SALEM — Oregon House Speaker Tina Kotek on Wednesday backed off her refusal to allow steeper cuts to public-employee retirement benefits, potentially paving the way out of a stalemate that has stalled budget progress for weeks.
Kotek's new position came in a statement released an hour after Gov. John Kitzhaber unveiled his latest budget proposal and gave legislative leaders slightly more than 24 hours to get on board. Kotek backed the governor's proposal to raise $200 million in additional tax revenue and eliminate or reduce one particularly costly method of calculating pension payments for retired government workers.
The speaker has refused for months to allow cuts in retirement benefits beyond two changes approved last month. Her statement did not explain her change of heart but said the plan would allow for increased education funding.
"The governor's proposal offers an achievable path forward toward stronger school budgets and more affordable higher education," Kotek said.
Republican leaders reacted less enthusiastically, saying the governor's proposed changes to the Public Employees Retirement System "still do not solve the problem for schools, fire departments and local governments."
"If we are going to invest the time and effort to tackle the PERS issue, we cannot settle for partial solutions," Sen. Ted Ferrioli and Rep. Mike McLane, the Senate and House GOP leaders, said in a joint statement.
Pension costs are rising precipitously for state and local governments due in large part to the Great Recession, which erased more than a quarter of the fund that pays retirement benefits for current and future retirees. In nearly party-line votes, the House and Senate last month backed a Democratic pension-cutting plan that would save state and local governments $460 million over the next two years.
Republicans are pushing for pension cuts that would save at least $1 billion over the next two years, and they've refused to consider revenue increases until Democrats back pension cuts. Democrats control the House and Senate but need at least two Republican votes in each chamber to raise taxes.
Some Democrats have said they're open to more pension cuts, but before Wednesday Kotek had drawn a hard line in the sand.
Kitzhaber's plan would cut back on use of the "money match" formula, one of several methods that can be used to calculate pension payments for the longest-serving public employees. Critics say the money match formula has allowed some workers to retire with large pensions — sometimes larger than their final salary.
The governor's proposal would apply only to inactive members of the pension system — those who have left their government jobs but aren't yet drawing their pension. It would either eliminate the money match option for those workers, or tweak it so it provides a less generous payout. Full elimination would save state and local governments $442 million over the next two years on top of the money saved in last month's pension cuts, according to the governor's office.
Notably, the people affected would not be members of politically powerful public-employee unions because they no longer work for the government.
The leaders of the Service Employees International Union released a statement saying they remain opposed to cutting retirement benefits, but praising the governor's push to raise taxes.
Kitzhaber said he'd leave it up to the Legislature to decide how to come up with $200 million in new revenue.
"This framework to me offers the opportunity for a true compromise, because everyone involved has got to take a step toward the center," he said.
The governor said that if legislative leaders don't agree to move forward with the new revenue and his proposed pension changes, he will push lawmakers to begin working on a budget based only on existing resources. He said it's possible to balance the budget without raising taxes or cutting pensions further, but it would lead to teacher layoffs in some school districts and sharp tuition increases at community colleges and universities.