It’s often said that you learn more from your mistakes than from your successes. True enough. But it’s also possible to learn from other people’s mistakes. That’s the case with Oregon.
Over the last several decades, Oregon school employee unions won health and pension benefits far higher than other states. The situation was made even worse by a series of incremental decisions made back in the 1970s. During that same period, Washington and other neighboring states realized pension costs were getting out of control and began to rein them in. But not Oregon.
While most public employee pensions pay out about 60 percent of a worker’s final salary after 30 years on the job, Oregon school employees who retired from 2000 to 2004 got pensions averaging 107 percent of their salaries. They are entitled to collect that amount, with cost-of-living adjustments, for the rest of their lives.
As Oregon legislators wrestle with a proposal by Gov. Kulongoski to commit 61 percent of the state’s budget to education, they realize that pensions and benefits erode their ability to reduce class sizes and increase college student enrollments. In fact, hundreds of millions of dollars in tax money that could otherwise be used in Oregon classrooms are being diverted to pay for health and pension benefits for school employees.
During 2002-2003, Oregon schools paid more than $18,000 for health insurance and retirement pay for every teacher, janitor, principal and secretary – 55 percent higher than schools across the nation. And because pension benefits are not a big issue for new teachers, the plush pensions have done nothing to attract better-qualified teachers to Oregon.
Bringing Oregon’s benefits into line with the national average would free up an additional $500 million a year for Oregon’s school children. But school employee unions oppose any efforts to reduce benefits.
In 2003, Oregon changed pension rules for new employees, a move that has slowed the rate of increase, but costs are expected to remain at record levels for the next 25 years until the pre-2003 employees retire.
While Washington averted a similar disaster by tweaking its pension rules years ago, we shouldn’t feel too smug. In Washington, the problem is health care costs.
According to the Washington Research Council, state workers in Washington pay only 12 percent of their health care premiums, compared to 21 percent for private sector workers. The taxpayers pick up the rest, to the tune of $633 per employee per month.
As the Research Council points out, escalating health care costs for public employees is crowding out other state spending priorities, particularly education. If we don’t get those costs under control, we’ll repeat the mistake Oregon made and our school children will pay the price.
There is some indication that Gov. Gregoire is concerned about the escalating costs and is looking for ways to rein them in. Let’s hope so. We can see the light at the end of the tunnel. Unfortunately, it is an oncoming freight train speeding directly toward us.
Don C. Brunell is president of the Association of Washington Business.