any confusion, I am not criticizing or devaluing the excellent work done by committed and competent State employees; I am merely opining that we state employees should be sharing in the cost of our medical benefits. That is what occurs in all other states and in private sector jobs. In sum, by paying our fair share of the employee group medical plan premiums, in the 2011-13 Budget we would save the state $250 million that could then be used to provide vital services for Oregon citizens.

Citizen Action Needed on Senate Bill. Senate Bill 702 could be the vehicle to implement this needed change in Oregon law. SB 702 would require State workers to begin paying 15% toward their benefit plan and it will get serious consideration if enough Legislators request immediate hearings to be scheduled and a work session to be held on it.

Public Employee Retirement System (PERS). In addition to medical benefits, Oregon’s State employee retirement plan (PERS) costs are also paid entirely by the State of Oregon. In reality, as a result of legislative “tweaks,” PERS Board decisions and Court rulings, Oregon’s retirement system has evolved into two separate retirement plans for every employee—a defined benefit plan and a defined contribution plan.

The defined benefit plan provided for “Tier One” workers (those hired before January 1, 1996) is one of the most expensive and most generous retirement plans in the world. (See Part I, Oregon PERS & the 2011-13 Budget–The Looming Crisis”) Those employees hired from 1996 to 2003 have less extravagant “Tier Two” PERS plans; and more recently hired State employees (hired since August 2003), have more modest PERS plans than either Tier One or Tier Two plans.

In short, regardless of when a State employee was hired, he or she now has two PERS plans.

Defined Benefits Plan. The Courts have ruled that certain portions of PERS’ defined benefit plan are protected by the constitutional protections of the Contracts Clause, and must be paid, regardless of the burden such payments place on the State or its taxpayers. The State’s anticipated cost for the defined benefit plan will be $950 million in the 2011-13 biennium.

Defined Contribution Plan. The PERS defined contribution plan, now referred to as the Individual Account Program (IAP), costs 6% for every payroll dollar, in addition to the costs of the defined benefit plan. This defined contribution plan is not constitutionally protected and the 6% paid for each worker goes into a separate account that belongs to the employee at his or her termination or retirement. The cost of this second, IAP, retirement plan in 2011-13 Budget will be $334 million. Thus, if Oregon were to pay only for the defined benefit plan, while enabling State employees the option of paying up to 6% of their wages toward their own defined contribution plan, $334 million could then be used to provide vital services for Oregon citizens in 2011-13.

At a time when the average private citizen feels fortunate to have a job, and even luckier to have a modest 401 (k) retirement plan, should Oregon be paying 100% for two retirement plans for every State employee? I believe State workers should be free to contribute to their own defined contribution plan, but every dollar the State spends on this second PERS retirement plan, in my opinion, is an extravagance we taxpayers can no longer afford to pay.

Citizen Action Needed on House Bill.  House Bill 2984 could be the vehicle to implement this needed change in Oregon law. HB 2984 would give State workers the option of paying up to six percent toward their own defined contribution plan, and would eliminate PERS employers from paying anything toward it. Like SB 702 above, HB 2984, will get serious consideration if enough Legislators request immediate hearings to be scheduled and a work session to be held.

In conclusion, I believe Oregon should employ as many talented and knowledgeable employees as needed to accomplish the purposes of State government. State workers should be paid wages and benefits that are comparable to those provided by other western states and in the private sector. Having said this, I believe it is unjustifiable for the State of Oregon to continue paying 100% of costs for group medical benefits and 100% of the costs for both the defined benefit and defined contribution retirement plans for State employees. In my opinion, it is simply indefensible to continue depriving desperately needed funds from vital Oregon programs and services by paying benefits that far exceed those paid by other states and private employers.

Do you agree that I and all other State employees should begin paying the western states’ average of 15% toward our employee medical benefits? Do you agree that if we State workers desire a second PERS retirement plan (in addition to the regular defined benefit plan), we should pay for it ourselves?

 Do you agree that I and all other State employees should begin on July 1, 2011 to pay the western states’ average of 15% toward our employee medical benefits? Do you agree that if we State workers desire a second PERS retirement plan (in addition to the regular defined benefit plan), we should pay for it ourselves?

If so, you might consider contacting your Legislator with your opinion. Your legislator’s contact number can be found by clicking here.

The Governor and the public employee unions are currently engaged in collective bargaining negotiations. Do you feel it is time for the legislature to pass laws requiring Oregon State employees to begin paying their fair share of the costs of their group medical and retirement benefits? If the actions suggested above were to be taken by this Legislature and signed by the Governor, $584 million could be added to the revenue available in 2011-13 to protect our families, imprison our criminals, educate our children and care for our most vulnerable seniors and disabled citizens.

If you think it is time for Oregon to stop paying 100% of these State employee benefits, call or email your Legislator today. We serve the citizens of Oregon. It is your government.

Thank you,

Dennis Richardson
State Representative

Member Spotlight: Rep. Katie Eyre Brewer

Katie Eyre Brewer is a long-time Hillsboro resident and CPA. As an accountant, Katie understands how decisions made in Salem can affect Oregon’s businesses and workers. She offers over 20 years of public and private-sector accounting experience. Before her election to the Oregon House of Representatives last November, Katie served in leadership roles in the Hillsboro Chamber of Commerce, including her service as a member and chair of its Board of Directors. She currently serves on the Hillsboro Planning Commission. In addition, she has been actively involved in education outreach to deal with domestic violence

Katie was born in New Jersey, the youngest of 5 children. Her parents were immigrants from England. She graduated from Delaware Valley High School in Pennsylvania, then graduated from college with a Bachelor of Science degree in Business Administration-Accounting from California State University. She moved to Oregon in 1991.

Katie and her husband, Bill, have five wonderful children ranging in age from 5 through 25. For fun, Katie and Bill love to spend time with their dog Fendi, write music together and ride their Harley Davidsons.

She was elected to her first term in the State House of Representatives on November 2, 2010 and is proud to represent the constituents of House District 29--which encompasses Forest Grove, Cornelius, Hillsboro and other small areas of Washington County. Katie is one of nine new State Representatives that where sworn into Oregon’s 76th Legislative Session on January 10, 2011. 


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