By John A. Charles, Jr.
Last month, the Metro Council voted to send a regional payroll tax to the November ballot. The rationale for the new $250-million-a-year tax is primarily to help fund a 12-mile light rail extension from Portland to Bridgeport Village in Tigard. It will also pay for a smattering of minor transportation projects throughout the region, but those are just ornaments on the tree.
There are at least three problems with this proposal. The first is that we already pay two transit taxes: the TriMet payroll tax assessed on employers, and the statewide transit tax collected from employees’ paychecks that was adopted by the Legislature in 2017. Most people don’t benefit from either one, because they don’t use transit. Adding a third tax to pay for light rail to Tigard – called the Southwest Corridor project – makes no sense.
Second, light rail ridership peaked in 2012 and has been dropping ever since. Now, amid the coronavirus pandemic, it is down about 70% from last July, according to TriMet ridership numbers. With many worried about the inability to physically distance on public transit and the prospect that some may work from home permanently, more rail is the wrong project at the wrong time.
Third, if the Metro tax is approved, TriMet could bulldoze nearly 300 homes and up to 156 businesses for the right-of-way, according to its environmental impact statement. Roughly as many as 1,990 employees will be forced to leave the area, the analysis states.
This ghastly level of destruction recalls the heavy-handed actions of the government when it rammed I-5 through the Albina neighborhood in the 1960s, an act that reverberates today as the state aims to widen the highway in that same stretch. Portland City Commissioner Chloe Eudaly, who resigned from the Oregon Department of Transportation’s steering committee for the I-5 project in June, emphasized this in her resignation letter: “In 1962, ODOT dug a trench through Oregon’s largest Black community, demolishing 300+ homes, disrupting and destabilizing the community, and polluting the environment.”
While the Southwest Corridor is not Albina and Commissioner Eudaly cannot undo history, she can help prevent a similar bulldozing of people’s homes. She is currently a member of the steering committee for the SW Corridor Project. If she really cares about protecting homes and businesses, she should resign from the SW Corridor Steering Committee and actively oppose more light rail construction. The other commissioners should join her.
But voters don’t need to wait for the Portland City Council to do the right thing. They will have the opportunity to reject Metro’s new tax in November, and they should.
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free-market public policy research organization. This article originally appeared in The Oregonian on August 5, 2020.
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By Rachel Dawson
The Portland Bureau of Transportation (PBOT), the agency charged with building and maintaining the city’s transportation system, is shifting the responsibility of improving traffic congestion away from itself and onto individual residents.
This was made apparent in a recently released 2018 report provided by Bloom Communications that surveyed Portland residents’ attitudes and perceptions of the Bureau. The contents of the survey are unsurprisingly critical of PBOT and demonstrate Portlanders’ increasing frustration with the region’s transportation system.
Of the themes that emerged, survey participants were generally concerned with safety on public transit, potholes and degrading roads, increasing traffic congestion, and PBOT’s lack of vision.
People want safe and efficient commutes. 81% of participants said that driving their car was the safest way for them and their families to commute, as they have greater control over who they come in contact with and what happens to them. Another 64% said they would consider taking transit if they were sure they “could reliably get to [their] destination faster or in the same amount of time as driving [their] personal car.” However, the current transportation system is seen as an inconvenience for many participants, and it is quicker for them to drive their car due to the frequency at which the MAX and city buses make stops.
PBOT is charged with repairing potholes and maintaining roads in Portland, yet some participants voiced their frustration with potholes not being filled in and car lanes disappearing across the city, replaced by bike lanes.
When it comes to bike lanes, PBOT doesn’t seem to know what it wants. Various striping patterns around the city lack consistency and confuse bikers and drivers alike.
According to one PBOT stakeholder (emphasis added):
“…The average joe probably doesn’t want the bike lane; they just want the street maintained. These are not necessarily the vocal people that come in and drive the budget. It’s concerning to see most of our city policies focused around that vocal minority. Are we aligning with who the general people are? Or are we focused on the Biker’s Alliance?”
