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Lawyer says PERS reform will fail in court

The Associated Press, April 23, 2003

The focus of the judges will be on whether there has been a substantial change in pension benefits,” said lawyer Greg Hartman. “If they find the Legislature has taken such an action, that is a breach of contract.”

Last week, Kulongoski presented a plan to reduce the system’s $16 billion long-term shortfall by taking back the high stock market gains plugged into pension accounts in 1999.

The plan also would reduce the state’s matching funds used to calculate benefits and would do away with an 8 percent guaranteed return on the pension accounts of employees hired before 1996.

Combined with other reforms working their way through the Legislature, the governor’s blueprint would shave about $9 billion off the shortfall. The changes would significantly reduce the pensions of future retirees and many who already have retired.

But even if the plan makes it through the Legislature, it will be overturned by the courts because of the “promissory language” in the statutes regarding those benefits, Hartman said.

Bill Gary, a lawyer representing a coalition of employers that won a lawsuit against the pension board last year, said it’s impossible to know how the courts will rule.

“But that is not a reason to do nothing,” he said.