28 Jun

In Oregon or Greece, public pensions are the last line of defense

Last week, Oregon did not seem that far from Greece.

Not physically, of course; to get from Portland to Athens still takes hard flying of about 16 hours, or about what it would take to drive back and forth across the state. And not even financially; despite warnings, the fiscal problems of Oregon, or even the federal government, are as far from the economic shipwreck that is Greece as a speed bump from a land mine.

But if Oregon has a different financial statement, it has a similar bottom line: Government’s basic credibility is about pensions.

Last week, after months of fevered speculation about Europe foreclosing on Greece, or making it the first country to be expelled from using the euro – sending it back either to the drachma or a donkeys-for-bread barter economy – there was a hint of a deal with Greece’s northern European creditors. Greece promised to try to do a better job collecting taxes – another way it’s different from Oregon, which is actually pretty good at that – but resisted another demand, that it cut back on pensions it was paying retirees.

After the Greeks and the European Union announced a breakthrough early last week, pension cuts seemed to be the key element preventing a deal, the issue causing crowds march through Athens and stirring graffiti reading, “Free Greece from European prison.” Greece had already agreed to cut pensions to future retirees, but it was cuts to those already retired that were largely blocking a deal, raising questions of the future of the entire European Union.

Oregon knows the feeling, or at least the principle.

Ever since the Grand Bargain of the 2013 special session of the legislature – what looked like John Kitzhaber’s legacy, until something else turned out to be – Oregon had been tensely awaiting the state Supreme Court’s ruling on cutting cost-of-living benefits for current retirees.

Like Greece, Oregon had been here before, with previous pension cuts by the 2003 legislature, stirring an uproar that ended the political careers of some legislators who backed the changes. Some of the changes were upheld and some rejected by the state Supreme Court, an overall political and judicial experience that nobody in Oregon politics wanted to go through again.

But partly driven by the economic collapse of 2008 – which also had something to do with Greece’s problems – the 2013 Legislature tried another shot at pension costs, as part of an elaborate deal that included some additional tax revenue, not to mention limitations on local government regulation of genetically modified farming.

Without stirring the riots – and the fall of the government – set off in Greece, the changes were politically explosive. Union leadership immediately went to court, and even the Republican legislative leadership committees quietly funded campaign mailings against some legislative Democrats, charging they had violated pension promises.

This spring, the Oregon Supreme Court reached the same conclusion, ruling on the cuts in the cost-of-living formula, “These provisions have remained largely unchanged for 40 years. They were part of the compensation that public employees—many of whom are now retired — were promised in exchange for the work that they already have performed.”

Considering the legislative upheaval two years ago, the backlash to the decision seemed muted – which may have been partly because the real financial impacts won’t hit for two years.

But there’s a reason, besides the massive numbers, why pension issues are at the hurricane center of government money crises from Salonika to Salem. It’s not even about heart-tugging footage of grandparents, but about the value and credibility of government commitments and obligations.

Last month, the Illinois Supreme Court ruled on pension reductions passed by its state legislature, in a state with a financial situation that looks a lot more like Greece than Oregon’s outlook does. Like the Oregon Supreme Court, its decision was unanimous, and like the Oregon Supreme Court, the Illinois judges upheld the state obligations.

“The financial challenges facing state and local governments in Illinois are well known and significant,” declared the opinion.

“… Crisis is not an excuse to abandon the rule of law. It is a summons to defend it. How we respond is the measure of our commitment to the principles of justice we are sworn to uphold.”

No state is at risk of being banned from using the dollar, and not even Illinois has Greece’s record of fiscal shiftiness. But a government is supposed to mean what it says, and live with it.

That would be true even if court decisions were written in Greek.

NOTE: This column appeared in The Sunday Oregonian, 6/28/15.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>