Despite this concern, it seems that PBOT will continue to turn a deaf ear to the majority of commuters who want improved roads and more efficient commutes. The report states that “Portlanders demand a solution to traffic congestion but are unwilling to alter the way they are used to commuting to make positive changes and ease the situation….[R]esidents will have to start changing how they commute.” PBOT has no desire to increase road capacity and is placing the responsibility for rising levels of traffic congestion on individual Portlanders.
Portland commissioner Chloe Eudaly will send Portland’s expiring 10 cent per gallon gas tax back to voters in May 2020. Gasoline-using vehicles pay for 100% of the tax but only receive 56% of the benefits. The other 44% is spent on pedestrian and bicycle safety. Portland’s auditor reported in a 2019 audit that the program was poorly managed and lacked realistic project schedules. Moreover, the program’s spending seems to highlight the concerns held by the above PBOT stakeholder, that city policies are focusing disproportionately on pet projects and the vocal biking minority instead of aligning with the general public.
Commuters want efficient and safe commutes on well-maintained roads. PBOT should be serving the public, not dictating how residents should commute. Voters should reject the 10-cent gas tax and demand that PBOT take responsibility for Portland’s increasing congestion. PBOT should try to reduce congestion, not make it worse. Portlanders deserve better.
Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.
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By Eric Fruits, Ph.D.
“It’s time to get this done!” Governor Kate Brown told the crowd at this year’s Oregon Leadership Summit, referring to a replacement for the Interstate 5 bridge over the Columbia River. The statement ended with an exclamation point, but it should have ended with a question mark. Despite the urgency, it’s not clear what the governor means by “this” or when “this” should be completed.
Last month Governor Brown met with Washington Governor Jay Inslee and inked a deal to begin the process of replacing the I-5 bridge connecting the two states. The two states have allocated $44 million to open an office for the I-5 bridge project. Governors Brown and Inslee hope to pick up some of the pieces of the Columbia River Crossing project that fell apart in 2013 after a dozen years of planning, costing taxpayers more than $200 million.
But what is “this” bridge replacement? Will there be more lanes than we have now, or fewer? Will lanes be set aside for buses or light rail? Will bicyclists and pedestrians get their own lane? These are all different ways of asking the same question: Will the replacement have more lanes for cars and trucks?
If the answer is “yes,” there will be more lanes to relieve traffic congestion, then the governor should push to get as much done as possible before her term is over. If the answer is “no,” there won’t be new through-lane capacity, then she should admit the project is an expensive no-growth policy and be upfront with Oregonians about it.
Since the beginning of the original CRC planning in 2001, the region’s population has grown by nearly 30%. Over that time congestion has worsened, commuting times have lengthened, and the bridge has become one of the worst freight bottlenecks in the country, according to the American Transportation Research Institute.
At this point there are no clear plans for how the I-5 bridge replacement will relieve pressure on this key pinch point. The current bridge has three northbound and three southbound lanes. At the time the CRC project imploded, there were no clear plans to add through lanes for cars and trucks—just added lanes for bikes, pedestrians, and public transit.
Opponents of the bridge replacement come from all sides. Environmentalists and active transportation advocates argue that relieving traffic congestion will trigger “induced demand” for travel that will make congestion worse and increase carbon emissions. Commuters and freight haulers complain the set-aside for bikes, pedestrians, and public transit is a wasteful use of lane capacity. Good government folks question spending billions of dollars on a project that would do little or nothing to relieve one of the nation’s worst traffic bottlenecks. Another group of good government folks—mostly from Washington and Clark counties—are clamoring for a third bridge that would allow Westsiders to avoid slogging through US Highway 26 and I-5 through Portland.
Opponents of the original CRC noted that improving traffic flows crossing the Columbia on I-5 would not solve any congestion problems. Instead, they argued, the new bridge would shift the bottleneck further south to the Rose Quarter. Things have changed, and that argument will soon lose its relevance.
