Highest State Court finds PERS reform unconstitutional

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By: Rebecca Watkins

In a decision issued April 30th, the Oregon Supreme Court struck down a key provision of 2013 legislation concerning the Public Employees Retirement System. The legislature reduced cost of living adjustments (COLA) for current PERS retirees to cut costs. In a decision that many predicted, the Court held that the legislature could not rescind a promise already made to retirees – to do so would violate the Contract Clause of the state constitution. It did note that prospective changes to COLA (for employment after the date of the legislative change) was allowed. In reaching its unanimous decision, the Court rejected arguments that an important public purpose (cost savings) justified the change. It explained that if such a defense were considered, alternative means of additional funding were not considered or explored. The Court did uphold another portion of the legislation: the elimination of an offset benefit to out-of-state retirees meant to compensate them for paying state taxes on their benefits did not violate the Contract Clause.

The Court’s decision can be found at: http://www.publications.ojd.state.or.us/docs/S061452A.pdf