In particular, the Oregon Department of Transportation is in the middle of a project to widen I-5 through the Rose Quarter. The addition of lane capacity alone will do much to relieve congestion in this choke point. But, there’s more.
Along with the addition of lane capacity, the legislature directed ODOT to experiment with congestion pricing along the improved stretch—an experiment supported by Governor Brown. The money raised from congestion pricing should be used to improve and expand roads for the people paying the tolls. If the governor doesn’t want to use the funds to expand highway capacity, she owes the people of Oregon a clear vision of where she thinks it should go.
Transportation is a crucial element of economic development. With transportation improvements, trade between regions increases. With easier commutes, employment opportunities open up. Increased trade and improved employment drive economic growth and prosperity. An I-5 replacement that does nothing to improve the flow of goods and people is a waste of money. A replacement that adds capacity and reduces congestion is an investment in shared prosperity for Oregon, Washington, and the West Coast.
Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute and an adjunct professor at Portland State University, where he teaches courses in urban economics and regulation. He can be reached at email@example.com.
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By Eric Fruits, Ph.D.
How did you get to work today? If you’re like 80% of Portland-area commuters, you rode in a car. And, on your way to and from work, you probably grumbled about how much worse your commute has gotten.
Over the past five years, the region has added nearly 180,000 more commuters. Most of them drive to work and they’re congesting our roads.
In normal times, transportation authorities would add capacity to the road network and improve streets for safe and speedy commutes.
But, we don’t live in normal times. Last week, Portland commissioner Chloe Eudaly declared to a packed council meeting that the city was not going to build more roads. This is nothing new; it was the same no-new-roads promise Mayor Ted Wheeler made early in his term.
Their solution is to pack more people on public transit and get more people to bike or walk to work. But their solution is doomed to fail. Despite a surging growth in commuters, TriMet ridership is down while so-called “active transportation” has stagnated. The most recent data show only a little over 5% of commuters bike or walk.
After decades of trying to get people to abandon their cars, our leaders need to understand the automobile is an amazing technology of freedom and improve our roads to support that freedom.
Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.
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By Rachel Dawson
TriMet’s MAX Yellow Line first opened 15 years ago in May 2004. The Yellow Line’s Final Environmental Impact Statement (FEIS) made a myriad of predictions for the year 2020, which makes now the perfect time to reflect on what officials promised and what taxpayers and transit riders have since received.
Yellow Line History
The Yellow Line originated in 1988 as a 21-mile project connecting Vancouver, Washington with Downtown Portland and Clackamas Town Center. This plan was scrapped after Clark County voters defeated a proposal to raise $236.5 million in 1995 and Oregon voters turned down a $475 million regional ballot measure in 1998.
Not to be deterred by a lack of voter support, officials developed a shorter alternative in 1999 that would run from the Expo Center to Downtown Portland along Interstate Avenue. This alternative cost $350 million, 74% of which came from the Federal Transit Administration (FTA).
The construction of the new alternative was not put to a public vote. Portland officials instead expanded an urban renewal district to include the Interstate Avenue Corridor. Doing so allowed them to appropriate $30 million in tax increment funds to finance the rail that otherwise would have gone to other tax-collecting jurisdictions, including Multnomah County. The county commissioners opposed expansion of the urban renewal district, but the Portland City Council approved it anyway.
Looking back after fifteen years, we find that key promises made in the FEIS were never kept:
1. Frequency of Service
What We Were Promised: TriMet promised FTA in their Full-Funding Grant Agreement (FFGA) that peak-hour trains would arrive every ten minutes and off-peak trains every 15 minutes. The promised service according to the FEIS was supposed to reach eight trains during peak hours in 2020.
What We Received: Instead of having 10-15-minute headways between trains, the Yellow Line runs every 15 minutes during peak-periods and every 30 minutes during other parts of the day.
2. Travel Times
What We Were Promised: TriMet predicted travel times to be 24 minutes from Downtown Portland to the Expo Center and 19 minutes from Downtown Portland to N Lombard. Light rail speeds were projected to reach 15.3 miles per hour (mph), and bus speeds were projected to be 13.2 mph in 2005.
What We Received: Actual travel times are slower than predicted. It takes 35 minutes to take light rail from Downtown Portland to the Expo Center and 28 minutes from Downtown Portland to N Lombard, even though light rail has its own exclusive right of way. Actual travel times are 45.8% greater to the Expo Center and 47.4% greater to N Lombard. Actual light rail speeds in the corridor only hit 14.1 mph in 2005 while bus speeds averaged 16.1 mph—significantly faster than predicted.
3. High ridership
What We Were Promised: The FEIS forecasted ridership in the corridor to dramatically increase with the building of the Yellow Line. By 2020 the line’s ridership was expected to have 18,100 average weekday riders.
What We Received: At no point since the Yellow Line opened has ridership met projected levels. In April 2019 ridership only reached 13,270, 26.7% less than projected. This number will not meet 2020 projected levels based upon the negative trend observed over the past three years. From March 2016 to March 2019 ridership levels decreased by 3.6%.
Lower than promised ridership isn’t unique to the Yellow Line; every TriMet rail forecast has been wrong, and always wrong on the high side.
The Yellow Line was expected to provide superior service compared to the no-build bus alternative. This forecast hasn’t panned out. The Yellow Line replaced Line #5, which if it were still operating, would have seven-minute headways between Vancouver and Downtown Portland. C-Tran express service was forecasted to have three-minute headways.
Light rail does not reach any more people or businesses than Line #5 did. In fact, Line #5 had more stops along Interstate Avenue, meaning some riders now have a longer walking commute to the MAX stations.
TriMet bus service from Vancouver to Downtown Portland continues to be an option even after the Yellow Line’s construction. Line #6 was changed to pick up the link between Jantzen Beach and the Yellow Line’s Delta Park stop that Line #5 had previously serviced. It then continues down MLK Boulevard to the Portland City Center.
In Spring 2019, Line #6 saw 665 average weekday on/offs at Jantzen Beach and only 190 total on/offs at Delta Park. This means that the vast majority of Vancouver commuters on Line #6 opt to stay on the bus to Portland instead of transferring to the Yellow Line.
Given the Yellow Line’s history, we can expect the prospective SW Corridor light rail project to increase traffic, have fewer trains than promised, and have lower ridership than predicted. If ridership levels are 26.7% below forecast 15 years into service, why should the SW Corridor ridership estimate of 43,000 daily boardings be taken seriously? The FTA should not offer TriMet additional light rail funding in the future if TriMet is unable to honor its past promises.
TriMet may argue that service levels are below EIS forecasted levels due to a lack of funds. However, TriMet’s revenue increase in recent years tells otherwise. Between 1998 and 2018, passenger fares increased by 116% and tax revenue increased by 64%. TriMet’s payroll tax has been increasing since 2005 and will continue to go up every year until 2024. There is no issue with revenue; rather, the issue lies with light rail.
Moving forward, Metro and TriMet should focus on creating a more reliable bus network that runs on an already built road system. Doing so will benefit riders and taxpayers alike.
 Federal Transportation Authority, Interstate MAX Before and After Study, 2005, 2-5.
 Id, 2-10.
 North Corridor Instate MAX Light Rail Project, Final Environmental Impact Statement Executive Summary, October 1999, S-17.
Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.
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By John A. Charles, Jr.
Portland-area motorists who have to regularly cross the Sellwood Bridge may wonder why the new structure is twice as wide as the 1925 bridge, yet has the same number of travel lanes. The answer is simple. Portland transportation planners don’t want to solve traffic congestion problems; they prefer to make them worse.
We know this because 20 years ago, Metro published a report entitled the “South Willamette River Crossing Study” (SWRCS), which examined the long-term bridge needs in the stretch of the Willamette River from the Marquam Bridge down to Oregon City. The study found that by 2015, levels of traffic congestion on those bridges would be at “unacceptable or grossly unacceptable levels” if new capacity wasn’t provided.
The study also looked at numerous potential sites for a new bridge but ultimately recommended that no new crossings be constructed. The Metro Council decided instead to focus on “transportation demand management” (TDM) to address the growing congestion. TDM is an amorphous concept utilizing public relations campaigns and regulatory mandates to encourage drivers to shift to other modes of travel.
Once the decision by Metro was made to place a freeze on new bridge capacity, it was easy for the City of Portland to implement a new policy downsizing Tacoma Street in Sellwood from a four-lane arterial to a two-lane “Main Street,” with lower speed limits. That made it politically impossible for Multnomah County, owner of the Sellwood Bridge, to replace the aging structure with a four-lane bridge.
The decision to build a new bridge was made in 2006, and construction began in 2012. The design featured two 12-foot-wide travel lanes for motor vehicles, two 12-foot-wide sidewalks, and two bike lanes. All the proponents claimed that dedicating more through-capacity for cyclists and pedestrians than vehicles would create a world-class, multi-modal showpiece that would finally tame the automobile and shift drivers to other modes.
In fact, when a USDOT official spoke at the groundbreaking ceremony while presenting an oversized check for $17 million, she told the audience, “We looked all over the country for the best projects, and I have to say, the application for the Sellwood Bridge project knocked it out of the park!”
Unfortunately, all of the hype turned out to be wrong. Extensive monitoring by Cascade Policy Institute over the past three years shows that on a typical day, motor vehicles account for 95% of all passenger-trips. Transit gets about 2%, and walking/cycling combined garner the final 3%. Traffic congestion is growing worse by the month because regional population is growing and the bridge infrastructure has not kept pace.
With a price tag of $328 million, the new bridge is 43 times more expensive than the original; but it’s not 43 times more useful. In fact, it’s less useful, because trucks are not allowed and TriMet never restored the promised transit service.
Metro’s no-growth policy was a predictable failure. It’s time for the Metro Council to admit the mistake, and begin a new planning process with the goal of building at least one new bridge for motorists in the South Willamette River Corridor.
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research institute. A version of this article appeared in The Portland Tribune on July 11, 2019.
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Testimony Before the Transportation and Economic Development Subcommittee of Ways and Means Regarding HB 5039
By John A. Charles, Jr.
Members of the Subcommittee, my name is John Charles and I am President of Cascade Policy Institute. Cascade is a non-partisan policy research organization working to promote public policies based on sound market principles. As a non-profit corporation we are supported by contributions from individuals, foundations and businesses, most of them based in Oregon.
Much of the proposed ODOT budget involves dedicated funding sources such as motor fuel taxes, which means the Subcommittee has limited discretion to move money around. However, there are some programs supported by the General Fund or lottery-backed bonds, and I would like to call your attention to several that appear to have questionable value:
Willamette Valley passenger rail, $9.86 million: This allocation provides operating support for the Portland-Eugene Cascades train that runs twice daily in each direction.
As noted in the budget documents, ridership for this line peaked in 2013 and has been flat for the past three years. Moreover, the ridership numbers provided to the Committee include the POINT bus service operated by ODOT. This significantly inflates the total number of riders attributed to the passenger rail program.
The POINT bus service includes five routes with stops at 42 locations, as shown below:
- Portland-Eugene, 7 trips/daily each way, 5 stops
- Bend-Ontario, 1 trip/daily each way, 11 stops
- Redmond-Chemult, 2 trips daily each way, 5 stops
- Portland-Astoria, 2 trips daily each way, 8 stops
- Klamath Falls-Brookings, 1 trip daily each way, 12 stops.
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By Scott Shepard and John A. Charles, Jr.
The Oregon Legislature is currently meeting, and the conventional wisdom is that reform of Oregon’s overly generous Public Employee Retirement System (PERS) is impossible. According to Governor Kate Brown, we signed contracts with public employee unions, a deal is a deal, and we should just quietly accept our fate that the massive cost of PERS will lead to layoffs and service cuts at schools and other service providers.
There is another way.
The Portland regional transit district, TriMet, is not part of PERS and has been slowly reforming its pension program since 2002. As a result, 100% of all new employees are now in 401(k)-style pensions that have no long-term liabilities for employers. These are referred to as “defined-contribution” (DC) pensions in which monthly payments are made by management into personal accounts owned by employees. Once those payments are made, the employer has no further financial obligations. The eventual pension payouts will be a function of the market performance of whatever investments are chosen by individual employees.
This stands in contrast to “defined benefit” (DB) programs like PERS in which employees are promised various levels of retirement payments calculated through arcane formulas that leave management mostly clueless about the level of funding obligation they’ve agreed to. In many cases, those liabilities turn out to be much larger than expected.
The advantages for taxpayers of moving public employees into DC pensions is now evident in the actuarial valuations done for TriMet. According to the most recent valuation, projected annual benefit payments for TriMet DB pensions will peak in 2034 at $74.6 million, and then steadily decline to $6 million in 2072. They will hit zero by the turn of the century.
This was not something that TriMet did casually. Management was forced into it because of decisions made a decade earlier that caused long-term retiree obligations to explode. TriMet Board members are appointed by the governor. In the early 1990s, Governor Barbara Roberts and TriMet General Manager Tom Walsh wanted public approval of a massive expansion of TriMet’s light rail empire and the tax funding to pay for it. They feared that controversy about a union contract could endanger public support.
In their efforts to avoid strife, in 1994 they granted expensive concessions to the Amalgamated Transit Union Local 757 (“the ATU”) on behalf of its represented employees. Loren L. Wyss, the long-serving president of TriMet, objected and his battle with Walsh became public. In back-channel communications with Gov. Roberts, Walsh made it clear that either he or Wyss needed to go. In August 1994, Wyss met with Gov. Roberts, where he submitted his resignation.
As later explained in The Oregonian,
“…the contract just approved by Tri-Met union employees will protect all its members from additional contributions to their pensions for 10 years. It will also guarantee 3 percent minimum wage increases in the future…every single dollar of health, welfare, dental and vision plans will be paid for by the public employer; [and] the retirement age will decline to 58 within 10 years….”
The die was set for cost escalation. In the decade from 1994 to 2004, salaries and wages increased 72 percent; annual pension costs went up 160 percent; and the cost of health care benefits rose 116 percent. These increases plus stagnant revenues in the latter half of the period resulted in a tripling of unfunded pension liabilities, from $38 million in 1993 to $112.4 million in 2002.
Fred Hansen followed Tom Walsh as General Manger; and he moved new, non-union hires into DC pensions after 2002. This was a first step towards fiscal sanity. Resistance from the ATU kept TriMet from moving its new unionized workers to DC plans for another decade, by which time a citizens’ committee of Portlanders had issued a report declaring TriMet “on the brink” of disaster.
During a protracted negotiation with the union in 2012, TriMet CFO Beth deHamel testified at a binding arbitration hearing,
“TriMet’s union defined benefit plan would be placed on critical status and under federal oversight if it were a private pension plan subject to ERISA.” She also stated that unless something was done to shore up the plan, “TriMet could be forced to default on its pension obligations or its other financial obligations in the future.”
Union leadership eventually agreed to move all new members to DC pensions by 2013, while protecting existing members from reform. As a result of this delay, the union workers’ DB fund remained only 59 percent funded in 2013.
Nevertheless, the trends were now moving in the right direction. The number of active employees still accruing DB pension benefits fell from 1,580 to 1,460 from 2016 to 2017 alone. In 2017 the unionized workers’ DB account reached nearly 80 percent funding, with unfunded liability falling by nearly $50 million in a single year.
Neil McFarlane was TriMet General Manager during that era. He commented recently, “The shift [to DC pensions] has been a success. TriMet is paying more than the required annual contribution every year right now” because the system is closed. “We will be fully funded within the next few years: five to ten for the union plan, fewer for the non-union.”
The DC plan to which TriMet moved new workers has been recognized as one of the best in the country. It features low costs, high returns, and a guaranteed employer contribution that is paid irrespective of employee matching contributions. As a DC plan it does not create open-ended, unpredictable public liabilities to be paid by generations as yet unborn.
TriMet has not fully banished the ghosts of unsustainable employee-benefit promises past. It still faces a massive and escalating unfunded liability driven by health care costs, known in accounting jargon as “other post-employment benefits,” or OPEB. The health care benefits that TriMet granted away in the 1994 contract debacle have been described as “universal health care into the afterlife.”
The description is only a minor exaggeration, as the plan offered TriMet’s unionized employees health care without premiums and with mere $5 co-pays, and benefits that ran not only throughout retirement, but to the employees’ spouses and dependents for fully 16 years after the employees’ deaths. Total unfunded liability for OPEBs reached an astonishing $769 million dollars in 2016.
Compare: State Paralysis on PERS
TriMet’s pension reform efforts offer a valuable guide to the Oregon legislature on how to contain and reverse the spiraling PERS disaster. The unfunded liabilities for PERS have grown from $16 billion to more than $25 billion in less than ten years, even with the far-too-optimistic 7.2 percent assumed-savings rate (i.e., discount rate) in place. Were the rate adjusted down to its actuarially appropriate level, PERS’ unfunded liability would explode to $50 billion or more at a stroke.
Even at the current recognized rate, funding status has fallen below 70 percent, even while mandatory payments to PERS by government employers have passed 26 percent of payroll.
Municipalities are laying off workers, depleting public services, and raising fees in order to fund the present level of recognized PERS unfunded liabilities. Some reduction in pension benefits will have to happen, one way or another. All parties will benefit from an orderly effort to reform benefits while there is still time.
The Way Forward
The state should follow the tracks laid by TriMet by moving its employees from DB to DC plans as soon as possible. As TriMet has demonstrated, this move will begin to stanch the fiscal wounds that have been inflicted by a generation of recklessly overgenerous pension benefit promises.
Unfortunately for everyone, PERS reform has been hamstrung for more than 20 years by a wayward state Supreme Court, which has thwarted previous attempts at thoughtful change with erroneous interpretations of the federal Contract Clause. The legislature will be obliged to make bigger changes than would have been required years ago. It will have to move all current workers, whenever they were hired, to DC plans for all work performed after the date of the effective legislation.
While this reform will be significant, it also will be deeply equitable. Right now, older workers are receiving higher benefits for each hour worked than ever will be available to younger workers. This isn’t fair, and it may violate civil rights laws: Younger workers are more diverse than their older peers, which means that benefit reductions that affect only new workers have a disparate impact on women and minorities.
The reform will also pass constitutional muster. As the Oregon Supreme Court finally recognized in its Moro decision, correcting its long-held error, the legislature may change any benefits for work not yet performed, even for current employees.
The Oregon Legislature can and must follow TriMet’s example. The sooner this is done, the less drastic any later steps will be. According to TriMet General Manager McFarlane, solving a pension crisis “doesn’t get any easier with passing time.”
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free-market research center. Scott Shepard is a lawyer and was a visiting law professor at Willamette University during 2016. This essay is a summary of a case study of TriMet’s pension reform written by Mr. Shepard for Cascade Policy Institute. The full report is available here. This essay was originally published in the February 2018 edition of the newsletter “Oregon Transformation: Ideas for Growth and Change,” a project of Third Century Solutions.
Click here for the full report, Following in TriMet’s Tracks: Defined-Contribution Plans a Necessary First Step to Oregon’s Fiscal Health: